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[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Proposed Rules]
[Pages 103722-103726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29384]

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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 383

[Docket No. 23-CRB-0013-NSR (2026-2030)]

Determination of Rates and Terms for Digital Performance of Sound 
Recordings by New Subscription Services and Making of Ephemeral Copies 
To Facilitate Those Performances (NSS V)

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges are publishing for comment 
proposed regulations governing the rates and terms for the digital 
performances of sound recordings by new subscription services and for 
the making of ephemeral recordings necessary to facilitate those 
transmissions for the period commencing January 1, 2026, and ending on 
December 31, 2030.

DATES: Comments and objections, if any, are due no later than January 
21, 2025.

ADDRESSES: You may submit comments using eCRB, the Copyright Royalty 
Board's online electronic filing application, at https://app.crb.gov/.
    Instructions: To send your comment through eCRB, if you don't have 
a user account, you will first need to register for an account and wait 
for your registration to be approved. Approval of user accounts is only 
available during business hours. Once you have an approved account, you 
can only sign in and file your comment after setting up multi-factor 
authentication, which can be done at any time of day. All comments must 
include the Copyright Royalty Board name and the docket number for this 
proposed rule (23-CRB-0013-NSR (2026-2030)). All properly filed 
comments will appear without change in eCRB at https://app.crb.gov, 
including any personal information provided.
    Docket: For access to the docket, go to eCRB, the Copyright Royalty 
Board's electronic filing and case management system, at https://app.crb.gov/, and search for docket number 23-CRB-0013-NSR (2026-2030).

FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist, 
at (202) 707-7658 or [email protected].

SUPPLEMENTARY INFORMATION:

Background

    Section 114 of the Copyright Act, title 17 of the United States 
Code, provides a statutory license that allows for the public 
performance of sound recordings

[[Page 103723]]

by means of a digital audio transmission by, among others, new 
subscription services. 17 U.S.C. 114(f). For purposes of the section 
114 license, a ``new subscription service'' is a ``service that 
performs sound recordings by means of noninteractive subscription 
digital audio transmissions and that is not a preexisting subscription 
or preexisting satellite digital audio radio service.'' 17 U.S.C. 
114(j)(8).
    Services using the section 114 license may need to make one or more 
temporary or ``ephemeral'' copies of a sound recording to facilitate 
the transmission of that recording. The section 112 statutory license 
allows for the making of these ephemeral reproductions. 17 U.S.C. 
112(e).
    Chapter 8 of the Copyright Act requires the Judges to conduct 
proceedings every five years to determine the rates and terms for the 
sections 114 and 112 statutory licenses. 17 U.S.C. 801(b)(1), 
804(b)(3)(A). The current proceeding commenced in January 2024 for 
rates and terms that will become effective on January 1, 2026, and end 
on December 31, 2030. Pursuant to section 804(b)(3)(A), the Judges 
published in the Federal Register a notice commencing the proceeding 
and requesting that interested parties submit their petitions to 
participate. 89 FR 810 (Jan. 5, 2024). SoundExchange, Inc. 
(``SoundExchange''), Sirius XM Radio Inc. (``Sirius XM''), and Stingray 
Music USA Inc. (``Stingray''), each filed Petitions to Participate.
    The Judges gave notice to all participants of the three-month 
negotiation period required by 17 U.S.C. 803(b)(3) and directed that, 
if the participants were unable to negotiate a settlement, they should 
submit Written Direct Statements no later than September 13, 2024. On 
September 9, 2024, the Copyright Royalty Judges (Judges) received a 
joint motion from SoundExchange, Sirius XM, and Stingray to adopt a 
settlement of their interests regarding the rates and terms for 2026-
2030 for certain new subscription services (NSS). The parties request 
that the Judges adopt the settlement in its entirety as a settlement of 
rates and terms under sections 112(e) and 114 of the Copyright Act for 
new subscription services of the type at issue in the captioned 
proceeding, i.e., music services provided to residential subscribers as 
part of a cable or satellite television bundle subject to royalty rates 
and terms in 37 CFR part 383. Joint Motion to Adopt Partial Settlement 
at 1 (Joint Motion). SoundExchange represents sound recording copyright 
owners and performers. Sirius XM and Stingray rely on the royalty rates 
and terms in 37 CFR part 383. Joint Motion at 2. The Judges hereby 
publish the settlement and request comments.

