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SECTION. 1. SHORT TITLE. 
This Act may be cited as the ‘‘Small Webcaster 
Amendments Act of 2002’’. 
SEC. 2. EPHEMERAL ROYALTY RATES FOR ELIGIBLE SMALL 
WEBCASTERS. 
Section 112(e) of title 17, United States Code, is 
amended—
(1) in paragraph (4), by inserting immediately 
before the period at the end of the first sentence the 
following: ‘‘, except that the royalty payable under 
this section for any reproduction of a phonorecord 
made during the period beginning on October 28, 
1998, and ending on December 31, 2004, and used 
solely by an eligible small webcaster to facilitate 
transmissions for which it pays royalties as and 
when provided in section 114(f)(2)(D) shall be 
deemed to be included within such royalty pay-
ments’’; and 
(2) in paragraph (6), by adding at the end the 
following: ‘‘Notwithstanding the preceding provisions 
of this paragraph, the royalty payable under this 
section for any reproduction of a phonorecord made 
during the period beginning on October 28, 1998, 
and ending on December 31, 2004, and used solely 
by an eligible small webcaster to facilitate trans-
missions for which it pays royalties as and when
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provided in section 114(f)(2)(D) shall be deemed to 
be included within such royalty payments.’’
SEC. 3. ROYALTY RATES AND NOTICE AND RECORD-
KEEPING 
FOR 
ELIGIBLE 
SMALL 
WEBCASTERS. 
(a) PROVISION
FOR
CERTAIN
RATES.—Section 
114(f)(2) of title 17, United States Code, is amended—
(1) in subparagraph (B), by inserting imme-
diately before the period at the end of the first sen-
tence the following: ‘‘, except that the royalty rates 
for certain public performances of sound recordings 
shall be as provided in subparagraph (D)’’; and 
(2) in subparagraph (C), by adding after clause 
(iii) the following: 
‘‘(iv) Notwithstanding the preceding provisions 
of this subparagraph, the royalty rates and terms 
for certain public performances of sound recordings 
by certain entities shall be as provided in subpara-
graph (D).’’. 
(b) RATES FOR ELIGIBLE SMALL WEBCASTERS.—
Section 114(f)(2) of title 17, United States Code, is 
amended by adding after subparagraph (C) the following: 
‘‘(D)(i) Subject to clause (iii) and paragraph 
(3), but notwithstanding any other provision of this 
paragraph, an eligible small webcaster may, as pro-
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vided in clause (ii)(VII), for the period beginning on 
October 28, 1998, and ending on December 31, 
2002, or one or both of calendar years 2003 and 
2004, elect the royalty rates specified in this clause 
in lieu of any other applicable royalty rates: 
‘‘(I) For eligible nonsubscription trans-
missions made by an eligible small webcaster 
during the period beginning on October 28, 
1998, and ending on December 31, 2002, the 
royalty rate shall be 8 percent of the 
webcaster’s gross revenues during such period, 
or 5 percent of the webcaster’s expenses during 
such period, whichever is greater, except that 
an eligible small webcaster that is a natural 
person shall exclude from expenses those ex-
penses not incurred in connection with the oper-
ation of a service that makes eligible non-
subscription transmissions, and an eligible small 
webcaster that is a natural person shall exclude 
from gross revenues his or her income during 
such period, other than income derived from—
‘‘(aa) a media or entertainment re-
lated business that provides audio or other 
entertainment programming, or
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‘‘(bb) a business that primarily oper-
ates an Internet or wireless service, 
that is in either case directly or indirectly con-
trolled by such natural person, or of which such 
natural person beneficially owns 5 percent or 
more of the outstanding voting or non-voting 
stock. 
‘‘(II) For eligible nonsubscription trans-
missions made by an eligible small webcaster 
during 2003 or 2004, the royalty rate shall be 
10 percent of the eligible small webcaster’s first 
$250,000 in gross revenues and 12 percent of 
any gross revenues in excess of $250,000 dur-
ing the applicable year, or 7 percent of the 
webcaster’s expenses during the applicable year, 
whichever is greater. 
