statutory license. For example, on May 8, 1998, the Librarian of Congress issued an initial
determination of rates and terms for the statutory license to be paid by nonexempt subscription
digital transmission services, imposing a royalty rate of 6.5% of gross revenues from U.S.
residential subscribers.^3140
The Copyright Office subsequently initiated separate CARP proceedings to set rates and
terms for transmissions made by “eligible nonsubscription services” and those transmissions
made by “pre-existing satellite digital audio radio services.”^3141 The latter proceeding was also
to establish rates and terms for transmissions made during the period Jan. 1, 2001, to Dec. 31,
2002, by “preexisting subscription services” (i.e., the three subscription services in existence
prior to the passage of the DMCA, as discussed in the next subsection). Neither proceeding
considered rates and terms for transmissions made by “new subscription services.” The manner
in which rates have subsequently been set for the various categories of services are enumerated
in the following subsections.
(a) Preexisting Subscription ServicesIn early 2003, three preexisting subscription services (Music Choice, DMX Music Inc.,
and Muzak LLC) reached agreement with the RIAA, American Federation of Television and
Radio Artists, and American Federation of Musicians of the United States and Canada on what
the terms and rates should be for the use of sound recordings by the preexisting subscription
services under the Section 114 statutory license. On Jan. 30, 2003, the Copyright Office
published the proposed rates and terms for comment on their possible adoption without the
convening of a CARP. The proposal covered rates and terms for the period Jan. 1, 2002 through
Dec. 31, 2007. SoundExchange would be the agent designated to receive the royalty
payments.^3142 On July 3, 2003, having received no objections, the Copyright Office adopted the
proposed rates and terms as final. Licensees were required to pay 7% of monthly gross revenues
from residential services in the United States for the period Jan. 1, 2002 through Dec. 31, 2003,
and 7.25 % for Jan. 1, 2004 through Dec. 31, 2007. In addition, an advance payment of
$100,000 was required each year, due by Jan. 20 of each year.^3143
distribute royalties collected under the various compulsory licenses and statutory obligations of the copyright
statute.(^3140) 63 Fed. Reg. 25394 (May 8, 1998). The determination was appealed by the RIAA. The D.C. Circuit affirmed
the rates, although it remanded the matter of certain payment terms to the Librarian for further proceedings.
Recording Industry Ass'n of Am. v. Librarian of Congress, 176 F.3d 528 (D.C. Cir. 1999).
(^3141) 66 Fed. Reg. 1700 (Jan. 9, 2001). A “pre-existing satellite digital audio radio service” is “a subscription
satellite digital audio radio service provided pursuant to a satellite digital audio radio service license issued by
the Federal Communications Commission on or before July 31, 1998, and any renewal of such license to the
extent of the scope of the original license, and may include a limited number of sample channels representative
of the subscription service that are made available on a nonsubscription basis in order to promote the
subscription service.” 17 U.S.C. § 114(j)(10).
(^3142) 68 Fed. Reg. 4744 (Jan. 31, 2003).
(^3143) 68 Fed. Reg. 39837 (July 3, 2003).