Statutory Timing of Adoption of Rates and Terms

    Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to 
adopt royalty rates and terms negotiated by ``some or all of the 
participants in a proceeding at any time during the proceeding'' 
provided they are submitted to the Judges for approval. The Judges must 
provide ``an opportunity to comment on the agreement'' to participants 
and non-participants in the rate proceeding who ``would be bound by the 
terms, rates, or other determination set by any agreement. . . .'' 17 
U.S.C. 801(b)(7)(A)(i). Participants in the proceeding may also 
``object to [the agreement's] adoption as a basis for statutory terms 
and rates.'' Id.
    The Judges ``may decline to adopt the agreement as a basis for 
statutory terms and rates for participants that are not parties to the 
agreement,'' only ``if any participant [in the proceeding] objects to 
the agreement and the [Judges] conclude, based on the record before 
them if one exists, that the agreement does not provide a reasonable 
basis for setting statutory terms or rates,'' 17 U.S.C. 
801(b)(7)(A)(ii), or where the negotiated agreement includes provisions 
that are contrary to the provisions of the applicable license(s) or 
otherwise contrary to statutory law. See Scope of the Copyright Royalty 
Judges Authority to Adopt Confidentiality Requirements upon Copyright 
Owners within a Voluntarily Negotiated License Agreement, 78 FR 47421, 
47422 (Aug. 5, 2013), citing 74 FR 4537, 4540 (Jan. 26, 2009).

Proposed Adjustments to Rates and Terms

    According to SoundExchange, Sirius XM, and Stingray, the settlement 
incorporates the same royalty rate structure presently set forth in 37 
CFR part 383 except that annual increases in the per-subscriber fees 
are to be based on changes in the Consumer Price Index for All Urban 
Consumers, rather than being pre-negotiated as during the current rate 
period. Thus, the statutory royalty rates for 2026 are to be based on 
an inflation adjustment to the 2025 rates currently provided in Sec.  
383.3(a), and the rates for each subsequent year of the royalty period 
are to be determined by a similar adjustment.
    The Parties have also agreed that the applicable terms used in part 
383 should be those finally determined in the Web VI proceeding (Docket 
No. 23-CRB-0012-WR (2026-2030)), except for (1) the provisions 
concerning auditing of payments and distributions, which are 
substantively the same as those currently in effect for new 
subscription services of the type at issue in the proceeding, and (2) a 
provision addressing distribution of royalties, which includes language 
based on that in 37 CFR 384.4(i)(1) and 370.4(f) permitting 
SoundExchange to use proxy data to distribute royalties when it is not 
able to obtain a usable report of use from a Licensee. In other 
respects, the Settlement preserves the existing provisions of part 383 
with only minor updating. Joint Motion at 2-3.
    The fact that the Settlement incorporates terms that have not yet 
been established in the Web VI proceeding may raise concern as to 
whether participants and non-participants in the rate proceeding who 
would be bound by the terms, rates, or other determination set by any 
agreement are properly afforded the aforementioned statutory 
opportunities to object or comment on the agreement. However, the 
Judges take notice that it is not inappropriate for agreements to 
incorporate and/or rely in part on events, facts or determinations that 
have not yet been established, e.g., references to adjustments based on 
yet to be determined consumer price index measurements. The Judges are 
also mindful that Congress intended to facilitate and encourage 
settlement agreements. See, H.R. Rep. No. 108-408, at 24 and 30 (2002). 
Accordingly, objectors and commenters may knowingly and willingly 
choose to accept some uncertainty as to future settlement terms and a 
reference to an outside method for resolving the uncertain issues. The 
Judges do not express an opinion as to the extent to which any persons 
or entities who would otherwise be bound by this settlement may have a 
subsequent right to challenge the applicability of as yet non-existent 
terms.
    Therefore, the Judges publish the Settlement with the current 
understanding that doing so is in compliance with the statutory 
opportunities to object or comment on the agreement.
    Those who would be bound by the terms, rates, or other 
determination set by the agreement may comment and proceeding 
participants may object to any or all of the proposed regulations 
contained in this document.\1\ Such

