On Nov. 30, 2004, the Copyright Royalty and Distribution Reform Act of 2004
(“CRDRA”)^3144 was enacted, with an effective date of May 31, 2005. That Act eliminated the
CARP system and replaced it with a Copyright Royalty Board (CRB) comprised of three
permanent Copyright Royalty Judges (CRJs).
On Jan. 9, 2006, the CRB announced commencement of a proceeding to determine rates
and terms of royalty payments under Sections 114 and 112 for preexisting subscription services
and preexisting satellite digital audio radio services (“SDARS”).^3145 SoundExchange, Music
Choice, Muzak, XM, Sirius, Royalty Logic Inc. and THP Capstar Acquisition dba DMX Music,
all filed petitions in response. DMX and Sirius asserted that they qualified as preexisting
subscription services and were thus eligible for the earlier, below-market rates established by the
CARP in May 1998 and revised in July 2003. SoundExchange challenged this assertion, arguing
that they did not qualify as a preexisting service under Section 114(j)(11) because neither had
provided digital audio transmissions on or before July 31, 1998. On Aug. 21, 2006, the CRB
referred this question to the Register of Copyrights for a ruling.^3146
In November of 2006, in response to the CRB’s request, the Copyright Office published
in the Federal Register a memorandum opinion concluding that
eligibility for a preexisting subscription service license is limited to subscription services
that satisfy the definition of 17 U.S.C. § 114(j)(11), which includes being in operation on
July 31, 1998 and continuously operating since that time. In 1998, Congress identified
those entities which satisfied the definition and were eligible at that time as being DMX,
Music Choice and the DISH Network. Therefore, today, those same services are the only
ones that may qualify as being preexisting subscription services, since they are the only
ones which can satisfy the requirement of being in operation as of July 31, 1998.
Moreover, for purposes of participating in a rate setting proceeding, the term ‘preexisting
subscription service’ is best interpreted as meaning the business entity which operates
under the statutory license. A determination of whether DMX is the same service that
was identified by the legislative history in 1998 and has operated continuously since that
time requires a factual analysis that is beyond the scope of the Register’s authority for
questions presented under 17 U.S.C. § 802(f)(1)(B).^3147Over the next year, various parties either entered into independent settlement
arrangements with SoundExchange, were dismissed by the CRB, or withdrew from the
proceedings, leaving only Sirius and XM to proceed as SDARS.^3148 In June 2007,
SoundExchange and Music Choice entered into an agreement that was submitted to the royalty
(^3144) Pub. L. No. 108-419, 118 Stat. 2341 (2004).
(^3145) 71 Fed. Reg. 1455 (Jan. 9, 2006).
(^3146) “Copyright Royalty Board Sets New Rates for Satellite Radio Providers XM and Sirius,” BNA’s Patent,
Trademark & Copyright Journal (Dec. 14, 2007) at 160.
(^3147) 71 Fed. Reg. 64639, 64640 (Nov. 3, 2006).
(^3148) “Copyright Royalty Board Sets New Rates for Satellite Radio Providers XM and Sirius,” BNA’s Patent,
Trademark & Copyright Journal (Dec. 14, 2007) at 160-61.