‘‘(ii) Notwithstanding paragraph (4)(C), pay-
ment of the amounts specified in clause (i) shall be 
made as follows: 
‘‘(I) Except as provided in clause (iii)(I) 
and (IV), the amounts specified in clause (i)(I) 
for eligible nonsubscription transmissions made 
by an eligible small webcaster during the period 
beginning on October 28, 1998, and ending on 
September 30, 2002, shall be paid in three
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equal installments, with the first due by No-
vember 30, 2002, the second due by May 31, 
2003, and the third due by October 31, 2003. 
‘‘(II) The amounts specified in clause (i) 
for eligible nonsubscription transmissions made 
by an eligible small webcaster during October 
2002 or any month thereafter shall be paid on 
or before the twentieth day of the month next 
succeeding such month. 
‘‘(III) If the gross revenues, plus the third 
party participation revenues and revenues from 
the operation of new subscription services, of a 
transmitting entity and its affiliates have not 
exceeded $1,250,000 in any year, and the 
transmitting entity expects to be an eligible 
small webcaster in 2003 or 2004, the transmit-
ting entity may make payments for 2003 or 
2004, as the case may be, on the assumption 
that it will be an eligible small webcaster for 
that year for so long as that assumption is rea-
sonable. 
‘‘(IV) In making payments under clause 
(i)(II), the webcaster shall, at the time a pay-
ment is due, calculate its gross revenues and 
expenses for the year through the end of the
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applicable month, and for the applicable month 
pay the applicable percentage of gross revenues 
or expenses, as the case may be, for the year 
through the end of the applicable month, less 
any amounts previously paid for such year. 
‘‘(V) If a transmitting entity has made 
payments under clause (i)(II) for 2003 or 2004 
based on the assumption that it will qualify as 
an eligible small webcaster, as provided in sub-
clause (IV), but the actual gross revenues in 
2003, or the actual gross revenues, third party 
participation revenues, and revenues from the 
operation of new subscription services in 2004, 
of the eligible small webcaster and its affiliates, 
exceed the maximum amounts provided in 
clause (vi)(II), then the transmitting entity 
shall immediately commence to pay monthly 
royalties based on the royalty rates otherwise 
applicable under this subsection, and on the 
third payment date after the month in which 
such maximum amounts are exceeded, it shall 
pay an amount of royalties based on such other-
wise applicable rates for the whole year through 
the end of the immediately preceding month,
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less any amounts previously paid under clause 
(i) for such year. 
‘‘(VI) Payments of all amounts specified in 
clause (i) shall be made to the entity designated 
by the Copyright Office to receive royalty pay-
ments under this section and shall under no cir-
cumstances be refundable, but if an eligible 
small webcaster makes overpayments during a 
year, it shall be entitled to a credit in the 
amount of its overpayment, and such credit 
shall be applicable to its payments in subse-
quent years. 
‘‘(VII) An eligible small webcaster that 
wishes to elect the royalty rates specified in 
clause (i) in lieu of any other royalty rates that 
otherwise might apply under this subsection for 
the period beginning on October 28, 1998, and 
ending on December 31, 2002, or one or both 
of calendar years 2003 and 2004, shall file an 
election with the Copyright Office and serve it 
on each entity designated by the Copyright Of-
fice to distribute royalty payments under this 
section to copyright owners and performers en-
titled to receive royalties under subsection 
(d)(2) by no later than the first date on which
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the webcaster is obligated under this clause to 
make a royalty payment for such period. An eli-
gible small webcaster that fails to make a time-
ly election shall pay royalties as otherwise pro-
vided under this section. As a condition of such 
election, an eligible small webcaster shall—
‘‘(aa) make available to the entity des-
ignated to receive royalties under this sec-
tion, on request at any time during the 3 
years following the applicable period, suffi-
cient evidence to support its eligibility as 
an eligible small webcaster; and 
‘‘(bb) provide to such entity, by not 
later than January 31 of the year following 
the applicable period, an accounting of its 
third party participation revenues. 
