Among the creative works that U.S. copyright law protects are sound recordings, which the Copyright Act defines as "works that result from the fixation of a series of musical, spoken, or other sounds." Owners of copyrighted sound recordings have exclusive rights to reproduce, adapt, or distribute their works, or to perform them publicly by digital means. Normally, anyone who wants to exercise any of the copyright owner's exclusive rights must obtain the copyright owner's permission to do so, typically by direct negotiations between copyright owners and users. However, the copyright law also provides several types of statutory, or compulsory, licenses for sound recordings. These licenses allow third parties who pay statutorily prescribed fees to use copyrighted sound recordings under certain conditions and according to specific requirements, without having to negotiate private licensing agreements. In 1998, in the Digital Millennium Copyright Act (DMCA), Congress amended several statutory licensing statutes to provide for and clarify the treatment of different types of Internet broadcasting, or "webcasting." Some transmissions of sound recordings are exempt from the public performance right, for example, a nonsubscription broadcast transmission; a retransmission of a radio station's broadcast within 150 miles of its transmitter; and a transmission to a business establishment for use in the ordinary course of its business. In contrast, a digital transmission by an "interactive service" is not exempt from the public performance right, nor does it qualify for a statutory license. The owner of an interactive service--one that enables a member of the public to request or customize the music that he or she receives --must negotiate a license, including royalty rates, directly with copyright owners. But, two categories of webcasting that do qualify for a compulsory license are specified "preexisting" subscription services (existing at the time of the DMCA's enactment) and "an eligible nonsubscription transmission." A subscription service is one that is limited to paying customers. The broader category of webcasters who may qualify for the statutory license under 17 U.S.C. SS 114(d) are those who transmit music over the Internet on a nonsubscription, noninteractive basis. A licensee under SS 114 may also qualify for a statutory license under 17 U.S.C. SS 112(e) to make multiple "ephemeral"--or temporary--copies of sound recordings solely for the purpose of transmitting the work by an entity legally entitled to publicly perform it. The initial ratemaking proceeding for statutory royalty rates for webcasters for the period 1998 through 2005 (referred to as "Webcaster I") proved to be controversial, perhaps reflecting in some degree the relative newness of both the DMCA and webcasting activity. A Copyright Arbitration Royalty Panel (CARP) issued a recommendation for the initial statutory royalty rate for eligible nonsubscription webcasters on February 20, 2002. Small-scale webcasters objected to the proposed rates. In accordance with then-existing procedures, the Librarian of Congress, on the recommendation of the U.S. Copyright Office, rejected the CARP's recommendation and revised rates downward. Congress interceded as well with enactment of the Small Webcasters Settlement Act (SWSA) of 2002, P.L. 107-321 . Although very complex, the law permitted more options than the royalty rates established by the Librarian's order. Qualifying small webcasters, for example, could elect to pay royalties based on a percentage of revenue or expenses rather than on a per-song per-listener basis. The rate agreement made pursuant to SWSA was published in the Federal Register but not codified in the Code of Federal Regulations. However, by SWSA's own terms, its provisions were not to be considered in subsequent ratemaking proceedings. Subsequent to passage of the SWSA and the initial ratemaking proceeding, Congress substantially revised the underlying adjudicative process. Enactment of the Copyright Royalty and Distribution Reform Act of 2004, P.L. 108-419 , abolished the CARP system and substituted a Copyright Royalty Board composed of three standing Copyright Royalty Judges. Rates established pursuant to the original ratemaking determination and SWSA were to remain in effect through 2005. As required by law, in March 2007 the Copyright Royalty Board announced royalty rates for the period that commenced (retroactively) from January 1, 2006, through December 31, 2010. The general process for statutory license ratemaking factors in a three-month period, during which interested parties are encouraged to negotiate a settlement agreement. In the absence of an agreement, written statements and testimony are gathered, discovery takes place, hearings are held, and the Copyright Royalty Board issues a ruling. Notice announcing commencement of the "Webcaster II" proceedings was published on February 16, 2005. On March 9, 2007, the Copyright Royalty Board issued its decision, which was published as a Final Rule and Order on May 1, 2007. The final determination of the CRB establishes new rates for commercial and noncommercial webcasters who qualify for the SS 114 compulsory license; the decision is effective on July 15, 2007. Rates are as follows: For