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Title 37 Part 385 → Subpart C

Title 37 → Chapter III → Subchapter E → Part 385 → Subpart C

Electronic Code of Federal Regulations e-CFR

Title 37 Part 385 → Subpart C

e-CFR data is current as of February 20, 2020

Title 37Chapter IIISubchapter EPart 385 → Subpart C


Title 37: Patents, Trademarks, and Copyrights
PART 385—RATES AND TERMS FOR USE OF NONDRAMATIC MUSICAL WORKS IN THE MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL PHONORECORDS


Subpart C—Eligible Interactive Streaming, Eligible Limited Downloads, Limited Offerings, Mixed Service Bundles, Bundled Subscription Offerings, Locker Services, and Other Delivery Configurations


Contents
§385.20   Scope.
§385.21   Royalty rates and calculations.
§385.22   Royalty floors for specific types of offerings.

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§385.20   Scope.

This subpart establishes rates and terms of royalty payments for Eligible Interactive Streams and Eligible Limited Downloads of musical works, and other reproductions or distributions of musical works through Limited Offerings, Mixed Service Bundles, Bundled Subscription Offerings, Paid Locker Services, and Purchased Content Locker Services provided through subscription and nonsubscription digital music Service Providers in accordance with the provisions of 17 U.S.C. 115, exclusive of Offerings subject to subpart D of this part.

[84 FR 32316, July 8, 2019]

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§385.21   Royalty rates and calculations.

(a) Applicable royalty. Licensees that engage in Licensed Activity covered by this subpart pursuant to 17 U.S.C. 115 shall pay royalties therefor that are calculated as provided in this section, subject to the royalty floors for specific types of services described in §385.22.

(b) Rate calculation. Royalty payments for Licensed Activity in this subpart shall be calculated as provided in paragraph (b) of this section. If a Service Provider includes different Offerings, royalties must be calculated separately with respect to each Offering taking into consideration Service Provider Revenue and expenses associated with each Offering.

(1) Step 1: Calculate the all-In royalty for the Offering. For each Accounting Period, the all-in royalty shall be the greater of the applicable percent of Service Provider Revenue and the applicable percent of TCC set forth in the following table.

Table 1 to Paragraph (b)(1)—2018-2022 All-In Royalty Rates

Royalty year2018
(%)
2019
(%)
2020
(%)
2021
(%)
2022
(%)
Percent of Revenue11.412.313.314.215.1
Percent of TCC22.023.124.125.226.2

(2) Step 2: Subtract applicable Performance Royalties. From the amount determined in step 1 in paragraph (b)(1) of this section, for each Offering of the Service Provider, subtract the total amount of Performance Royalty that the Service Provider has expensed or will expense pursuant to public performance licenses in connection with uses of musical works through that Offering during the Accounting Period that constitute Licensed Activity. Although this amount may be the total of the Service Provider's payments for that Offering for the Accounting Period, it will be less than the total of the Performance Royalties if the Service Provider is also engaging in public performance of musical works that does not constitute Licensed Activity. In the case in which the Service Provider is also engaging in the public performance of musical works that does not constitute Licensed Activity, the amount to be subtracted for Performance Royalties shall be the amount allocable to Licensed Activity uses through the relevant Offering as determined in relation to all uses of musical works for which the Service Provider pays Performance Royalties for the Accounting Period. The Service Provider shall make this allocation on the basis of Plays of musical works or, where per-play information is unavailable because of bona fide technical limitations as described in step 3 in paragraph (b)(3) of this section, using the same alternative methodology as provided in step 4 in paragraph (b)(4) of this section.

(3) Step 3: Determine the payable royalty pool. The payable royalty pool is the amount payable for the reproduction and distribution of all musical works used by the Service Provider by virtue of its Licensed Activity for a particular Offering during the Accounting Period. This amount is the greater of:

(i) The result determined in step 2 in paragraph (b)(2) of this section; and

(ii) The royalty floor (if any) resulting from the calculations described in §385.22.

(4) Step 4: Calculate the per-work royalty allocation. This is the amount payable for the reproduction and distribution of each musical work used by the Service Provider by virtue of its Licensed Activity through a particular Offering during the Accounting Period. To determine this amount, the result determined in step 3 in paragraph (b)(3) of this section must be allocated to each musical work used through the Offering. The allocation shall be accomplished by dividing the payable royalty pool determined in step 3 for the Offering by the total number of Plays of all musical works through the Offering during the Accounting Period (other than Plays subject to subpart D of this part) to yield a per-Play allocation, and multiplying that result by the number of Plays of each musical work (other than Plays subject to subpart D of this part)) through the Offering during the Accounting Period. For purposes of determining the per-work royalty allocation in all calculations under step 4 in this paragraph (b)(4) only (i.e., after the payable royalty pool has been determined), for sound recordings of musical works with a playing time of over 5 minutes, each Play shall be counted as provided in paragraph (c) of this section. Notwithstanding the foregoing, if the Service Provider is not capable of tracking Play information because of bona fide limitations of the available technology for Offerings of that nature or of devices useable with the Offering, the per-work royalty allocation may instead be accomplished in a manner consistent with the methodology used for making royalty payment allocations for the use of individual sound recordings.