The entity designated to receive royalties under 
this section may share with individual copyright 
owners the accounting provided by an eligible 
small webcaster under division (bb) if such enti-
ty does so in such a way that the eligible small 
webcaster cannot readily be identified. 
‘‘(iii) Notwithstanding clause (i), eligible small 
webcasters that elect the royalty rates specified in
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clause (i) shall pay a minimum fee for the periods 
specified in this clause, as follows: 
‘‘(I) For eligible nonsubscription trans-
missions made by an eligible small webcaster 
during the period beginning on October 28, 
1998, and ending on December 31, 1998, the 
minimum fee for the year shall be $500. 
‘‘(II) For eligible nonsubscription trans-
missions made by an eligible small webcaster in 
any part of calendar years 1999 through 2002, 
the minimum fee for each year in which such 
transmissions are made shall be $2,000. 
‘‘(III) For eligible nonsubscription trans-
missions made by an eligible small webcaster in 
any part of calendar years 2003 and 2004, the 
minimum fee for each year in which such trans-
missions are made shall be $2,000 if the eligible 
small webcaster had gross revenues during the 
immediately preceding year of not more than 
$50,000 and expects to have gross revenues 
during the applicable year of not more than 
$50,000. 
‘‘(IV) For eligible nonsubscription trans-
missions made by an eligible small webcaster in 
any part of calendar years 2003 and 2004, the
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minimum fee for each year in which such trans-
missions are made shall be $5,000 if the eligible 
small webcaster had gross revenues during the 
immediately preceding year of more than 
$50,000 or expects to have gross revenues dur-
ing the applicable year of more than $50,000. 
‘‘(V) The minimum fees specified in sub-
clauses (I) and (II) shall be paid within 30 days 
after the date of the enactment of the Small 
Webcaster Amendments Act of 2002, except in 
the case of an eligible small webcaster with 
gross revenues during the period beginning on 
October 28, 1998, and ending on December 31, 
2002, of not more than $100,000, which may 
pay such minimum fees in three equal install-
ments at the times specified in clause (ii)(I). 
The minimum fees specified in subclauses (III) 
and (IV) shall be paid in two equal install-
ments, with the first due by January 31 of the 
applicable year and the second due by June 30 
of the applicable year. 
‘‘(VI) Payments of all amounts specified in 
this clause shall be made to the entity des-
ignated by the Copyright Office to receive roy-
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alty payments under this section and shall 
under no circumstances be refundable. 
‘‘(VII) All amounts paid under this clause 
shall be fully creditable toward amounts due 
under clauses (i) and (ii) for the same year. 
‘‘(iv) Subject to paragraph (3), but notwith-
standing any other provision of this paragraph, a 
noncommercial, non-FCC webcaster may, for the pe-
riod beginning on October 28, 1998, and ending on 
December 31, 2002, or one or both of calendar years 
2003 and 2004, elect the royalty rates specified in 
this clause in lieu of any other royalty rates that 
otherwise might apply under this section. The roy-
alty rate shall be .02 cents per performance. For the 
purpose of this clause, the term ‘performance’ has 
the meaning given that term in section 261.2 of title 
37, Code of Federal Regulations, as published in the 
Federal Register on July 8, 2002. Such royalties 
shall be payable at the times specified in clause 
(ii)(I) 
and 
(II). 
Noncommercial, 
non-FCC 
webcasters shall pay a minimum fee, for any part of 
calendar years 1998 through 2004, of $500 for each 
year in which such performances are made. Such 
minimum fee shall be fully creditable toward royal-
ties due for the same year. For performances made
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during the period beginning on October 28, 1998, 
and ending on December 31, 2002, such minimum 
fee shall be paid within 30 days after the date of the 
enactment of the Small Webcaster Amendments Act 
of 2002. The minimum fee for a subsequent year 
shall be paid by January 31 of that year. All pay-
ments specified in this clause shall be made to the 
entity designated by the Copyright Office to receive 
royalty payments under this section and shall under 
no circumstances be refundable. 