commercial webcasters: $.0008 per performance for 2006, $.0011 per performance for 2007, $.0014 per performance for 2008, $.0018 per performance for 2009, and $.0019 per performance for 2010. This includes fees for making an ephemeral recording under 17 U.S.C. SS 112. For noncommercial webcasters: (i) For Internet transmissions totaling less than 159,140 Aggregate Tuning Hours (ATH) a month, an annual per channel or per station performance royalty of $500 in 2006, 2007, 2008, 2009, and 2010. (ii) For Internet transmissions totaling more than 159,140 Aggregate Tuning Hours (ATH) a month, a performance royalty of $.0008 per performance for 2006, $.0011 per performance for 2007, $.0014 per performance for 2008, $.0018 per performance for 2009, and $.0019 per performance for 2010. These rates include fees for making an ephemeral recording under 17 U.S.C. SS 112. Minimum fee. Commercial and noncommercial webcasters will pay an annual, nonrefundable minimum fee of $500 for each calendar year or part thereof. This rate structure does not make special provision for "small" webcasters, who were addressed in the SWSA by reference to revenues. The standard for establishing rates, set forth by statute, is known as the "willing buyer/willing seller" standard. The determination is informed by the "Webcaster I" initial royalty proceedings of the CARP. In essence, both the previous CARP and the current Copyright Royalty Board attempt to implement the statutorily mandated standard to reach a royalty rate. Explaining its interpretation of the governing language, the CRB wrote the following: Webcaster I clarified the relationship of the statutory factors to the willing buyer/willing seller standard. The standard requires a determination of the rates that a willing buyer and willing seller would agree upon in the marketplace. In making this determination, the two factors in section 114(f)(2)(B)(i) and (ii) must be considered, but neither factor defines the standard. They do not constitute additional standards, nor should they be used to adjust the rates determined by the willing buyer/willing seller standard. The statutory factors are merely to be considered, along with other relevant factors, to determine the rates under the willing buyer/willing seller standard. The board considered the proposals of representatives for "small" webcasters that rates be structured as a percentage of revenue, but ultimately rejected them: In short, among the parties on both sides who have proposed rates covering Commercial Webcasters, only Small Commercial Webcasters propose a fee structure based solely on revenue. However, in making their proposal, this group of five webcasters clearly is unconcerned with the actual structure of the fee, except to the extent that a revenue-based fee structure--especially one in which the percent of revenue fee is a single digit number (i.e., 5%)--can protect them against the possibility that their costs would ever exceed their revenues.... Small Commercial Webcasters' focus on the amount of the fee, rather than how it should be structured, is further underlined by the absence of evidence submitted by this group to identify a basis for applying a pure revenue-based structure to them. While, at times, they suggest that their situation as small commercial webcasters requires this type of structure, there is no evidence in the record about how the Copyright Royalty Judges would delineate between small webcasters and large webcasters. And, in a substantive footnote, the board expressed its view that it lacks statutory authority to carve out royalty rate niches for the emergent business models promoted by small commercial webcasters: It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant. Indeed, the normal free market processes typically weed out those entities that have poor business models or are inefficient. To allow inefficient market participants to continue to use as much music as they want and for as long a time period as they want without compensating copyright owners on the same basis as more efficient market participants trivializes the property rights of copyright owners. Furthermore, it would involve the Copyright Royalty Judges in making a policy decision rather than applying the willing buyer/willing seller standard of the Copyright Act. In setting the rates, the board looked to proposed "benchmark" agreements to determine what a hypothetical buyer and seller would agree to in the marketplace. It rejected the proposals advanced by the radio broadcasters and small commercial webcasters that the appropriate benchmark was the fee paid to performing rights organizations (PROs), such as ASCAP, BMI and SESAC, for the digital public performance of the underlying musical composition. It also rejected a proposal that analog over-the-air broadcast music radio be used as a benchmark, with reference to musical composition royalties paid by such broadcasters to the PROs. Based on the evidence before it, the Copyright Royalty Board found that the most appropriate benchmark agreements are those in the market for interactive webcasting covering the digital performance of sound recordings, with appropriate adjustments. In summary, the Copyright Royalty Board's decision, like that of its predecessor, the CARP, declines to