Looking at the Performance Complement and Other Rules that Apply to Webcasting Companies Relying on the Sound Recording Statutory License

David Oxenford

By: David Oxenford,
Wilkinson Barker Knauer LLP

We are waiting on the Copyright Royalty Board to release its decision setting the royalties that webcasters (including broadcasters who simulcast their over-the-air programming on the Internet) will pay to SoundExhange for the public performance of sound recordings in the period 2021 through the end of 2025.  As we wrote here, that decision would normally have been released in December but, as the trial to establish those rates was delayed by the pandemic and held virtually over the summer, the decision on rates could come as late as this April, though once effective it will be retroactive to all streaming that has occurred since January 1 of this year.  While we await the announcement of the new rates, as I’ve recently received several questions about the rules that apply to streaming under the statutory license, I thought that I would take a quick look at the “performance complement” and other rules that apply to companies that rely on this license.

Note that the rules set out below are slightly different for certain broadcasters, as the NAB in 2016 entered into agreements with Sony and Warner Music Groups to waive certain of the statutory requirements for broadcasters who stream their over-the-air signals on the Internet.  These agreements allow broadcasters to stream their normal over-the-air programming featuring music from these labels without having to observe all of the obligations set out below.  We summarized those waivers here, and hope that they will be further extended to cover the new royalty term.  Also, some big webcasters have negotiated relief from these requirements (see our article here).  But for those not subject to a waiver, let’s look at some of the rules that webcasters relying on the statutory license are to observe.

These rules are generally set out in Section 114 of the Copyright Act.  From time to time, webcasters who have not been observing the rules have received letters from representatives of copyright owners warning these services of the potential violation of the terms of the license.  While we are unaware of any lawsuits that have resulted from these claims, we have heard that streams that don’t comply with the rules, when available through an App, have been kept out of certain App stores based on these complaints.  Both for this practical reason and because of the potential for liability, these rules need to be observed absent waivers or separately negotiated deals for the use of music:

• The performance complement is perhaps the best know of the rules. This rule limits a webcaster relying on the statutory license from playing more than 2 songs from the same CD or album in a row, or playing more than 3 songs in a row from the same artist.  Also, in any three-hour period, a webcaster cannot play more than 4 songs from the same artist (or from the same compilation CD or box set featuring multiple artists) or more than 3 songs from any CD or album by a single performer.
• The rules, with certain very limited exceptions for noncommercial stations that had printed program guides that have been published since before the 1996 Digital Millennium Copyright Act, prohibits stations from pre-announcing or publicizing when any particular sound recording will be played. (The idea is to prevent listeners from setting up recording devices to copy a sound recording.  So a list of what already was played is not prohibited – but any idea of what songs are upcoming at specific times when listeners might be able to record that song is prohibited.)
• Webcasters must identify in text on their website or mobile app the name of the song that is playing, the artist who performs the song, and the album from which that song is taken.  There are again some limited exceptions where the music is played on a device where all the required information cannot, for technical reasons, be displayed, but those are very limited exceptions.
• Section 112 of the Copyright Act provides an additional requirement as to “ephemeral copies” of sound recordings that require that such recordings can be kept for no longer than 6 months.  This requirement has consistently been waived in NAB agreements because, if interpreted literally, webcasters that make a copy of a sound recording in furtherance of their streaming (or for their over-the-air broadcasts), by for instance making a copy of a song so that it can be stored in their digital music storage systems, could keep those copies for only 6 months.  After that time, the station would be required to delete any copy of a song and re-record it if they wanted to keep a copy in their music library for another six months.

There are other rules that apply to webcasters who want to rely on the statutory license allowing them access to all legally released music as long as they pay the SoundExchange royalties.  Without that license, webcasters would need to negotiate directly with record labels or artists who own the copyrights to sound recordings.  Obviously, any stream must be non-interactive, meaning that the listener cannot dictate the songs that he or she will hear.  See our articles here and here on that distinction, and here on the one case that has been litigated as to what is and what is not an interactive service.  Also, songs cannot be used to specifically promote a commercial product (so you can’t use airplane songs to promote United Airlines or truck songs to promote Ford trucks).

And, of course, there are registration and reporting requirements.  Webcasters must register with the Copyright Office to rely on the statutory license.  The reporting requirements require most webcasters to report to SoundExchange each month the songs that they played in the prior month and how many listeners there were to each song, so that their payments can be computed and the distribution of that money determined (some small noncommercial webcasters have negotiated exceptions to these requirements, but if you plan to rely on the exceptions, look carefully to be sure that they apply to your operations).

This is just a summary of some of the requirements of the statutory license.  SoundExchange’s own website has more information on these requirements.  But any webcaster should consult with their own attorneys to see how these rules apply to their operations and be alert for further developments especially after we see the Copyright Royalty Board decision on the new royalty rates.  Stay alert and carefully monitor your compliance.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).

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