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Interview With SoundExchange Executive Director John Simson
Satellite Radio, Cable And Webcaster Reporting Requirements To SoundExchange
SoundExchange, the digital transmission performance royalty collection agency for labels and performers, celebrated ten years in existence on February 1, 2006. President Clinton signed the Digital Performance Right in Sound Recordings Act (“DPRA”) on February 1, 1996, giving copyright owners of sound recordings (usually record labels) a limited public performance right for certain digital transmissions of their recordings and divided royalties evenly between labels and performers. SoundExchange was created to collect and distribute these royalties. So far, SoundExchange has distributed almost $32 million dollars in performance royalties.
SoundExchange is the first performance rights organization in the United States to collect and distribute digital audio transmission royalties to artists and sound recording copyright owners. Traditional radio broadcasts were exempted from this sound recording royalty requirement when the DPRA was passed and signed into law.
 SoundExchange currently represents more than 1,200 different record companies and 12,000 recording artists. SoundExchange is seeking labels and artists that are not registered with SoundExchange who are owed royalties for sound recordings played on digital cable and satellite television music services, satellite radio services or streamed via noninteractive webcast. All artists, labels and/or their representatives are invited to visit SoundExchange and get registered
now to find out if you are owed sound recording performance royalties!
I conducted an in-depth interview with John Simson, Executive Director and official spokesperson of SoundExchange to learn more about what this 10-year-old collection agency does and is doing, what music broadcasters, webcasters and subscription services providers have to know to be in compliance with the DPRA, and what labels and artists have to know and do to ensure that their royalties are collected and distributed properly. This will be a multiparty interview.
[The Aspiring Songwriter] John, the Sound Exchange website talks about collecting royalties for “non-interactive digital transmission,” cable, satellite and web transmissions. For those of us unfamiliar with this terminology, what is a non-interactive digital transmission?
John Simson The short answer is, what is the difference between an interactive and a noninteractive digital transmission, and what is the significance? If a webcaster – someone streaming over the Internet, wants to take what is known as a “statutory license” under Section 114 of the Copyright Act, it makes the webcaster’s life very straightforward and simple. A statutory license means that they don’t have to contact thousands and thousands of labels and artists because before they start their business. They can start streaming music once they file a notice under the Copyright Act, pay $20.00 fee, and agree to abide by the requirements of our license and pay SoundExchange according to the current rates that have been set. The statutory license is only available for non-interactive services.
A noninteractive service is what you would commonly find when listening to the radio. You’re hearing songs as they’re being played. You’re not requesting a specific song to be played at a specific time as you might with an interactive service. In an interactive service, you’re going in and saying, “I want to hear this record, then I want to hear that record,” like a Rhapsody or a Napster, those kinds of services.
Non-interactive services are not allowed to post advanced playlists, they’re not allowed to give you the song that you want when you want it. If you would to have that kind of a service, which is interactive, you would have to go to each and every label and license each and every sound recording, and agree to whatever those terms and rates might be.
With a statutory license, you just pay the license fee and start streaming the music, and pay as you go. It’s a very big advantage. There is another big advantage to the statutory license, which is that you can play anything that has been commercially released on a sound recording in the United States, and pretty much around the world, without any restrictions.
For example, if you look at a Rhapsody service or a Napster service, the Beatles aren’t there. Beatles aren’t on iTunes. The reason that the Beatles aren’t there is that the Beatles have the right to approve those interactive digital services before their record company, EMI, can put them there. They want more than the services are willing to pay them, so they are not there. On a statutory license, the Beatles can’t say no: it’s compulsory, so long as the service is not interactive and you abide by the statutory license.
[The Aspiring Songwriter] In summary, John, for the person who is new to this world, would it be an appropriate analogy to say that non-interactive digital transmissions on cable, satellite and webcasts are similar to terrestrial radio?
John Simson It’s similar to terrestrial radio, yes. XM and Sirrus Satellite Radio are that, and Live365 and AOL’s Spinner. Some services, such as Rhapsody, have both services. And radio stations may, in fact, have over-the-air radio, which are statutory, and then have a service where you get what you want, when you want it. That part would have to be exclusively licensed.
[The Aspiring Songwriter] If I wanted to start a non-interactive digital transmission service, I could go to the SoundExchange website and find more detailed information regarding what criteria I would have to meet in order to have a statutory license under SoundExchange?
John Simson Right.
[The Aspiring Songwriter] So for those of our readers who would want to become a service provider …
John Simson They can go to the SoundExchange website and find a lot of information. The other option would be that they could go to the Copyright Law Section 114, but our website probably makes it a little more straightforward, and a little easier to figure out what you’re supposed to be doing.
[The Aspiring Songwriter] John, let’s continue our discussion from the perspective of the service provider. What responsibility do I as a service provider have regarding filling out paperwork, playlists, and what am I transmitting? Do I have a responsibility to forward paperwork to SoundExchange? What process do I have to follow once I’ve been granted a statutory license to stream, play or webcast non-interactive digital transmissions?
John Simson The way that works is that if you want to stream under a statutory license, the Copyright Office already has agreements with services like DMX, Music Choice, Muzak, XM and Sirrus, where they send me, once a month, every single track that they play. That is what is known as “full census data.” They can transmit everything by hitting a button that sends out what is played by month. It makes our distributions that much more accurate for our members, as opposed to some sort of a sample playlist.
