Opinion ID: 187426
Heading Depth: 3
Heading Rank: 3

Heading: Percentage-of-Revenue Rates

Text: The Judges adopted a per-performance usage fee structure for all commercial webcasters. Small commercial webcasters object to this uniform solution, seeking instead to pay a percentage of their revenues. The Judges rejected such an argument because they found no evidence in the record about how [to] delineate between small webcasters and large webcasters and noted that none of the small commercial webcasters ... provided helpful evidence about what demarcates a `small' commercial webcaster from other webcasters at any given point in time. Order, 72 Fed.Reg. at 24,089 & n. 9. The small commercial webcasters now argue that the definition of small commercial webcaster is irrelevant because the percentage-of-revenue approach would apply only to those webcasters that elected to pay a percentage of total gross revenue. The Board and SoundExchange say that this revised argument, which they claim was first raised at rehearing, is waived. See 37 C.F.R. § 351.14(b) (A party waives any objection to a provision in the determination unless the provision conflicts with a proposed finding of fact or conclusion of law filed by the party.). We assume without deciding that the small commercial webcasters' initial proposal, combined with the references to gross revenue they made during the proceedings, are sufficient to avoid waiver. Regardless, their objection fails on the merits. The Judges' determination spelled out five reasons they favored payments based on performances rather than webcaster revenue: (1) performances are more directly tied to the nature of the right being licensed; (2) it is difficult to calculate revenue; (3) it is difficult to define revenue unambiguously; (4) auditing and enforcement would be more difficult; and (5) payments might not increase with increased usage of copyrights. Id. at 24,089-90. An opt-in regime charging a fraction of total gross revenue would address only two of the Judges' five concerns. It might remove some of the difficulty in calculating and defining revenue, because total gross revenue includes all money received by a webcaster. But it would not address the other problems raised by the Judges: that total gross revenue is not directly tied to the right being licensed; that auditing and enforcement would be difficult; and that usage might increase without a corresponding increase in royalty payments. In an attempt to address these problems, the small commercial webcasters point to the Judges' subsequent adoption of a percentage-of-revenue royalty in the SDARS [(i.e., satellite radio)] proceeding. Commercial Op. Br. 47. Because the Judges adopted it for satellite radio, they argue, the Judges should have adopted it for webcasting. Beyond the ordinary problem of trying to hold an agency to action it takes in a subsequent proceeding, see supra Part II.B.2, the Judges were explicitly reluctant to adopt that approach in the satellite radio proceeding: Because we have no true per performance fee proposal before us nor sufficient information from evidence of record to accurately transform any of the parties' proposals into a true per performance fee proposal, the Copyright Royalty Judges conclude that a revenue-based fee structure for the SDARS is the most appropriate fee structure applicable to these licensees. SDARS, 73 Fed.Reg. at 4085. The Judges therefore appear committed to applying per-performance royalties for commercial services, and deviated from that preference for satellite-radio licensing only because the parties presented them with no better options. Finally, it was not error for the Judges to reject the small commercial webcasters' pleas that paying per performance would wreck their inefficient business models. The Judges made clear they could not guarantee a profitable business to every market entrant. Order, 72 Fed.Reg. at 24,088 n. 8. The 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. § 114(f)(2)(B). If small commercial webcasters cannot pay the same rate as other willing buyers and still earn a profit, then the Judges are not required to accommodate them.