[[Page 103724]]

comments and objections must be submitted no later than January 21, 
2025.
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    \1\ The parties represent that SoundExchange, Sirius XM, and 
Stingray, all of which have joined in the Joint Motion, are the only 
parties that have filed petitions to participate in this proceeding 
and, therefore, ``there is no basis for the Judges not to adopt the 
Settlement as the statutory terms and rates under [s]ection 112(e) 
and 114 for services relying on the royalty rates and terms in 37 
CFR [p]art 383.'' Joint Motion at 3.
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List of Subjects in 37 CFR Part 383

    Copyright, Sound recordings, Webcasters.

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges propose to revise 37 CFR part 383 to read as follows:

PART 383--RATES AND TERMS FOR SUBSCRIPTION TRANSMISSIONS AND THE 
REPRODUCTION OF EMPHEMERAL RECORDINGS BY CERTAIN NEW SUBSCRIPTION 
SERVICES

Sec.
383.1 General.
383.2 Definitions.
383.3 Royalty fees for public performances of sound recordings and 
the making of ephemeral recordings.
383.4 Distribution of royalties.
383.5 Auditing payments and distributions.
383.6 Terms for making payment of royalty fees.

    Authority: 17 U.S.C. 112(e), 114, and 801(b)(1).

Sec.  383.1  General.

    (a) Scope. This part establishes rates and terms of royalty 
payments for the public performance of sound recordings in certain 
digital transmissions by Licensees in accordance with the provisions of 
17 U.S.C. 114, and the making of certain ephemeral recordings by 
Licensees in accordance with the provisions of 17 U.S.C. 112(e), during 
the period commencing January 1, 2026, and continuing through December 
31, 2030.
    (b) Legal compliance. Licensees relying upon the statutory licenses 
set forth in 17 U.S.C. 112(e) and 114 shall comply with the 
requirements of those sections and the rates and terms of this part.
    (c) Relationship to voluntary agreements. Notwithstanding the 
royalty rates and terms established in this part, the rates and terms 
of any voluntary license agreements entered into by Copyright Owners 
and Licensees shall apply in lieu of the rates and terms of this part 
to transmissions with the scope of such agreements.

Sec.  383.2  Definitions.