‘‘(v) Any otherwise applicable terms determined 
in accordance with this paragraph and applicable to 
payments under this paragraph shall apply to pay-
ments under this subparagraph except to the extent 
inconsistent with this subparagraph. 
‘‘(vi) The rates and terms set forth in this sub-
paragraph shall not constitute evidence of rates and 
terms that would have been negotiated in the mar-
ketplace between a willing buyer and a willing seller 
or that meet the objectives set forth in section 
801(b)(1). 
‘‘(E) As used in subparagraph (D), the fol-
lowing terms have the following meanings:
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‘‘(i) An ‘affiliate’ of a transmitting entity 
is a person or entity that directly, or indirectly 
through one or more intermediaries —
‘‘(I) has securities or other ownership 
interests representing more than 50 per-
cent of such person’s or entity’s voting in-
terests beneficially owned by—
‘‘(aa) such transmitting entity; or 
‘‘(bb) a person or entity bene-
ficially owning securities or other own-
ership interests representing more 
than 50 percent of the voting interests 
of the transmitting entity; 
‘‘(II) beneficially owns securities or 
other ownership interests representing 
more than 50 percent of the voting inter-
ests of the transmitting entity; or 
‘‘(III) otherwise controls, is controlled 
by, or is under common control with the 
transmitting entity. 
‘‘(ii) A ‘beneficial owner’ of a security or 
other ownership interest is any person or entity 
who, directly or indirectly, through any con-
tract, arrangement, understanding, relationship, 
or otherwise, has or shares voting power with
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respect to such security or other ownership in-
terest. 
‘‘(iii) The term ‘control’ means the posses-
sion, direct or indirect, of the power to direct 
or cause the direction of the management and 
policies of a person or entity, whether through 
the ownership of voting securities, by contract 
or otherwise. 
‘‘(iv)(I) Subject to subclause (II), an 
‘eligible small webcaster’ is a webcaster (as de-
fined in section 261.2 of title 37, Code of Fed-
eral Regulations, as published in the Federal 
Register on July 8, 2002) that—
‘‘(aa) for the period beginning on Oc-
tober 28, 1998, and ending on December 
31, 2002, has gross revenues during the 
period beginning on November 1, 1998, 
and ending on June 30, 2002, of not more 
than $1,000,000; 
‘‘(bb) for 2003, together with its af-
filiates, has gross revenues during 2003 of 
not more than $500,000; and 
‘‘(cc) for 2004, together with its affili-
ates, has gross revenues, third party par-
ticipation revenues, and revenues from the
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operation of new subscription services dur-
ing 2004 of not more than $1,250,000. 
‘‘(II) In determining qualification under 
subclauses (I)(bb) and (cc), a transmitting enti-
ty shall exclude—
‘‘(aa) income of an affiliate that is a 
natural person, other than income such 
natural person derives from another affil-
iate of such natural person that is either a 
media or entertainment related business 
that provides audio or other entertainment 
programming, or a business that primarily 
operates an Internet or wireless service; 
and 
‘‘(bb) gross revenues of any affiliate 
that is not engaged in a media or enter-
tainment related business that provides 
audio or other entertainment program-
ming, and is not engaged in a business 
that primarily operates an Internet or 
wireless service, if the only reason such af-
filiate is affiliated with the transmitting 
entity is that it is under common control 
of the same natural person or both are
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beneficially owned by the same natural 
person. 