delineate a separate class or to integrate a separate market analysis on behalf of "small" webcasters. The expiration of the option to pay a percentage of revenues, to be replaced by a minimum payment, per-song per-listener formula, was, predictably, not well received in the small webcasting business community, among others. Some Members of Congress voiced concern as well. What follows below are descriptions of the responses to the CRB decision in different settings: the negotiating table, the federal courts, and the Congress. Following the issuance of the CRB decision, private negotiations between SoundExchange, the organization charged with collecting and distributing performance royalties, and both large and small webcasters were initiated in an attempt to reach a compromise royalty rate agreement that would serve as an alternative to the payment scheme provided by the CRB decision. In response to a request from the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property, SoundExchange offered in May 2007 to extend the terms of the Small Webcaster Settlement Act of 2002, with some modifications, to certain qualified small webcasters through 2010. "Small" webcasters, those with annual revenues of less than $1.25 million, could pay royalties based on a percentage of revenue model, that is, fees of 10% of all gross revenue up to $250,000, and 12% for gross revenue above that amount. SoundExchange's proposal for small webcasters, however, was met by criticism that the deal would effectively restrict small webcasters from becoming larger, more profitable businesses and would limit the diversity of music that may be played. Another proposal that was discussed and subsequently agreed to between several of the largest webcasters and SoundExchange is a $50,000 per year cap on the $500 annual-per-channel minimum fee through 2010. In exchange for this cap, the webcasters agreed to provide SoundExchange with a comprehensive annual accounting of all songs performed (24 hours a day, 365 days a year) and to form a committee with SoundExchange to evaluate the issue of unauthorized copying of Internet radio streams (a practice known as "streamripping," or the process of converting ephemeral Internet-streamed content into permanent recordings). The agreement does not require webcasters to implement technological measures aimed at preventing their listeners from engaging in streamripping, however. In a unilateral offer put forth by SoundExchange, qualified small webcasters (those earning $1.25 million or less in total revenues) would be permitted to stream sound recordings of all SoundExchange members by paying royalties under the old percentage-of-revenue scheme. Over 20 small webcasters have since accepted this offer, the terms of which are retroactive to January 1, 2006, and continue through December 31, 2010. Parties to the "Webcaster II" proceeding before the CRB appealed the board's decision. On April 16, 2007, the Copyright Royalty Board issued an order denying rehearing. On May 30, 2007, several parties, including the Digital Media Association, National Public Radio, and a coalition of small commercial webcasters filed suit in the U.S. Court of Appeals for the D.C. Circuit requesting a stay pending their appeal of the board's decision. The motion alleged that the board's decision is arbitrary and capricious in several respects, but particularly with regard to the requirement of a minimum fee "per station" or "per channel." On July 11, 2007, a three-judge panel of the court of appeals denied the emergency motion to delay the CRB decision pending the parties' appeal. The five separate appeals by the parties were consolidated into one case. On July 10, 2009, the federal court of appeals issued an opinion in the case that affirmed nearly all aspects of the "Webcaster II" royalty rate proceeding, although it vacated the $500 minimum annual fee per channel or station and remanded that portion of the determination for the CRB to reconsider. In evaluating the CRB's determination, the appellate court followed the standard of review provided for under the Administrative Procedure Act (APA); that is, the court was required to "uphold the results of adversarial agency proceedings unless they are arbitrary, capricious, contrary to law, or not supported by substantial evidence." The court admitted that "the standard of review applicable in ratemaking cases is highly deferential." According to the court, the webcasters failed to show that the CRB's rates satisfied any of the criteria under the APA that would permit the court to set them aside. The court also upheld the CRB's decision to reject the small commercial webcasters' arguments for including a percentage of revenue royalty fee option, noting that the Copyright Royalty Judges are not required to preserve the business of every participant in a market. They are required to set rates and terms that "most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller." 17 U.S.C. SS 114(f)(2)(B). If small commercial webcasters cannot pay the same rate as other willing buyers and still earn a profit, then the [Copyright Royalty] Judges are not required to accommodate them. While the D.C. Circuit Court of Appeals sustained the royalty rates that were the result of the "Webcaster