    For purposes of this part, the following definitions shall apply:
    (a) Bundled Contracts means contracts between the Licensee and a 
Provider in which the Service is not the only content licensed by the 
Licensee to the Provider.
    (b) Collective means the collection and distribution organization 
that is designated by the Copyright Royalty Judges, and which, for the 
current rate period, is SoundExchange, Inc.
    (c) Copyright Owner means a sound recording copyright owner, or a 
rights owner under 17 U.S.C. 1401(l)(2), who is entitled to receive 
royalty payments made under this part pursuant to the statutory 
licenses under 17 U.S.C. 112(e) and 114.
    (d) License Period means the period commencing January 1, 2026, and 
continuing through December 31, 2030.
    (e) Licensee is a person that has obtained statutory licenses under 
17 U.S.C. 112(e) and 114, and the implementing regulations in this 
part, to make digital audio transmissions as part of a Service (as 
defined in this section), and ephemeral recordings for use in 
facilitating such transmissions.
    (f) Payor means the entity required to make royalty payments to the 
Collective or the entity required to distribute royalty fees collected, 
depending on context. The Payor is:
    (1) A Licensee, in relation to the Collective; and
    (2) The Collective in relation to a Copyright Owner or Performer.
    (g) Performers means the independent administrators identified in 
17 U.S.C. 114(g)(2)(B) and (C) and the parties identified in 17 U.S.C. 
114(g)(2)(D).
    (h) Provider means a ``multichannel video programming distributor'' 
as that term is defined in 47 CFR 76.1000(e); notwithstanding such 
definition, for purposes of this part, a Provider shall include only a 
distributor of programming to televisions, such as a cable or satellite 
television provider.
    (i) Qualified auditor means a Certified Public Accountant 
independent within the meaning of the American Institute of Certified 
Public Accountants Code of Professional Conduct.
    (j) Service is a non-interactive (consistent with the definition of 
``interactive service'' in 17 U.S.C. 114(j)(7)) audio-only subscription 
service (including accompanying information and graphics related to the 
audio) that is transmitted to residential subscribers of a television 
service through a Provider which is marketed as and is in fact 
primarily a video service where:
    (1) Subscribers do not pay a separate fee for audio channels.
    (2) The audio channels are delivered by digital audio transmissions 
through a technology that is incapable of tracking the individual sound 
recordings received by any particular consumer.
    (3) However, paragraph (j)(2) of this section shall not apply to 
the Licensee's current contracts with Providers that are in effect as 
of the effective date of this part if such Providers become capable in 
the future of tracking the individual sound recordings received by any 
particular consumer, provided that the audio channels continued to be 
delivered to Subscribers by digital audio transmissions and the 
Licensee remains incapable of tracking the individual sound recordings 
received by any particular consumer.
    (k) Subscriber means every residential subscriber to the underlying 
service of the Provider who receives Licensee's Service in the United 
States for all or any part of a month; provided, however, that for any 
Licensee that is not able to track the number of subscribers on a per-
day basis, ``Subscribers'' shall be calculated based on the average of 
the number of subscribers on the last day of the preceding month and 
the last day of the applicable month, unless the Service is paid by the 
Provider based on end-of-month numbers, in which event ``Subscribers'' 
shall be counted based on end-of-month data.
    (l) Stand-Alone Contracts means contracts between the Licensee and 
a Provider in which the only content licensed to the Provider is the 
Service.

Sec.  383.3  Royalty fees for public performances of sound recordings 
and the making of ephemeral recordings.

    (a) Royalty rates. Royalty rates for the public performance of 
sound recordings by eligible digital transmissions made over a Service 
pursuant to 17 U.S.C. 114, and for ephemeral recordings of sound 
recordings made pursuant to 17 U.S.C. 112(e) to facilitate such 
transmissions during the License Period, are as follows. For 2026, each 
Licensee will pay, with respect to content covered by the License that 
is provided via the Service of each such Licensee:
    (1) For Stand-Alone Contracts, a monthly payment of [amount to be 
calculated in November 2025 and published in December 2025 in the final 
rule] per Subscriber to the Service of such Licensee, which is 
equivalent to the 2025 royalty rate of $0.0234, as adjusted by the 
annual royalty fee adjustment in paragraph (b) of this section.
    (2) For Bundled Contracts, a monthly payment of [amount to be 
calculated in November 2025 and published in December 2025 in the final 
rule] per Subscriber to the Service of such

[[Page 103725]]

