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Two media attorneys look toward tomorrow’s CRB announcement

The Copyright Royalty Board (CRB) will outline new webcaster royalty rates tomorrow (Wednesday). The rates will cover the 2016-2020 period. That announcement will momentous, shining a light into the future of webcasting generally, small webcasters in particular, and Pandora as the biggest brand and highest royalty payer in the Internet radio space. (See the RAIN Prep Sheet here.)

jay rosenthal

Jay Rosenthal

Jay Rosenthal, Partner at Mitchell Silberberg & Knupp LLP, predicts that the CRB will tread a moderate path through the middle of petitions for higher and lower rates. “Most likely, the Copyright Royalty Board (CRB) Judges will not change the rates significantly one way or another – and perhaps they might not change them at all,” Rosenthal commented in an email to RAIN News. Since the Copyright Office did not allow for two levels of rates, based on the size of the copyright owner, there is no way to reconcile the two opposing positions. The most sensible position for the CRB to take is that they will essentially push forward the rates as they are today.”

david leichtman

David Leichtman

For David Leichtman, partner at Robins Kaplan LLP, the CRB decision-making power should be wielded with a compass of fairness. “This is an issue of fundamental fairness. Fairness to the talent who creates the music and fairness to the labels who invest in incubating, guiding the development of, and distributing that music. While companies with billion-dollar market capitalizations and valuations complain that they pay a large share of their revenue in royalties, the fact is they have virtually no other overhead. Instead, unlike other businesses who pay even larger shares of their revenue to the key suppliers of their inputs, for some reason music broadcasters who have built their businesses on the backs of artists feel entitled to do so without fair and adequate compensation.”

Advocates of lower rates say that higher rates would not only threaten existing webcasters, but strangle competitive potential in the market, making costs too high for startups to try new ideas. Leichtman flips that equation, and notes that music creation might be at risk with what he calls “discounted” rates: “While music creators would like to see digital services succeed as a general matter, heavily discounted rates will discourage the creation of new music in both the short and long runs.”

Jay Rosenthal observes that Pandora has strategically hedged its bet on the CRB by forging a number of privately negotiated licensing deals, and that the CRB decision could affirm that course. “Of more significance to Pandora is their strategy of entering into more direct licenses, and resolving the pre-1972 cases. If the CRB does not increase the rate significantly, it will most likely be viewed as a win for Pandora, and will validate a continuation of their present strategy.”

Keep your browser parked at RAIN News for tomorrow’s announcement. It is the most important webcasting story of the year.

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Brad Hill

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