II" proceeding, the court vacated the minimum fee provision of the CRB determination that would have required webcasters to pay a minimum fee of $500 per channel or station. The court first observed that the Copyright Act requires the CRB to set a minimum fee that licensees must pay to cover the "administrative costs of the copyright owners in administering the license." While acknowledging that some webcasters represented by the Digital Media Association (DiMA) had reached an agreement with SoundExchange in 2007 to cap the minimum fees at $50,000 per year per license, the court explained that not all parties that would be bound by the CRB decision had contracted around the statutory minimum fee requirement and thus the issue was not moot. The court expressed concern that the CRB's determination on minimum fees did not reveal an awareness of the possibility of a licensee paying "hundreds of thousands of dollars or more" in minimum fees, depending on the potential interpretation of the phrase "per channel or station": Depending on future interpretations of "channel or station," the Judges' determination might impose enormous fees on some business models and tiny fees on others, based on regulations that have not yet been defined. Such a regime is arbitrary and does not appear to represent what "would have been negotiated in the marketplace between a willing buyer and a willing seller." Consequently, the appellate court remanded the minimum fee portion of the determination to the CRB for further reconsideration. On October 23, 2009, the CRB issued an order that established a one-month period, from November 2, 2009, until December 2, 2009, during which the parties to the litigation were to negotiate and submit a settlement of the minimum fee issue for commercial webcasters. SoundExchange and DiMA submitted a settlement on December 2, 2009, to the CRB, which calls for each commercial webcaster that utilizes the SS 114 compulsory license to pay an annual, nonrefundable minimum fee of $500, for each individual channel and each individual station that it maintains, although no commercial webcaster is required to pay more than $50,000 per calendar year. To implement the settlement, the CRB published proposed regulations concerning the minimum fees in the Federal Register on December 23, 2009; public comments and objections to the proposed amendments were due no later than January 22, 2010. Two bills related to the CRB's decision were introduced in the 110 th Congress (the Internet Radio Equality Act; H.R. 2060 , S. 1353 ) that would have nullified the board's decision and substituted different rates and terms. Neither were enacted, however. Instead, the 110 th Congress passed the Webcaster Settlement Act of 2008 ( P.L. 110-435 ) that authorized SoundExchange to enter into settlement agreements with webcasters that effectively replace the CRB's decision. Such authority expired on February 15, 2009. In the 111 th Congress, the Webcaster Settlement Act of 2009 ( P.L. 111-36 ) was passed to reinstate SoundExchange's authority to negotiate settlement agreements with webcasters for a period of 30 days starting on July 1, 2009. The Webcaster Settlement Act of 2008 (WSA of 2008), H.R. 7084 , was introduced on September 25, 2008, by Representative Inslee and then subsequently approved by voice vote in the House on September 27 and by unanimous consent in the Senate on September 30. It was signed by President Bush on October 16, 2008 ( P.L. 110-435 ). The purpose of the act was to provide statutory authority for SoundExchange to negotiate and enter into alternative royalty fee agreements with webcasters that would replace the rates established under the CRB's decision, while Congress was in recess for the November 2008 elections. However, the act provided a limited period of time for reaching voluntary accords, as it terminated SoundExchange's authority to make settlements with webcasters on February 15, 2009. These agreements "shall be binding on all copyright owners of sound recordings and other persons entitled to payment ... in lieu of any determination [of royalty rates] by the Copyright Royalty Judges." However, the act did not mandate that SoundExchange negotiate agreements with webcasters. The WSA of 2008 amended 17 U.S.C. SS 114(f)(5), which had been added to the Copyright Act by the Small Webcaster Settlement Act of 2002. The act deleted references to "small" webcasters, thereby allowing the section to pertain to all webcasters regardless of size. The act also amended the section to state that agreements "may" include provisions for payment of royalties on the basis of a percentage of revenue or expenses, or both, and a minimum fee; the section originally provided that agreements "shall" contain these terms. The WSA also provided that the terms of a negotiated agreement may be effective for up to a period of 11 years beginning on January 1, 2005. The act permitted any agreement to be precedential in future CRB ratemaking proceedings, if the parties to the agreement so expressly authorized. Finally, the act declared that nothing in the WSA of 2008 (or any agreement entered into under it) shall be taken into account by the U.S. Court of Appeals for the District of Columbia Circuit in its review of the May 1, 2007, determination of