Licensee, which is equivalent to the 2025 royalty rate of $0.0390, as 
adjusted by the annual royalty fee adjustment in paragraph (b) of this 
section.
    (b) Annual royalty fee adjustment. (1) The Copyright Royalty Judges 
shall adjust the royalty fees each year, as described in paragraph 
(b)(2) of this section, beginning with the fees for 2026, to reflect 
any changes occurring in the cost of living as determined by the most 
recent Consumer Price Index for All Urban Consumers (U.S. City Average, 
all items) (CPI-U) published by the Secretary of Labor before December 
1 of the preceding year.
    (2)(i) The calculation of the rate for each year shall be 
cumulative based on a calculation of the percentage increase in the 
CPI-U from the CPI-U published in November, 2024 (CPI-U%) and shall be 
made according to the following formulas:
    (A) For Stand-Alone Contracts, (1 + (Cy-315.664/315.664) 
x $0.0234; and
    (B) For Bundled Contracts, (1 + (Cy-315.664/315.664) x 
$0.0390; and
    (ii) For both formulas Cy is the CPI-U published by the 
Secretary of Labor before December 1 of the preceding year. The 
adjusted rate shall be rounded to the nearest fourth decimal place.
    (3) The Judges shall publish notice of the adjusted fees in the 
Federal Register at least 25 days before January 1 of each year of the 
License Period. The adjusted fees shall be effective on January 1 of 
each year of the License Period for such year.
    (c) Minimum fee. Each Licensee will pay an annual, non-refundable 
minimum fee of one hundred thousand dollars ($100,000), payable on 
January 31 of each calendar year in which the Service is provided 
pursuant to statutory licenses under 17 U.S.C. 112(e) and 114. Such fee 
shall be recoupable and credited against royalties due in the calendar 
year for which the payment is made.
    (d) Allocation between ephemeral recordings fees and performance 
royalty fees. The Collective must credit 5% of all royalty payments as 
royalty payment for Ephemeral Recordings and credit the remaining 95% 
to royalties under 17 U.S.C. 114. All Ephemeral Recordings that a 
Licensee makes which are necessary and commercially reasonable for 
making noninteractive digital transmissions through a Service are 
included in the 5%.

Sec.  383.4  Distribution of royalties.

    The Collective must promptly distribute royalties received from 
Licensees to Copyright Owners and Performers that are entitled thereto, 
or to their designated agents. The Collective shall only be responsible 
for making distributions to those who provide the Collective with 
information as is necessary to identify and pay the correct recipient. 
The Collective must distribute royalties on a basis that values all 
usage by a Licensee equally based upon the information provided under 
the Reports of Use requirements for Licensees pursuant to Sec.  370.4 
of this chapter and this part. However, in any case in which a Licensee 
has not provided a compliant Report of Use, whether for the License 
Period or otherwise, and the board of directors of the Collective 
determines that further efforts to seek the missing Report of Use from 
the Licensee would not be warranted, the Collective may distribute the 
royalties associated with the Licensee's missing Report of Use on the 
basis of Reports of Use for the corresponding calendar year filed by 
other Licensees.

Sec.  383.5  Auditing payments and distributions.

