As music-licensing expert David Oxenford reminded attendees at the recently held 2008 Annual Broadcast Cable Financial Management Conference (BCFM), when operating in the digital world, this isn’t your daddy’s radio …or TV.
Many sessions at the Conference were devoted to the ways that media companies can expand their businesses and increase their revenues through online media opportunities. In keeping with the Association’s need to cover both sides of the ledger, Oxenford and several other experts tempered any irrational exuberance by providing a reality check about the music licensing and other copyright issues affecting Internet radio.
I want to call your attention to few examples of the issues addressed in Oxenford’s presentation that we need to keep in mind as we extend our businesses into the new media frontier:
Very different rules apply to Internet radio, podcasts and the use of copyrighted music in online video. While we are already familiar with the need to compensate music composers for public performances of their songs, many of our digital media enterprises must also address rules concerning sound recordings – the song as it is recorded by a particular artist. Digital services such as satellite radio, cable and Internet radio are required to pay royalties for the performance of a sound recording. These fees are in addition to the royalties paid to ASCAP, BMI and SESAC to compensate the composer for the online broadcast. The fees for the performance of a sound recording and are paid to SoundExchange, a nonprofit collective originally established by the RIAA.
SoundExchange distributes the fees to the copyright holders (typically the record companies) (50%), the featured artists (45 %) and the other musicians on the recording (5%).
Oxenford also recapped the restrictions that must be met to qualify to pay these royalties. They include:
Not pre-announcing when a particular song will play
Not playing three or more songs by a particular artist back-to-back
No more than four songs by the same artist in a three-hour period
No more than two songs from the same CD in a row
And the song, artist, and CD title must be identified in writing on the web site as the song is being played
2008 is the first year that stations must pay royalties for “performances” (a performance being one song played to one listener) rather than paying based on Aggregate Tuning Hours, a metric that most broadcasters used to pay their royalties in previous years No bills will be sent by SoundExchange and no contracts are required, however stations need to register with the Copyright Office before they start streaming, and must file reports of the number of performances they have made and make the required payments to SoundExchange 45 days after the end of each month.
Oxenford estimated that Internet radio stations playing 15 songs per hour would pay an average of $15.00 per month for each average listener they have (on a 24/7 basis)in 2008 and $20.50 per listener per month by 2010, based upon the SoundExchange fees that were approved last year by the Copyright Royalty Board. New proceedings in beginning in 2009 will determine the fees that will be assessed beginning in 2011.
While Internet broadcasts have a global reach, these rules apply only to the US market. If a station streams to listeners outside of the US, it may have liability for royalties to performing rights organizations in the countries where the listener resides.
Podcasts and music downloads are not covered by public performance fees. Instead, a separate copyright, one giving the owner the right to license the “reproduction” of the copyrighted material, is involved. To be legal, stations must get permission for the use of both the composition and the sound recording of the music. This also applies to synchronization rights issues. Whenever stations combine audio and video, or talk and music in a recorded fashion (for instance for use in an on-demand stream on a website), they aren’t covered by public performance rights, so the rights to each piece of music must be individually negotiated.
Oxenford also recapped the “Fair Use” rules. There are a number of factors that need to be considered in determining if there is a “fair use” for which no rights fees need to be paid. They are summarized in the online copy of Oxenford’s presentation, and involve the use of copyrighted material in a manner that does not affect its commercial exploitation by the copyright holder, and where the use has some socially redeeming quality (e.g. education, criticism, parody). But note that the creation of a “parody” of the copyrighted work (for instance a song) must be making fun of the song itself to be considered fair use – it can’t just be an appropriation of the music and the use of your own funny lyrics that have nothing to do with the original song.
He also reminded attendees that they need to carefully monitor their web sites to ensure that everything people can see on them does not give rise to any possible liability. Posting something on a website gives the world access to it. Stations need to be mindful that they have all rights to station logos, and slogans, as once they are posted online, if they have not been properly cleared, right holders in other parts of the country can discover your infringement. Similarly, stations need to be sure that they obtain all rights to materials created by independent contractors, so that there are no issues about when that material can be repurposed by the station on the Internet or in other new media formats.
While the web lends itself to audience interaction and posting user generated content, Oxenford stressed the importance of stations insulating themselves from tort and other legal liability and from copyright infringement. Stations must never encourage users to create content that violates any law or violates any copyright. To be immune from copyright infringement that may occur in user-generated content, the website owner must register a contact person with the Copyright Office, and take down any infringing content when they are notified of its existence by a copyright holder. To cover any possible on-line liability, stations should examine their liability insurance to make sure that their polices cover website issues.
This list of issues and perils associated with Internet operations can be intimidating, especially to the risk- averse members of our management teams. However, as the members of our organization have concluded, not being a part of the world of new media represents a much greater risk to the future of our companies. That’s why they also approved changing our name from BCFM – Broadcast Cable Financial Management Association to MFM – Media Financial Management Association. As RBR’s editors noted last week, “the financial folks at broadcast and cable companies already knew a lot about the financial issues of their traditional businesses. Also, why not try to bring in new media members not attached to radio, TV and cable companies, since their financial and regulatory issues are generally the same as the new media issues being faced by current BCFM…er, make that MFM…members.”
We appreciate both the support of RBR/TVBR (and other industry publications) as well as that of industry experts like David Oxenford. And we look forward to providing education and information about best practices to an even wider group of media financial professionals.
Mary M. Collins is President & CEO, Broadcast Cable Financial Management Association.