16 June 2017 V I D E O A G E (Continued from Cover) Cover Story: TV Copyrights distribution of the 2014 Cable Funds would total approximately $140,134,224.20. In a nutshell, “secondary transmissions” to the public by a cable system of a performance or display of a work embodied in a primary transmissionmade by a broadcast station licensed by theFederal CommunicationsCommission shall be subject to statutory licensing. Consequently, twice each year, American cable services and satellite carriers deposit with the U.S. Copyright Office royalties payable for the privilege of retransmitting over-the-air television and radio broadcast signals via cable and satellite. Section 111 of the U.S. Copyright Act grants a statutory copyright license to cable television systems for the retransmission of over-the-air television and radio broadcast stations to their subscribers. In exchange for this license, cable operators submit royalty payments and statements of account detailing their retransmissions semiannually to the Copyright Office. The Copyright Office deposits the royalties into the United States Treasury for later distribution to copyright owners of the broadcast programming that the cable systems retransmit. Then, Copyright Royalty Judges oversee distribution of the royalties to copyright owners whose works are included in the retransmissions and who have filed a timely claim for royalties. If an interested party fails to file a “Petition to Participate” in response to a formal public notice, that party will not be eligible for distribution of royalties for a pre-determined period from either the cable or satellite. Allocation of the royalties collected occurs in one of two ways: In the first instance, the Judges may authorize distribution in accordance with a negotiated settlement among all claiming parties. If all claimants do not reach an agreement with respect to the royalties, the Judges must conduct a proceeding to determine the distribution of any royalties that remain in controversy. Alternatively, the Judges may, on motion of claimants and on notice to all interested parties, authorize a partial distribution of royalties, reserving on deposit sufficient funds to resolve identified disputes. Under this system, a U.S. copyright tribunal determines whether fund distribution controversies exist and either distribute uncontroverted royalties or commence a distribution proceeding to resolve controversies. As a matter of procedure, the Copyright Royalty Judges issued their written determination of royalty rates and terms prospectively. These payments originate from two funds: 1) the Cable Statutory License Royalty Rates; and 2) the Satellite Royalty Funds. A cable system calculates its royalty payments in accordance with the statutory formula as published in the U.S. Federal Register. Royalty rates are based upon a cable system’s gross receipts from subscribers who receive retransmitted broadcast signals. contributing factor. It was not until March 1, 1989 that American copyright law, in compliance to the Berne Convention, did away with the “must publish” requirement for non-American rightsholders. Because of the diversity of what is aired on cable and satellite television, large commoninterest negotiating blocs have been created. One such major group is known as the “Phase I Parties” or “Allocation Phase” parties, which represent copyright owners of programming and other works included in broadcasts that are and will be secondarily transmitted by cable systems pursuant to the Section 111 compulsory license. They include: Program Suppliers Joint Sports Claimants Public Broadcasting Service National Association of Broadcasters SESAC Performing Rights National Public Radio Devotional Claimants On the other side of the coin are the cable and satellite interests in the form of: 1) National Cable & Telecommunications Association (NCTA), which represents the owners and operators of cable systems serving more than 80 percent of the nation’s cable television households. 2) American Cable Association (ACA), approximately 850 cable operators that serve nearly seven million subscribers (with an average system size of around 8,500 subscribers (and a median size of around 1,000 subscribers). The cable system operator members that belong to NCTA and ACA are users of copyrighted works whose royalty rates are specified by Title 17. But cable television is not alone. There is the Audio Home Recording Act of 1992, in which the same copyright tribunal distributes royalties paid for the manufacture and distribution of digital audio recording devices and media (DART). Ironically, in 2016, those collected royalties declined dramatically, to the extent that amounts deposited are insufficient to cover the costs of managing the DART funds and subfunds and distributing royalties to claimants. The result: As of royalty year 2016, it became impossible for the Judges to fulfill this directive. By Steven M. Schiffman, a copyrights lawyer, television producer and VideoAge contributor based in Las Vegas For rate calculation purposes, cable systems are divided into three tiers based on their gross receipts: small, medium, and large. Both the applicable rates and the tiers are subject to adjustment. Every five years, people with a significant interest in the royalty rates may file petitions to initiate a proceeding to adjust the rates. If such a petition does not take place, as was the case in 2015, the Tribunal must, therefore, publish notice in the Federal Register announcing the commencement of a proceeding and calling for Petitions to Participate in the proceeding to determine cable royalty rates for 2015 through 2019. This rule has its roots stemming back to 1941 when the U.S. Justice Department filed antitrust lawsuits against the nation’s two leading music performing rights licensing organizations, ASCAP and BMI — concerned about price-fixing by songwriters who, technically, compete with one another — bringing them under federal court supervision in 1941. The consent decrees signed that year require ASCAP and BMI to offer licenses to their entire catalog to anyone who wants one, at a fee that’s either negotiated or set by a federal judge in a “rate court.” The decrees have since been updated. Originally designed to generate royalty income from the use of the then-novel “player-piano” in commercial establishments, such as restaurants, it soon evolved to cover radio and then television broadcast. Prior to the player-piano, income was based solely on the sales of “sheet music” that was published. It is important to keep in mind it was a novel contention at the time that the composer had a further right to a share of any other revenue stream to which his work was a Twice each year, American cable services and satellite carriers deposit with the U.S. Copyright Office royalties payable for the privilege of retransmitting over-the-air television and radio broadcast signals via cable and satellite.
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