    (a) General. This section prescribes procedures by which any entity 
entitled to receive payment or distribution of royalties may verify 
payments or distributions by auditing the Payor. The Collective may 
audit a Licensee's payments of royalties to the Collective, and a 
Copyright Owner or Performer may audit the Collective's distributions 
of royalties to the Copyright Owner or Performer. Nothing in this 
section shall preclude a verifying entity and the Payor from agreeing 
to verification methods in addition to or different from those set 
forth in this section.
    (b) Frequency of auditing. The verifying entity may conduct an 
audit of each Licensee only once a year for any or all of the prior 
three calendar years. A verifying entity may not audit records for any 
calendar year more than once.
    (c) Notice of intent to audit. The verifying entity must file with 
the Copyright Royalty Judges a notice of intent to audit the Payor, 
which notice the Judges must publish in the Federal Register within 30 
days of the filing of the notice. Simultaneously with the filing of the 
notice, the verifying entity must deliver a copy to the Payor.
    (d) The audit. The audit must be conducted during regular business 
hours by a qualified auditor who is not retained on a contingency fee 
basis and is identified in the notice. The auditor shall determine the 
accuracy of royalty payments or distributions, including whether an 
underpayment or overpayment of royalties was made. An audit of books 
and records, including underlying paperwork, performed in the ordinary 
course of business according to generally accepted auditing standards 
by a qualified auditor, shall serve as an acceptable verification 
procedure for all parties with respect to the information that is 
within the scope of the audit.
    (e) Access to third-party records for audit purposes. The Payor 
must use commercially reasonable efforts to obtain or to provide access 
to any relevant books and records maintained by third parties for the 
purpose of the audit.
    (f) Duty of auditor to consult. The auditor must produce a written 
report to the verifying entity. Before rendering the report, unless the 
auditor has a reasonable basis to suspect fraud on the part of the 
Payor, the disclosure of which would, in the reasonable opinion of the 
auditor, prejudice any investigation of the suspected fraud, the 
auditor must review tentative written findings of the audit with the 
appropriate agent or employee of the Payor in order to remedy any 
factual errors and clarify any issues relating to the audit; provided 
that an appropriate agent or employee of the Payor reasonably 
cooperates with the auditor to remedy promptly any factual errors or 
clarify any issues raised by the audit. The auditor must include in the 
written report information concerning the cooperation or the lack 
thereof of the employee or agent.
    (g) Audit results; underpayment or overpayment of royalties. If the 
auditor determines the Payor underpaid royalties, the Payor shall remit 
the amount of any underpayment determined by the auditor to the 
verifying entity, together with interest at the rate specified in Sec.  
380.2(d) of this chapter. In the absence of mutually agreed payment 
terms, which may, but need not, include installment payments, the Payor 
shall remit promptly to the verifying entity the entire amount of the 
underpayment determined by the auditor. If the auditor determines the 
Payor overpaid royalties, however, the verifying entity shall not be 
required to remit the amount of any overpayment to the Payor, and the 
Payor shall not seek by any means to recoup, offset, or take a credit 
for the overpayment, unless the Payor and the verifying entity have 
agreed otherwise.
    (h) Paying the costs of the audit. The verifying entity must pay 
the cost of the verification procedure, unless the auditor determines 
that there was a net underpayment (i.e., underpayments less any 
overpayments) of 10% or more, in which case the Payor must bear the 
reasonable costs of the verification procedure, in addition to paying 
or distributing the amount of any underpayment.

[[Page 103726]]

    (i) Retention of audit report. The verifying party must retain the 
report of the audit for a period of not less than three years from the 
date of issuance.

Sec.  383.6  Terms for making payment of royalty fees.

    (a) Terms in general. Subject to the provisions of this section, 
terms governing timing and due dates of royalty payments to the 
Collective, late fees, statements of account, audit and verification of 
royalty payments and distributions, retention of records requirements, 
treatment of Licensees' confidential information, distribution of 
royalties by the Collective, unclaimed funds, designation of the 
Collective, and any definitions for applicable terms not defined in 
this part and not otherwise inapplicable shall be those adopted by the 
Copyright Royalty Judges for digital audio transmission and the 
reproduction of ephemeral recordings by Commercial Webcasters in part 
380, subpart A, of this chapter, for the License Period. For purposes 
of this part, the term ``Collective'' refers to the collection and 
distribution organization that is designated by the Copyright Royalty 
Judges. For the License Period, the sole Collective is SoundExchange, 
Inc.
    (b) Reporting of performances. Without prejudice to any applicable 
notice and recordkeeping provisions, statements of account shall not 
require reports of performances.
    (c) Applicable regulations. To the extent not inconsistent with 
this part, all applicable regulations, including part 370 of this 
chapter, shall apply to activities subject to this part.

    Dated: December 10, 2024.
David P. Shaw,
Chief Copyright Royalty Judge.
[FR Doc. 2024-29384 Filed 12-18-24; 8:45 am]
BILLING CODE 1410-72-P
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