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July 8, 2009 5:12 PM

Jenner, Davis Wright on Internet Radio Settlement

Posted by Zach Lowe

If you want to wade into a very interesting area of law, try doing some research into what radio stations and other broadcasters are required to pay--and to whom--for the right to broadcast songs. We did so this morning after reading the news that three Internet radio broadcasters (or "Webcasters") reached a settlement with the nonprofit that collects royalty payments for musicians and record companies that will allow Webcasters to stay in business.

The three Webcasters turned to Davis, Wright & Tremaine partner David Oxenford for help negotiating the agreement, which will allow them to pay a lump sum based on revenue instead of a charge for each song streamed online--a charge that was scheduled to escalate to about 0.19 cents per song next year. Smaller Webcasters said that rate would have driven them out of business. Webcasters with revenues exceeding $1.25 million will have a choice of paying per song or handing over 25 percent of their revenue; smaller Webcasters will pay a smaller chunk of their gross revenue, according to The New York Times.

Oxenford was a good choice, since he has been working in broadcast law for nearly 30 years and runs a blog devoted to the subject. Jenner & Block represented SoundExchange, the nonprofit responsible for collecting music royalties, Oxenford says.

Oxenford has been knee-deep in internet broadcasting issues since 2002, when he first represented Webcasters after an initial series of rules set by the federal Copyright Royalty Board (CRB) called for these broadcasters to pay substantially higher rates than traditional radio broadcasters. (That still is the case, according to Oxenford and the Washington Post. Satellite providers pay royalties of about 6.5 to 8 percent of their gross revenue to songwriters and music companies; AM and FM stations pay none. The main reason behind this, Oxenford says, has been the belief that Internet streaming would allow more users to create their own high-quality versions of songs, thus costing music-makers a bundle.)

The fees fight intensified in 2007, when the CRB approved a new set of rates, peaking at 0.19 cents per song. A group of Webcasters sued the CRB over the rates. Parts of that case are pending. Perhaps the most interesting slice is the question of whether the board is unconstitutional because a low-level figure--the librarian of Congress--appoints its members, Oxenford says. (Similar constitutional questions have been raised about the U.S. Patent and Trademark Office.)

"We've been talking about reaching this kind of deal for years," Oxenford says of the agreement reached Tuesday. "It has been a long time."

The current agreement runs through 2015. 

Jenner's Steven Englund did not return a message seeking comment. Tom Perrelli, former head of Jenner's Washington, D.C., office, led the firm's team on the matter before leaving earlier this year for a plum Justice Department job. 

One other interesting bit of trivia: Radio stations--even the AM and FM variety--have to pay royalties to song composers, but not record labels or performers, according to Oxenford and the WaPo. Pending legislation would change that and require all broadcasters to pay royalties to performers as well as composers. 

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