royalty rates by the Copyright Royalty Judges. Three negotiated royalty agreements have been made under the authority of the WSA of 2008. The Corporation for Public Broadcasting (CPB) and SoundExchange announced on January 15, 2009, that they had reached a "comprehensive agreement" on the royalty rates to be paid for Internet streaming of sound recordings by approximately 450 public radio webcasters, including CPB-supported station websites, NPR, NPR members, National Federation of Community Broadcasters members, American Public Media, Public Radio Exchange, and Public Radio International. The agreement, which substitutes for the statutory rates determined by the CRB in May 2007, covers a royalty period from January 1, 2005, through December 31, 2010. Under the agreement, CPB is required to pay SoundExchange a single, "up-front" flat-fee royalty payment of $1.85 million. The agreement applies to 450 public radio stations in the years 2005-2007, with an allowance for growth in the number of stations of up to 10 per year starting in 2008 (therefore a maximum of 480 stations in 2010). In addition, CPB, on behalf of the public radio system, is to provide SoundExchange with consolidated usage and playlist reporting in order to "improve the efficiency of the payment process helping to ensure that performers and sound recording copyright owners are accurately paid for the use of their recordings." As a condition of the agreement, NPR also agreed to drop its appeal of the CRB's royalty rate decision. On February 15, 2009, the National Association of Broadcasters (NAB) and SoundExchange informed the Copyright Office that they had made an agreement that covers an extended royalty period (from January 1, 2006, through December 31, 2015) for terrestrial AM or FM radio broadcasters (licensed by the Federal Communications Commission) who simulcast their signal or stream other programming over the Internet. The negotiated agreement calls for each broadcaster to pay an annual minimum fee of $500 for each of its channels, although no broadcaster is required to pay more than $50,000 on the minimum fees. In addition, broadcasters must pay royalty rates on a per-performance basis, as follows: Broadcasters must also submit, on a monthly basis, "census" reports to SoundExchange that detail information about the songs that they play over the Internet, including song title, artist, album, number of times a song is played, and the number of listeners for each song. "Small" broadcasters that stream less than 27,777 aggregate tuning hours per year may pay $100 per year to obtain a waiver from this detailed annual census reporting requirement. On February 15, 2009, a limited number of "small" webcasters reached an agreement with SoundExchange for the same royalty period as the NAB's license (2006-2015). The webcasters that are party to this agreement must comply with census reporting requirements and pay annual minimum fees that vary from $500 to $5,000, depending on specified gross revenue limits. The negotiated royalty rate for these small webcasters is as follows: All of the three agreements described above provide that their rates and terms are nonprecedential, and "shall not be admissible as evidence or otherwise taken into account in any administrative, judicial, or other government proceeding involving the setting or adjustment of" royalties for Internet transmission of copyrighted music. Although SoundExchange successfully negotiated new rates with certain categories of webcasters discussed above, SoundExchange did not reach agreements with all webcasters, including the largest commercial webcasters such as Pandora, Live365, and RealNetworks, prior to the February 15, 2009, sunset of SoundExchange's settlement authority under the WSA of 2008. SoundExchange appealed to Congress to renew such authority due to "positive developments in its discussions" with these webcasters. The Webcaster Settlement Act of 2009 (WSA of 2009) ( H.R. 2344 , S. 1145 ) was introduced in the House on May 12, 2009, by Representative Inslee, and in the Senate by Senator Wyden on May 21, 2009. On June 9, 2009, the House passed H.R. 2344 by voice vote under suspension of the Rules of the House. The Senate passed H.R. 2344 without amendment by unanimous consent on June 17, 2009. President Obama signed the bill on June 30, 2009 ( P.L. 111-36 ). The WSA of 2009 reinstated SoundExchange's authority to negotiate settlement agreements for a 30-day period starting on July 1, 2009. Pursuant to the WSA of 2009, SoundExchange negotiated five royalty agreements. The first agreement was announced on July 7, 2009, and is available to certain "pureplay" commercial webcasters (those that derive nearly all of their revenue from the streaming of sound recordings) such as Pandora, AccuRadio, and Live365.com. Commercial pureplay webcasters can either opt-in to the agreement or choose not to sign onto it and instead comply with the CRB-issued rates and terms. The pureplay agreement covers three rate classes: large commercial webcasters (those exceeding $1.25 million in annual revenues); small pureplay webcasters (those with an annual gross revenue of less than $1.25 million and that do not exceed certain monthly aggregate tuning hour limits ); and webcasters that provide bundled, syndicated, or