NAB, NRB, SoundExchange Push Back on Web Royalties at DC Circuit

The U.S. government hasn’t sufficiently made a case defending the Copyright Royalty Board’s Web V ruling on royalty rates for webcast music, said reply briefs Friday in the U.S. Court of Appeals for the D.C. Circuit from NAB, SoundExchange and the National Religious Broadcasters Noncommercial Music License Committee.

Each challenged a different aspect of the CRB’s ruling (see 2211100069). NAB is seeking lower rates for broadcasters simulcasting their radio programming online, the NRBNMLC wants lower rates for noncommercial religious stations, and SoundExchange wants the rates to be higher, said the briefs. “It is the height of arbitrary and capricious decisionmaking to ignore countervailing, and indeed conclusive, evidence,” said SoundExchange.

SoundExchange, NAB and the NRBNMLC are the appellants in three separate cases filed in November 2021 after the CRB’s Web V ruling became official. The CRB’s Web V decision set royalties for nonsubscription services at .0021 cent per song per listener from 2021 until 2025, and increased the annual minimum fee paid by webcasters from $500 to $1,000. Though the appeals have different docket numbers -- 21-1245 for NAB, 21-1243 for NRBNMLC, and 21-1244 for SoundExchange -- they are being briefed together, with final briefs due Jan. 12.

The CRB’s ruling incorrectly went against its prior endorsement of testimony that the opportunity cost for SoundExchange of collecting royalty fees is .0022 cents per song by setting the royalty rate beneath that, said Sound Exchange’s reply brief. Federal arguments that the opportunity cost wasn’t an official finding of the CRB and that it was subject to downward adjustments are ignoring evidence, SoundExchange said.

SoundExchange disputed a CRB contention that estimates of the opportunity costs of collecting royalties should be offset by consideration of “opportunity benefits”: that streaming music services attract listeners who might otherwise spend their time engaged in activities that don’t produce royalties. Calculation of opportunity benefits was already included in the testimony the CRB received on opportunity cost, SoundExchange said. “The CRB thus had no valid basis to reduce the $0.00222 finding due to opportunity benefit.”

The CRB’s decision “to set an identical rate for custom radio and simulcasts of over-the-air radio must be set aside,” said NAB. Simulcasting an on-air radio broadcast should be treated differently from custom streaming services such as Pandora because the simulcast isn’t interactive, NAB said. The CRB hasn’t shown any legal reason for treating the two the same, said the reply brief. “That gaping hole in the government’s defense -- and the Board’s reasoning -- should be dispositive,” NAB said. “Instead of adhering to the plain text of the Copyright Act requiring different rates for different ‘types’ of services, the Board did the opposite: it deployed an effectively insurmountable presumption in favor of uniform rates.”

“The Board unlawfully burdened broadcasters’ religious expression” when it ruled that they should pay higher rates “than secular-formatted NPR stations are charged,” said NRBNMLC’s reply filing. While federal filings have argued NPR's rates are due to a settlement, NRBNMLC disputed that and said it doesn’t matter. “Even if NPR rates bound only settling parties, the Board cannot effectuate private rate biases by charging religious broadcasters more,” said the filing. The higher rates charged to commercial broadcasters don’t mean the CRB can charge NRB broadcasters more than other noncommercial broadcasters, said NRBNMLC . “If some entities are treated better than religious broadcasters, it is irrelevant that others are treated worse.”