Webcasting Royalties

Jul 1, 2003 12:00 PM, By Christian L. Castle

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HOW PRODUCERS CAN GET THEIR FAIR SHARE

The fight to get public-performance royalties for sound recordings in the U.S. has a history that is long, distinguished and largely unsuccessful. Congress took a relatively small step with amendments to the Copyright Act that established a limited public-performance royalty for digital transmissions of sound recordings, but stopped short of suggesting rates. That resulted in the Copyright Arbitration Royalty Panel addressing Webcasting and simulcasting royalty rates, which resulted in the decision of the Librarian of Congress last year establishing rates. Those rates were revisited recently by a negotiation between the RIAA and the Digital Media Association, which established rates through 2004. The good news for producers (and anyone who has a contracted royalty) is that they are finally cut in for some royalties. The bad news: Royalties won't come to them automatically.

The Copyright Act divides “Webcasting” royalties among four groups: copyright owners (50%), featured artists (45%), nonfeatured musicians (2.5%) and nonfeatured vocalists (2.5%). Missing are producers, who typically have a contractual right to royalty income from sound recordings.

However, given that producers' royalties are deducted from an artists “all-in” royalty, Sound-Exchange, a division of the RIAA that is responsible for collecting these monies, currently requires a separate letter of direction from the artist in order to pay producers, even if the producer has already sent a similar letter to the record company or copyright owner.

However, there are a few ways to fix this problem.

  1. SoundExchange should take flat-fee rates and payment instructions from existing letters of direction that artists provide to the record company copyright owners.

  2. SoundExchange should provide Web access to part of its database so that artists and producers can confirm if they are included and are receiving royalties properly.

  3. Producers should require artists to send a confirming letter of direction on a go-forward basis to SoundExchange for new recordings produced, which could be included in the producer agreements.

  4. Producers and artists should agree on a fixed share of performance royalties to be paid to producers and call upon Congress to amend the Copyright Act to include producers.

If none of these steps are followed, producers will have to ask artists to sign new letters of direction for each old recording, a process that will involve lawyers and cost hundreds of dollars for each letter. When one considers that some recordings could be 20 to 30 years old or older, it may be difficult to find the artists in the first place.

But the real significance may arise when and if SoundExchange starts collecting foreign-performance royalties, and if Congress passes legislation that extends these royalties to regular radio and television broadcasts. Together, all of these streams will likely constitute a significant amount of money. As a result, producers should get their act together now or risk further frustrations down the road.


Christian L. Castle is senior counsel in the music group at the law firm Akin Gump Strauss Hauer & Feld in Los Angeles. Write to ccastle@akingump.com.






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