subscription services. The pureplay webcaster agreement pertains to the royalty period starting on January 1, 2006, and ending on December 31, 2015 (although it expires at the end of 2014 for small webcasters). Commercial webcasters that want to claim the benefit of the rates and terms under this agreement must submit to SoundExchange an election form every year. The agreement contains the following warning: It is the responsibility of each transmitting entity to ensure that it is in full compliance with applicable requirements of the statutory licenses under Sections 112(e) and 114 of the Copyright Act. SoundExchange is not in a position to, and does not, make determinations as to whether each of the many services that rely on the statutory licenses is eligible for statutory licensing or any particular royalty payment classification, nor does it continuously verify that such services are in full compliance with all applicable requirements.... SoundExchange and copyright owners reserve all their rights to take enforcement action against a transmitting entity that is not in compliance with all applicable requirements. The rates available under the pureplay webcaster agreement are described in Table 3 . Under the pureplay agreement, commercial webcasters must provide monthly census reports to SoundExchange concerning every sound recording performed during that month and the number of performances of each recording. The agreement also provides that its rates and terms may not be admissible as evidence or otherwise taken into account in any administrative, judicial, or other government proceeding concerning the setting of royalties for public performance of sound recordings. Furthermore, the agreement contains a clause that expresses the following sentiment: These Rates and Terms shall be considered as a compromise motivated by the unique business, economic and political circumstances of Commercial Webcasters, copyright owners and performers rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller. The agreement with college-affiliated Internet radio webcasters covers those that are "directly operated by, or [are] affiliated with and officially sanctioned by, and the digital audio transmission operations of which are staffed substantially by students enrolled at, a domestically-accredited primary or secondary school, college, university or other post-secondary degree-granting educational institution." The college webcaster agreement covers the period from January 1, 2011, until December 31, 2015. There is a minimum annual fee of $500 for each individual channel and each station that the college webcaster operates. For college webcasters that make total transmissions in excess of 159,140 aggregate tuning hours (ATH), the webcaster must pay additional usage fees at the following per-performance rates: College webcasters that do not exceed 55,000 total ATH per month for any individual channel may pay a $100 annual "proxy" fee in lieu of providing reports of use to SoundExchange. Those not exceeding 159,140 total ATH per month may submit reports of use on a sample basis (two weeks per calendar quarter) and such reports need only report how many times a song is played (rather than ATH or actual total performances). College webcasters that exceed 159,140 total ATH must submit census reporting (name of each song performed and how many listeners for each song). The college webcaster agreement expressly provides that the rates and terms contained within the agreement may be used as precedent in future ratemaking proceedings. The noncommercial religious broadcaster agreement governs the royalty period from 2006 to 2015. Like the agreement made with noncommercial college webcasters, this agreement requires religious webcasters to pay SoundExchange an annual minimum fee of $500 for each individual channel or station through which they stream sound recordings over the Internet. This minimum fee constitutes "full payment" for the religious webcaster to stream up to 159,140 monthly ATH of programming on each channel or station. If religious webcasters stream in excess of that amount per month, they must pay SoundExchange additional royalties at the following rates: Religious webcasters that do not exceed 44,000 ATH per year may pay SoundExchange a $100 proxy fee to waive the reporting requirement. Those not exceeding 159,140 total ATH per month may submit reports of use on a sample basis (two weeks per calendar quarter) and such reports must describe total ATH. Religious webcasters that exceed 159,140 total ATH per month must submit census reporting (total performances and number of listeners). Unlike the noncommercial educational webcaster agreement, the noncommercial religious broadcaster agreement does not authorize its rates to be precedential in future administrative, judicial, or other government proceeding involving royalty rate setting. The agreement SoundExchange reached with Sirius XM applies not to performances of sound recordings transmitted by satellite, but rather to the streaming of Sirius programming over the Internet or to mobile phones using Internet technology. The Sirius agreement covers the royalty period 2009-2015, and the annual minimum fee required is $500 for each individual channel and each