‘‘(v) The term ‘expenses’—
‘‘(I) means all costs incurred (whether 
actually paid or not) by an eligible small 
webcaster, except that capital costs shall 
be treated as expenses allocable to a period 
only to the extent of charges for amortiza-
tion or depreciation of such costs during 
such period as are properly allocated to 
such period in accordance with United 
States generally accepted accounting prin-
ciples (GAAP); 
‘‘(II) includes the fair market value of 
all goods, services, or other non-cash con-
sideration (including real, personal, tan-
gible, and intangible property) provided by 
an eligible small webcaster to any third 
party in lieu of a cash payment and the 
fair market value of any goods or services 
purchased for or provided to an eligible 
small webcaster by an affiliate of such 
webcaster; and 
‘‘(III) shall not include—
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‘‘(aa) the imputed value of per-
sonal services rendered by up to 5 
natural persons who are, directly or 
indirectly, owners of the eligible small 
webcaster, and for which no com-
pensation has been paid; 
‘‘(bb) the imputed value of occu-
pancy of residential property for 
which no Federal income tax deduc-
tion is claimed as a business expense; 
or 
‘‘(cc) 
costs 
of 
purchasing 
phonorecords of sound recordings 
used in the eligible small webcaster’s 
service. 
‘‘(vi) The term ‘gross revenues’—
‘‘(I) means all revenue of any kind 
earned by a person or entity, less —
‘‘(aa) revenue from sales of 
phonorecords and digital phonorecord 
deliveries of sound recordings; 
‘‘(bb) the person or entity’s ac-
tual cost of other products and serv-
ices actually sold through a service 
that makes eligible nonsubscription
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transmissions, and related sales and 
use taxes imposed on such trans-
actions, costs of shipping such prod-
ucts, allowance for bad debts, and 
credit card and similar fees paid to 
unrelated third parties; 
‘‘(cc) revenue from the operation 
of a new subscription service for 
which royalties are paid in accordance 
with provisions of this section other 
than this subparagraph; and 
‘‘(dd) revenue from the sale of 
assets in connection with the sale of 
all or substantially all of the assets of 
such person’s or entity’s business, or 
from the sale of capital assets; and 
‘‘(II) includes—
‘‘(aa) all cash or cash equiva-
lents; 
‘‘(bb) the fair market value of 
goods, services, or other non-cash con-
sideration (including real, personal, 
tangible, and intangible property); and 
‘‘(cc) amounts earned by such 
person or entity but paid to an affil-
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iate of such person or entity in lieu of 
payment to such person or entity. 
Gross revenues shall be calculated in ac-
cordance with United States generally ac-
cepted accounting principles (GAAP), ex-
cept that a transmitting entity that com-
putes Federal taxable income on the basis 
of the cash receipts and disbursements 
method of accounting for any taxable year 
may compute its gross receipts for any pe-
riod included in such taxable year on the 
same basis. 
‘‘(vii) 
A 
‘noncommercial, 
non-FCC 
webcaster’ is a webcaster as defined in section 
261.2 of title 37, Code of Federal Regulations, 
as published in the Federal Register on July 8, 
2002, that is exempt from taxation under sec-
tion 501 of the Internal Revenue Code of 1986 
(26 U.S.C. 501). 
‘‘(viii) The ‘third party participation reve-
nues’ of a transmitting entity are revenues of 
any kind earned by a person or entity, other 
than the transmitting entity, including those 
identified in divisions (aa), (bb), and (cc) of 
clause (vi)(II)—
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‘‘(I) that relate to the public perform-
ance of sound recordings and are subject 
to an economic arrangement in which the 
transmitting entity receives anything of 
value; or 
‘‘(II) that are earned by such person 
or entity from the sale of advertising of 
any kind in connection with the transmit-
ting entity’s eligible nonsubscription trans-
missions.’’. 
(c) 
NOTICE
AND
RECORDKEEPING.—Section 
114(f)(4)(A) of title 17, United States Code, is amend-
ed—
(1) by striking ‘‘(A) The’’ and inserting ‘‘(A)(i) 
Subject to clauses (ii) and (iii), the’’; and 
(2) by adding at the end the following: 
‘‘(ii) For either or both of calendar years 2003 
and 2004, an eligible small webcaster that makes an 
election pursuant to paragraph (2)(D)(ii)(VII) for 
any year shall, for that year, keep records, and make 
available to copyright owners of sound recordings re-
ports of use, covering the following on a channel by 
channel basis: 
‘‘(I) The featured recording artist, group 
or orchestra.
