SoundExchange Seeks Permission to Distribute Royalties Based on Proxy Information

by Davis Wright Tremaine LLP
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What should SoundExchange do with money that it collects for the performance of sound recordings, when it does not know what sound recordings were played by a particular service? As we've written many times on this blog, SoundExchange collects royalties from digital music services , including satellite radio, cable radio and webcasters, for the performance of sound recordings (i.e. a recording of a song by a particular artist). It is charged with the obligation to distribute these royalties one-half to those who hold of the copyright to the sound recording and one-half to the artists who perform on those recordings. However, SoundExchange, according to a filing recently made with the Copyright Royalty Board, does not always know which songs were played by a particular music service. Thus, it has had difficulty distributing all of the money it collects - currently holding $28 Million in royalties from the period 2004 to 2009 that have not been distributed. Why? According to SoundExchange much of the problem is that not all services report what they played and how often, and other information that is submitted is sometimes inaccurate or otherwise does not adequately identify the music that was played. To deal with this problem, SoundExchange has asked that the Copyright Royalty Board authorize it to use proxy information to distribute these funds from 2004-2009. The CRB has asked for comments on that proposal. Comments are due on May 19.

What is proxy information? Basically, SoundExchange plans to infer from the information that it does have what music was played by the services for which it has no information. According to the SoundExchange filing, they would make these assumptions based on the type of service. Thus, information from webcasters would be used to estimate what other webcasters were playing. Information from background music services who did report would be used to determine what other background music services played, and so on. The CRB, in its request for comments, asks if the proxy should be further broken down so that, for instance, noncommercial webcasters would serve as a proxy for other noncommercial webcasters, and commercial webcasters would serve as a proxy for other commercial webcasters. The Copyright Royalty Judges are also seeking to assess whether SoundExchange has done all that it can do to get the required information, and if the proxy system is a fair way of determining distributions for the money that has not yet been awarded to rightsholders and artists.

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