station. There is a $50,000 cap on this minimum fee in any one year. In addition, Sirius must pay royalties at the following per-performance rate: The Sirius XM agreement requires monthly statements of account and reports of use. In addition, it expressly authorizes the use of the agreement in future ratemaking proceedings. Under the WSA of 2009, Sound Exchange and the Corporation for Public Broadcasting (CPB) reached another agreement that extends the agreement the parties had made under the WSA of 2008. The second agreement governs the royalty period from January 1, 2011, through December 31, 2015. The total license fee that CPB must pay to SoundExchange for this royalty period is $2.4 million, payable in five equal installments each year starting December 31, 2010. The license applies to 490 public radio stations in the year 2011, with an allowance for growth in the number of stations of up to 10 per year (and a limit of 530 stations in 2015). For all of these stations, if the total music ATH exceeds certain ATH limits per year, CPB must pay additional fees to SoundExchange on a per performance basis as specified in the table below: The agreement requires CPB-affiliated public radio broadcasters to submit reports of use, play frequency, and ATH per calendar quarter. The agreement provides that the rates, fees, and other requirements are nonprecedential and may not be introduced as evidence or taken into account in any ratemaking proceeding. Although the past two years have been consumed with the reactions to the Copyright Royalty Board's May 2007 decision, time marches on, and the CRB announced on January 5, 2009, that it would begin the third proceeding ("Webcaster III") to determine the royalty rates for the statutory license covering Internet transmissions of sound recordings, applicable to the next royalty period that runs from January 1, 2011, through December 31, 2015. Any webcaster that chooses not to opt-in to one of the settlement agreements described above may participate in this proceeding and would be bound by the rates and terms that the CRB shall determine.

Summary:
Under the Copyright Act, Internet radio broadcasters, or "webcasters," that stream copyrighted music to their listeners are obliged to pay royalty fees to the sound recording copyright owners at statutory rates established by the Copyright Royalty Board (CRB). However, some webcasters may also have the option of paying different royalty fees that are privately negotiated with SoundExchange, the entity that collects performance royalties on behalf of sound recording copyright owners and recording artists. On March 9, 2007, the CRB announced statutory royalty rates for certain digital transmissions of sound recordings by webcasters for the royalty period January 1, 2006, through December 31, 2010. Several webcasters appealed the CRB's decision to the U.S. Court of Appeals for the District of Columbia Circuit. The appellants argued that the rates were unreasonably high and that the absence of a cap on minimum fees paid per licensee was arbitrary and capricious. On July 10, 2009, the federal court of appeals issued a decision that upheld nearly all aspects of the CRB's determination of rates. Two recent laws, the Webcaster Settlement Act of 2008 (WSA of 2008; P.L. 110-435) and the Webcaster Settlement Act of 2009 (WSA of 2009; P.L. 111-36), facilitated the ability of webcasters to enter into voluntary agreements with SoundExchange that provide alternative royalty rates that substitute for the statutory rates established under the CRB's decision. These agreements generally permit a webcaster to pay lower rates and may cover a longer royalty period. Pursuant to the WSA of 2008 and 2009, voluntarily negotiated royalty agreements were reached between SoundExchange and the following entities: the Corporation for Public Broadcasting (for the online streaming of public radio stations); the National Association of Broadcasters (for online simulcasts by FM and AM radio stations); a group of "small" webcasters; certain "pureplay" commercial webcasters (those that derive nearly all of their revenue from the streaming of sound recordings) such as Pandora, Live365.com, and AccuRadio; noncommercial educational webcasters (college-affiliated Internet radio stations); noncommercial religious broadcasters (that stream their AM/FM programming over the Internet); and Sirius XM (concerning Internet streaming of Sirius programming as opposed to its satellite-transmitted programming). Although the above settlements cover the same royalty period as the CRB's determination (from 2006 through 2010), some rate agreements extend beyond that period, until the end of 2015. Thus, webcasters that are parties to extended agreements need not participate in the CRB proceedings to determine statutory royalty rates for the period 2011 to 2015, which were initiated in January 2009. Any webcaster that chooses not to opt-in to a settlement agreement with SoundExchange must instead comply with the applicable statutory rates and terms established by the CRB for the period 2006-2010, and will be subject to any new rates that the CRB determines for 2011-2015. This report surveys the legislative history of this issue, the CRB's rate decision, and the congressional and public response.