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‘‘(II) The sound recording title. 
‘‘(III) The title of the retail album or other 
product (or, in the case of compilation albums 
created for commercial purposes, the name of 
the retail album identified by the eligible small 
webcaster for purchase of the sound recording). 
‘‘(IV) The marketing label of the commer-
cially available album or other product on which 
the sound recording is found—
‘‘(aa) for all albums or other products 
commercially released after 2002; and 
‘‘(bb) in the case of albums or other 
products 
commercially 
released 
before 
2003, for 67 percent of the eligible small 
webcaster’s digital audio transmissions of 
such pre-2003 releases during 2003 and all 
of the eligible small webcaster’s digital 
audio transmissions during 2004. 
‘‘(V) The International Standard Record-
ing Code (ISRC) embedded in the sound re-
cording, if available—
‘‘(aa) for all albums or other products 
commercially released after 2002; and 
‘‘(bb) in the case of albums or other 
products 
commercially 
released 
before
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2003, for 50 percent of the eligible small 
webcaster’s digital audio transmissions of 
such pre-2003 releases during 2003, and 
for 75 percent of the eligible small 
webcaster’s digital audio transmissions of 
such pre-2003 releases during 2004, to the 
extent that such information concerning 
such pre-2003 releases can be provided 
using commercially reasonable efforts. 
‘‘(VI) The copyright owner information 
provided in the copyright notice on the retail 
album or other product (e.g., following the sym-
bol (P) (the letter P in a circle) or, in the case 
of compilation albums created for commercial 
purposes, in the copyright notice for the indi-
vidual track)—
‘‘(aa) for all albums or other products 
commercially released after 2002; and 
‘‘(bb) in the case of albums or other 
products 
commercially 
released 
before 
2003, for 50 percent of an eligible small 
webcaster’s digital audio transmissions of 
such pre-2003 releases during 2003, and 
for 75 percent of an eligible small 
webcaster’s digital audio transmissions of
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such pre-2003 releases during 2004, to the 
extent that such information concerning 
such pre-2003 releases can be provided 
using commercially reasonable efforts. 
‘‘(VII) The aggregate tuning hours, on a 
monthly basis, for each channel provided by the 
eligible small webcaster as computed by a rec-
ognized industry ratings service or as computed 
by the eligible small webcaster from its server 
logs. For the purpose of this subclause, the 
term ‘aggregate tuning hours’ has the meaning 
given that term in section 261.2 of title 37, 
Code of Federal Regulations, as published in 
the Federal Register on July 8, 2002. 
‘‘(VIII) The channel for each transmission 
of each sound recording. 
‘‘(IX) The start date and time of each 
transmission of each sound recording. 
‘‘(iii) Reports of use described in clause (ii) 
shall be provided, at the same time royalty payments 
are due under paragraph (2)(D)(ii)(II), to the entity 
designated by the Copyright Office to distribute roy-
alty payments under this section. 
‘‘(iv) For calendar years 2003 and 2004, details 
of the means by which copyright owners may receive
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notice of the use of their sound recordings, and de-
tails of the requirements under which reports of use 
concerning the matters identified in clause (ii) shall 
be made available, shall be as provided in regula-
tions issued by the Librarian of Congress under 
clause (i).’’.
SEC. 4. DEDUCTIBILITY OF COSTS AND EXPENSES OF 
AGENTS AND DIRECT PAYMENT TO ARTISTS 
OF ROYALTIES FOR DIGITAL PERFORMANCES 
OF SOUND RECORDINGS. 