(c) Overtime adjustment. For purposes of the calculations in step 4 in paragraph (b)(4) of this section only, for sound recordings of musical works with a playing time of over 5 minutes, adjust the number of Plays as follows.

(1) 5:01 to 6:00 minutes—Each play = 1.2 plays.

(2) 6:01 to 7:00 minutes—Each play = 1.4 plays.

(3) 7:01 to 8:00 minutes—Each play = 1.6 plays.

(4) 8:01 to 9:00 minutes—Each play = 1.8 plays.

(5) 9:01 to 10:00 minutes—Each play = 2.0 plays.

(6) For playing times of greater than 10 minutes, continue to add 0.2 plays for each additional minute or fraction thereof.

(d) Accounting. The calculations required by paragraph (b) of this section shall be made in good faith and on the basis of the best knowledge, information, and belief at the time payment is due, and subject to the additional accounting and certification requirements of 17 U.S.C. 115(c)(2)(I), 17 U.S.C. 115(d)(4)(A)(i), and part 210 of this title. Without limitation, statements of account shall set forth each step of the calculations with sufficient information to allow the assessment of the accuracy and manner in which the payable royalty pool and per-play allocations (including information sufficient to demonstrate whether and how a royalty floor pursuant to §385.22 does or does not apply) were determined and, for each Offering reported, also indicate the type of Licensed Activity involved and the number of Plays of each musical work (including an indication of any overtime adjustment applied) that is the basis of the per-work royalty allocation being paid.

[84 FR 2031, Feb. 5, 2019, as amended at 84 FR 32316, July 8, 2019]

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§385.22   Royalty floors for specific types of offerings.

(a) In general. The following royalty floors for use in step 3 of §385.21(b)(3)(ii) shall apply to the respective types of Offerings.

(1) Standalone non-portable Subscription—streaming only. Except as provided in paragraph (a)(4) of this section, in the case of a Subscription Offering through which an End User can listen to sound recordings only in the form of Eligible Interactive Streams and only from a non-portable device to which those Streams are originally transmitted while the device has a live network connection, the royalty floor is the aggregate amount of 15 cents per subscriber per month.

(2) Standalone non-portable Subscription—mixed. Except as provided in paragraph (a)(4) of this section, in the case of a Subscription Offering through which an End User can listen to sound recordings either in the form of Eligible Interactive Streams or Eligible Limited Downloads but only from a non-portable device to which those Streams or Eligible Limited Downloads are originally transmitted, the royalty floor for use in step 3 of §385.21(b)(3)(ii) is the aggregate amount of 30 cents per subscriber per month.

(3) Standalone portable Subscription Offering. Except as provided in paragraph (a)(4) of this section, in the case of a Subscription Offering through which an End User can listen to sound recordings in the form of Eligible Interactive Streams or Eligible Limited Downloads from a portable device, the royalty floor for use in step 3 of §385.21(b)(3)(ii) is the aggregate amount of 50 cents per subscriber per month.

(4) Bundled Subscription Offerings. In the case of a Bundled Subscription Offering, the royalty floor for use in step 3 of §385.21(b)(3)(ii) is the royalty floor that would apply to the music component of the bundle if it were offered on a standalone basis for each End User who has made at least one Play of a licensed work during that month (each such End User to be considered an “active subscriber”).

(b) Computation of royalty rates. For purposes of paragraph (a) of this section, to determine the royalty floor, as applicable to any particular Offering, the total number of subscriber-months for the Accounting Period, shall be calculated by taking all End Users who were subscribers for complete calendar months, prorating in the case of End Users who were subscribers for only part of a calendar month, and deducting on a prorated basis for End Users covered by an Offering subject to subpart D of this part, except in the case of a Bundled Subscription Offering, subscriber-months shall be determined with respect to active subscribers as defined in paragraph (a)(4) of this section. The product of the total number of subscriber-months for the Accounting Period and the specified number of cents per subscriber (or active subscriber, as the case may be) shall be used as the subscriber-based component of the royalty floor for the Accounting Period. A Family Plan shall be treated as 1.5 subscribers per month, prorated in the case of a Family Plan Subscription in effect for only part of a calendar month. A Student Plan shall be treated as 0.50 subscribers per month, prorated in the case of a Student Plan End User who subscribed for only part of a calendar month.

[84 FR 2031, Feb. 5, 2019, as amended at 84 FR 32316, July 8, 2019]

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