A Look at Developments in SoundExchange Webcasting Royalties (Including for Broadcast Simulcasts) From the End of 2021

As 2021 wound down, there were significant developments on SoundExchange royalties for webcasters – including broadcasters who simulcast their on-air programming through IP channels (such as on their websites and on mobile apps).  While we covered many of these matters in our weekly Sunday updates on regulatory matters of importance to broadcasters, we thought that it would be worth summarizing all of the action in one place.  Most, but not all, of these developments follow from last year’s  Copyright Royalty Board decision  raising webcasting rates for 2021-2025 (see our article here summarizing that decision).

The CRB’s decision was published in the Federal Register in October 2021.  As of that date, all webcasters, if they had not already been doing so, should be paying the higher royalties ($.0021 per song per listener in 2021 for nonsubscription streams). SoundExchange has appealed the CRB’s decision (presumably to argue the rates should have been set even higher), as have the NAB and the National Religious Broadcasters Noncommercial Music License Committee.  These appeals are pending and likely will be briefed and argued sometime in 2022.  If you have not trued up your payments (the increase in royalties was retroactive to January 1, 2021), consult your legal advisor as to the effect that these appeals may have on your responsibility for that true-up.

Even though the appeals are pending and could eventually be changed by a Court decision, the rates are effective now, as are all other terms.  One issue became immediately apparent, as the rates contained a provision providing for cost-of-living increases during the 5-year term that they are in effect.  Once  inflation  hit all areas of the economy, that cost-of-living increase was immediately triggered, and the CRB announced that rates for nonsubscription streams in 2022 would increase from $.0021 to $.0022 as of January 1, 2022 (rates for subscription streams increased to $.0028).  When you pay your royalties for January (45 days after the end of the month), they should be at the new, higher rate.

Also going into effect this year is an increase in the minimum fees that are due by January 31, 2022.  Instead of the $500 per stream fee that most webcasters are familiar with from past years, the CRB decision raised the minimum fee for most webcasters to $1000 per stream.  Remember to make that higher payment by January 31.  Note that educational webcasters affiliated with a school may qualify for different rates that phase in the increase – starting with a $600 minimum fee this year.  Also, stations affiliated with NPR or receiving CPB funding may qualify to be included in a separate arrangement between SoundExchange and these organizations where CPB, through an annual payment to SoundExchange, covers the royalties.  Check with NPR or CPB for details.

Remember, SoundExchange is watching the payment of these royalties.  Each year, SoundExchange decides to audit certain webcasters and the payments that they have made.  When it decides to audit a webcaster, it must give notice to the CRB, which publishes that notice in the Federal Register (though the results of the audit are not made public).  This year, the CRB announced in a Federal Register publication that SoundExchange will audit broadcasters Audacy and Midwest Communications.  See our article here on IP audits and considerations to keep in mind if you are selected for such an audit.

The CRB itself has had a change in the final months of the year.  The CRB’s Chief Judge when last year’s decision was released, Jesse Feder, has stepped down and was replaced on an interim basis by Suzanne Barnett, who was Feder’s predecessor in the Chief Judge role until her retirement in 2019.  Expect to see more changes in this position as the year progresses.

Obviously, there was plenty of action on SoundExchange webcasting royalties for 2022.  Watch to see how these actions play out and watch for other music royalty issues that are also sure to come this new year (including possible resolution of broadcasters’ long-running disputes with GMR – see our article here).

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). There are no additional costs for the call; the advice is free as part of your MAB membership.