(a) FINDINGS.—The Congress finds that—
(1) in the case of royalty payments from the li-
censing of digital transmissions of sound recordings 
under subsection (f) of section 114 of title 17, 
United States Code, the parties have voluntarily ne-
gotiated arrangements under which payments shall 
be made directly to featured recording artists and 
the administrators of the accounts provided in sub-
section (g)(2) of that section; 
(2) such voluntarily-negotiated payment ar-
rangements have been codified in regulations issued 
by the Librarian of Congress, currently found in sec-
tion 261.4 of title 37, Code of Federal Regulations, 
as published in the Federal Register on July 8, 
2002;
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(3) other regulations issued by the Librarian of 
Congress were inconsistent with the voluntarily-ne-
gotiated arrangements by such parties concerning 
the deductibility of certain costs incurred for licens-
ing and arbitration, and the Congress is therefore 
restoring those terms as originally negotiated among 
the parties; and 
(4) in light of the special circumstances de-
scribed in this subsection, the uncertainty created by 
the regulations issued by the Librarian of Congress, 
and the fact that all of the interested parties have 
reached agreement, the voluntarily-negotiated ar-
rangements agreed to among the parties are being 
codified. 
(b) DEDUCTIBILITY.—Section 114(g) of title 17, 
United States Code, is amended by adding after para-
graph (2) the following: 
‘‘(3) A nonprofit agent designated to distribute 
receipts from the licensing of transmissions in ac-
cordance with subsection (f) may deduct from any of 
its receipts, prior to the distribution of such receipts 
to any person or entity entitled thereto, the reason-
able costs of such agent incurred after November 1, 
1995, in—
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‘‘(B) 2-1/2 percent of the receipts shall be 
deposited in an escrow account managed by an 
independent administrator jointly appointed by 
copyright owners of sound recordings and the 
American Federation of Musicians (or any suc-
cessor entity) to be distributed to nonfeatured 
musicians (whether or not members of the 
American Federation of Musicians) who have 
performed on sound recordings. 
‘‘(C) 2-1/2 percent of the receipts shall be 
deposited in an escrow account managed by an 
independent administrator jointly appointed by 
copyright owners of sound recordings and the 
American Federation of Television and Radio 
Artists (or any successor entity) to be distrib-
uted to nonfeatured vocalists (whether or not 
members of the American Federation of Tele-
vision and Radio Artists) who have performed 
on sound recordings. 
‘‘(D) 45 percent of the receipts shall be 
paid, on a per sound recording basis, to the re-
cording artist or artists featured on such sound 
recording (or the persons conveying rights in 
the artists’ performance in the sound record-
ings).’’.
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SEC. 5. REPORT TO CONGRESS. 
(a) FINDINGS.—The Congress finds that—
(1) eligible small webcasters have economic ar-
rangements with third parties, as a result of which 
third parties, many of them large businesses, realize 
a significant portion of the revenues generated from 
the use of sound recordings in the services operated 
by eligible small webcasters; and 
(2) as a result of these arrangements, any roy-
alty based on revenues realized by an eligible small 
webcaster may result in recording artists and sound 
recording copyright owners receiving a royalty based 
on revenues that are a fraction of the total revenues 
generated from the use of the sound recordings 
under statutory license. 
(b) REPORT TO CONGRESS.—By not later than June 
1, 2004, the Register of Copyrights and the Comptroller 
General of the United States shall prepare and submit to 
the Committee on the Judiciary of the House of Rep-
resentatives and the Committee on the Judiciary of the 
Senate a joint report concerning—
(1) the economic arrangements among eligible 
small webcasters and third parties and their con-
sequences for the ability of recording artists and 
sound recording copyright owners to be compensated 
appropriately on a percentage of revenue basis; and
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(2) the economic incentives that percentage of 
revenue statutory rates create for structuring eco-
nomic arrangements among eligible small webcasters 
and third parties that may be to the detriment of re-
cording artists and sound recording copyright own-
ers. 
(c) DEFINITION.—In this section, the term ‘‘eligible 
small webcaster’’ has the meaning given that term in sec-
tion 114(f)(2)(E) of title 17, United States Code, as added 
by section 3 of this Act. 
SEC. 6. EFFECTIVE DATE. 
The amendments made by this Act shall take effect 
on the date of the enactment of this Act.
Passed the House of Representatives October 7, 
2002. 
Attest: 
JEFF TRANDAHL, 
Clerk.