In 2004, the Copyright Office issued regulations that said that for webcasters, they only have to provide us with two weeks of data per calendar quarter.
[The Aspiring Songwriter] That limitation is for webcasters only? It does not include subscription services like iRadio or the other satellite radio stations?
John Simson No, for satellite radio, we already had a deal.
[The Aspiring Songwriter] OK, so satellite radio gives you everything.
John Simson Yes. For webcasters, we may eventually get to a full census. But for right now, we require that two weeks from each calendar quarter must be reported, including each recording that is played during those two weeks by the service.
[The Aspiring Songwriter] So, are they looking at submitting a two-week block, or is it any two weeks that the service provider wants to sample?
John Simson The Copyright Office, because I don’t believe that they’ve done very much work in this area, didn’t say, “The first quarter sample weeks one and eight, then sample weeks two and nine in the next quarter,” to ensure that we have full coverage of the quarters. We’re working informally with the licensees.
We need to do that, because if you think about Christmas time, if in December everyone gives us the two weeks right before Christmas, it’s probably not going to be pretty representative of what they’re actually playing in October and November. So, it’s really important that we get a full spread of the entire quarter. We’re working, basically, to try to fix the problem created by the Copyright Office in their ruling.
And frankly, their ruling has another hole in it. The Copyright Office never issued the technical requirements of how the data was to be submitted to SoundExchange. Imagine … can someone write down all of the playlist information on a piece of paper with a crayon and just mail it to me? Or do they have to send it as an electronic file? Does it need to be an electronic spreadsheet or SML?
Many of the largest webcasters have no problem with format, although the Copyright Office never issued any requirements. For the last two years, although people are required to keep data, there is no delivery requirement for the data. So, we’ve basically gotten no data from the webcasters.
[The Aspiring Songwriter] I saw on the SoundExchange website that there are some software programs that are commercially available right now to collect the data – is that for webcasters?
John Simson There are programs that actually provide the data. It’s not that it’s a difficult thing for them to do. But until the final regulations, no one wants to pick something to collect data, not knowing what the final requirement is going to be.
[The Aspiring Songwriter] Would it be a reasonable assumption that once the Copyright Office creates those reporting details, then will the data collection will be retroactive to the 2004 date, or will the collection requirements be from this day forward, or don’t you know?
John Simson It will be retroactive, because there was an obligation established for the webcasters to keep the data starting April 1, 2004.
[The Aspiring Songwriter] And the webcasters have been notified of that fact?
John Simson Right. They all know that they have to keep that data.
[The Aspiring Songwriter] John, let me ask you a question about the webcasters. How does SoundExchange deal with a big aggregate of streaming radio stations, such as Live365, where everyone is doing their webcasting under what I assume is a really big umbrella license? Is that how Live 365 works? Will all of the individual webcasters be required to submit their playlists, or does Live365 have to submit an aggregate playlist for all of them?
John Simson It will be Live365 that is going to have to supply the data and the playlist information.
[The Aspiring Songwriter] So, providers like Live365 will have to figure out some way to collect that information from their service users.
John Simson Right.
[The Aspiring Songwriter] For the individual webcast station, they will be obligated in the same way. So, anyone who has a webcast …
John Simson They’ll have to report.
[The Aspiring Songwriter] So webcasters should be on notice to keep their playlists, not only the songs they play but the artists, the album info, the record label?
John Simson They should look at the Copyright Office Ruling, which basically says, here’s what you have to keep. Here’s what you have to report: the artist, album, title, etc.
[The Aspiring Songwriter] I saw on the SoundExchange website that there are samples that webcasters can look at demonstrative what to collect and where to find that information. Some of the items that were identified in the samples: “The name of the service making the transmission.” So that would be the name of the webcaster?
John Simson Yes.
[The Aspiring Songwriter] “Identification of the transmission category.” Where would someone find that information? How would they categorize themselves? The site shows eleven transmission category choices.
John Simson When they go to the SoundExchange site, or they call my staff to find out if they’re on the right track, typically, they know whether or not they’re a subscription service or not. Are they commercial or noncommercial – that’s a pretty easy one to figure out.
Once they determine, say, that they’re commercial, then are they a small webcaster or they a big webcaster. That’s pretty easy to figure out based upon the criteria on the SoundExchange website. And once they say, “I’m a big webcaster, then they have three choices: are they a subscription service, are they charging a monthly fee? Then they pay a percentage of monthly revenue. If I am not a subscription service, I will pay either on a per stream rate or an aggregate tune-in hour rate.
If they are a smaller webcaster, they can pay on a percentage of revenue. If they’re non-commercial, really the only question is are they a college or university, or are they a community broadcaster, or are they a religious broadcaster? The rules are pretty much all the same, except if you are a college webcaster, and you have less than ten thousand students, you’re minium fee at the present time is a little bit cheaper.
[The Aspiring Songwriter] What about terrestrial radio stations that have a website where they are simulcasting?
John Simson A radio station that simulcasts is treated the same way as a webcaster. They have to report and pay the same way as if they were a webcaster.
We’ll continue our discussion with SoundExchange Executive Director John Simson next month!
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