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The Lowdown: SiriusXM, Pandora and iHeart Eye Big Cuts as Copyright Royalty Board Rate Trial Looms

The Copyright Royalty Board webcast rate trial V, which will set rates from 2021-2025 for Pandora, iHeart and other programmed music webcasters, is set to begin July 20. But at this point, it’s unclear if that will proceed with hearings in person or via a virtual video streaming.

That was one of the things discussed last month on an A2IM IndieWeek panel featuring some members of the SoundExchange staff that mainly focused on neighboring rights but did give some insights into where the CRB rate trial is headed, according to a video replay of that panel.

During that segment, SoundExchange senior counsel for licensing and enforcement Brad Prendergast summarized where the rate trail, which began in January 2019, had already progressed, noting that the proceeding has already seen written testimony submissions, two discovery periods, written rebuttal testimony, and settlement discussions.

As part of that, he noted, the participants, which include SoundExchange on behalf of labels and artists; and Pandora/SiriusXM, Google, and the National Assn. of Broadcasters and iHeart for the digital services. All participants have submitted rate proposals, Prendergast reported.

Current rates include ad-supported streams being paid out at $0.0018 per play while paid subscription streams are paying a rate of $0.0024 per play from programmed music webcasting.

According to Prendergast, “SoundExchange is seeking a meaningful increase in rates while the other side [digital services] are seeking a significant reduction.”

A SoundExchange chart summarizing the rate proposals —  which was referred to during the panel but absent in the replay, though the collection agency later supplied it to Billboard — shows the collection agency has proposed that non-subscription streams be increased from $0.0018 to $0.0028 per stream while subscription streams payout should grow from $0.0024 to $0.0031 per play.

Meanwhile, Prendergast noted that the digital services are asking for a decrease in webcasting per stream rates, Pandora/Sirius XM appears to ask for the largest cut. According to the chart, Pandora is proposing an ad-supported per stream rate of $0.0008, a more than 50% cut from 2020’s rate of $0.0018. Likewise, Pandora is asking for a similar cut for paid subscription stream to $0.0011 from the current per play rate of $0.0024.

Moving over to NAB/iHeart, the traditional radio industry is proposing that both paid subscription and ad-supported programmed music stream pay the same rate of $0.0016, below the current floor rate of $0.0018. But beyond that, iHeart is asking for an even lower rate for simulcasts from terrestrial radio of $0.0008 per stream, just like the Pandora floor rate.

But Google appears to be asking for an even lower floor rate, according to the chart. Google is only proposing rates for non-subscription, i.e., ad-supported streams of $0.0013. But it also asks that streams played on non-portable devices like desktops, would only pay a little more than half, or $0.0007.

This introduction of a non-portable rate is a nuance that hadn’t previously come up, according to Prendergast. Likewise, another new wrinkle is the iHeart request that simulcast rates be less than the regular non-subscription rate.

According to Prendergast’s interpretation of iHeart’s thoughts behind its rate proposal, he said during the panel that iHeart’s view is that simulcast is of lesser value to the recording industry because it represent a listening segment of the population that is less willing to pay to consume music. Also, the lower rate proposal is a reflection of the difference in the ad rates for programmed content devoted exclusive to digital radio, as opposed to traditional over-the-air radio that is also actually simulcast.

When asked what might happen with the rates out of the current proceeding, Prendergast allowed that if the Judges act similarly to the rate hearing from five years ago, it could result in a 10% increase with rates going to $0.0021 for non-subscription streams and $0.0026 for paid subscriber streams. However, those predictions are based on what happened at the last rate trial.

“We think the [CRB Judges] should take a completely whole new look at all the information” because all the factors that went into the last decision are now stale — five years old, he said. “It remains to be seen how persuasive each party are in arguing [their positions] to the judges,” he added.

After the upcoming hearing, the judges must weigh all the evidence, looking at a variety of economic factors and determine the rates in a process that usually takes six months. Yet, the Judges by law are supposed to set a rate by Dec. 16, 2020. But with the proceedings now behind schedule, the CARES Act included a caveat anticipating this issue in that it allows the Copyright Office to defer the determination date, if the CRB Judges request additional time.

Meanwhile, SoundExchange has reached a settlement with public and college radio, with college radio annual minimum fees for a license increased fro $550 in 2021 to $750 in 2025, while playing levels would remain the same at 159,140 hours per month. Moving over to public radio, NPR’s annual fee increases to $800,000, while the amount of listening hours increases from 360 million hours in 2021 to 400 million in 2025; or in other words increasing by 10 million hours a year.

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