Opinion ID: 2762941
Heading Depth: 3
Heading Rank: 2

Heading: Defining “Gross Revenues” and Eligible

Text: Deductions for SDARS In the same proceedings, the Judges considered the definition of “Gross Revenues” and deductions applicable to the SDARS. Final Determination, 78 Fed. Reg. at 23,071– 75. The Copyright Act employs a percentage-of-revenue metric for calculating licensing fees. “Gross Revenues” represents the revenue base against which the percentage rate is applied in order to calculate the total royalty obligation. The Copyright Royalty Judges promulgate regulations to define the scope of “Gross Revenues” for each type of service. See 37 C.F.R. § 382.11. The copyright user may also take deductions from its total royalty obligation to offset separate payments and non-compensable revenue. For example, a copyright user may deduct from its total payments the cost of separate direct-licensing agreements, such as the direct licenses Sirius XM had reached with independent labels. See Final Determination, 78 Fed. Reg. at 23,071–73. In defining “Gross Revenues,” the Judges allowed Sirius XM to exclude revenues received for “[c]hannels, programming, products and/or other services offered for a separate charge where such channels use only incidental performances of sound recordings.” 37 C.F.R. § 382.11. Sirius XM offers several subscription packages, including a 9 bundled “Select” package with music and non-music channels, and a “talk-only” package with exclusively nonmusic channels. The Judges allowed Sirius XM to exclude from its royalty base revenue from talk-only packages and advertising on non-music channels. Final Determination, 78 Fed. Reg. at 23,071–72. The Judges also allowed Sirius XM, after calculation of its total revenue royalty obligations including deduction of the above items from Gross Revenues, to then deduct revenues attributable to its use of sound recordings created on or before February 14, 1972. The Judges reasoned that since federal copyright protection does not extend to pre-1972 sound recordings, such recordings are outside the federal statutory license and revenue associated with such recordings may be deducted. Final Determination, 78 Fed. Reg. at 23,073.