Update - Copyright Royalty Board Mechanical Rate Hearing

March 10, 2008

On January 28, the Copyright Royalty Board (CRB) commenced hearings that will determine the mechanical rates for both physical and digital music. Written direct cases were filed over a year ago, followed by months of discovery. The "Copyright Owners" are represented by members of the National Music Publishers Association, Inc., the Songwriters Guild of America and the Nashville Songwriters Association International; and the music users, record labels and digital service companies, are represented by the Recording Industry Association of America, DiMA (Digital Media Association) and DiMA member companies (AOL, Apple Computer, MusicNet, Napster, RealNetworks and Yahoo).

Just prior to the hearings, DiMA filed a motion arguing that interactive streaming was not covered by Section 115 (US Copyright Act). The CRB denied this motion, noting that "interactive streaming" is not defined within the US Copyright Act. Moreover, the CRB judges viewed the issue as to whether an interactive stream constitutes a DPD (Digital Phonorecord Delivery) to be a question of fact for the CRB to decide, rather than a question of law to be decided by the Register of Copyrights. This ruling by the CRB can be seen as an initial victory for publishers and creators, though a final determination regarding this matter will not be made until later in the year. In contrast, a decision by the CRB judges to consider taking into evidence publishing rates from agreements outside the U.S. is seen as a setback for publishers.

Testimony on behalf of the "Copyright Owners" included statements presented by ASCAP Board members Irwin Z. Robinson and Stephen Paulus. In the CRB presentation by the Recording Industry Association of America, key label representatives argued that the growth of digital music sales has not compensated the industry for losses due to piracy and intrinsic and far-ranging changes to business conditions. Also cited were the labels' financial (and creative) contribution to the recording process and to new technologies, and arguments that the current mechanical rate was too high and should be switched to a percentage of wholesale revenue. Representatives from digital media services (represented by DiMA) also testified to the challenges they are faced with.

There is currently a brief break in the trial until all parties have completed preparation of their rebuttal cases, which must be filed on April 4. The next phase in these proceedings will be rebuttal hearings, which are scheduled for May 6-21, 2008.

For a schedule of the CRB proceedings and to view witnesses' testimony and submitted documents, click here (to visit the Copyright Royalty Board's website).


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