PART 382—RATES AND TERMS FOR TRANSMISSIONS OF SOUND RECORDINGS BY PREEXISTING SUBSCRIPTION SERVICES AND PREEXISTING SATELLITE DIGITAL AUDIO RADIO SERVICES AND FOR THE MAKING OF EPHEMERAL REPRODUCTIONS TO FACILITATE THOSE TRANSMISSIONS Authority: 17 U.S.C. 112(e), 114 and 801(b)(1). Source: 83 FR 65265, Dec. 19, 2018, unless otherwise noted. Subpart A—Regulations of General Application § 382.1 Definitions. In this subpart: Collective Copyright Owners Digital Audio Transmission Eligible Transmission Ephemeral Recording GAAP Licensee Payor (1) A Licensee, in relation to the Collective; and (2) The Collective in relation to a Copyright Owner or Performer. Performers Preexisting Subscription Service PSS) Qualified Auditor Satellite Digital Audio Radio Service SDARS) Transmission Verifying Entity [83 FR 65265, Dec. 19, 2018, as amended at 84 FR 32313, July 8, 2019] § 382.2 Scope and compliance. (a) Scope. (b) Legal compliance. (c) Voluntary agreements. § 382.3 Making payment of royalty fees. (a) Payment to the Collective. (b) Advance payment. (c) Minimum payments. (d) Monthly payments. (e) Late fees. (1) Waiver of late fees. (2) Notice regarding noncompliant Statements of Account. If it is reasonably evident to the Collective that a timely-provided Statement of Account is materially noncompliant, the Collective must notify the Licensee within 90 days of discovery of the noncompliance. § 382.4 Delivering statements of account. (a) Statements of Account. (1) Information as is necessary to calculate the accompanying royalty payment; (2) The name, address, business title, telephone number, facsimile number (if any), electronic mail address (if any) and other contact information of the person to be contacted for information or questions concerning the content of the Statement of Account; (3) The signature of: (i) The Licensee or a duly authorized agent of the Licensee; (ii) A partner or delegate if the Licensee is a partnership; or (iii) An officer of the corporation if the Licensee is a corporation; (4) The printed or typewritten name of the person signing the Statement of Account; (5) If the Licensee is a partnership or corporation, the title or official position held in the partnership or corporation by the person signing the Statement of Account; (6) A certification of the capacity of the person signing; (7) The date of signature; and (8) An attestation to the following effect: I, the undersigned owner/officer/partner/agent of the Licensee have examined this Statement of Account and hereby state that it is true, accurate, and complete to my knowledge after reasonable due diligence and that it fairly presents, in all material respects, the liabilities of the Licensee pursuant to 17 U.S.C. 112(e) and 114 and applicable regulations adopted under those sections. (b) Certification. § 382.5 Distributing royalty fees. (a) Distribution of royalties. (2) Identification of Copyright Owners. (b) Unclaimed funds. (c) Retention of records. (d) Designation of the Collective. (2) If SoundExchange, Inc. should dissolve or cease to be governed by a board consisting of equal numbers of representatives of Copyright Owners and Performers, it shall be replaced for the applicable royalty period by a successor Collective according to the following procedure: (i) The nine Copyright Owner representatives and the nine Performer representatives on the SoundExchange board as of the last day preceding SoundExchange's cessation or dissolution shall vote by a majority to recommend that the Copyright Royalty Judges designate a successor and must file a petition with the Copyright Royalty Judges requesting that the Judges designate the named successor and setting forth the reasons therefor. (ii) Within 30 days of receiving the petition, the Copyright Royalty Judges must issue an order designating the recommended Collective, unless the Judges find good cause not to make and publish the designation in the Federal Register § 382.6 Handling Confidential Information. (a) Definition. (b) Use of Confidential Information. (c) Disclosure of Confidential Information. (1) Employees, agents, consultants, and independent contractors of the Collective, subject to an appropriate written confidentiality agreement, who are engaged in the collection and distribution of royalty payments hereunder and activities related directly thereto who require access to the Confidential Information for the purpose of performing their duties during the ordinary course of their work; (2) A Qualified Auditor or outside counsel who is authorized to act on behalf of: (i) The Collective with respect to verification of a Licensee's statement of account pursuant to this part; or (ii) A Copyright Owner or Performer with respect to the verification of royalty distributions pursuant to this part; (3) Copyright Owners and Performers, including their designated agents, whose works a Licensee used under the statutory licenses set forth in 17 U.S.C. 112(e) and 114 by the Licensee whose Confidential Information is being supplied, subject to an appropriate written confidentiality agreement, and including those employees, agents, consultants, and independent contractors of such Copyright Owners and Performers and their designated agents, subject to an appropriate written confidentiality agreement, who require access to the Confidential Information to perform their duties during the ordinary course of their work; (4) Attorneys and other authorized agents of parties to proceedings under 17 U.S.C. 112 or 114, acting under an appropriate protective order. (d) Safeguarding Confidential Information. § 382.7 Auditing payments and distributions. (a) General. (b) Frequency of auditing. (c) Notice of intent to audit. Federal Register (d) The audit. (e) Access to third-party records for audit purposes. (f) Duty of auditor to consult. (g) Audit results; underpayment or overpayment of royalties. (h) Paying the costs of the audit. (i) Retention of audit report. Subpart B—Preexisting Subscription Services (PSS) § 382.10 Royalty fees for the digital performance of sound recordings and the making of ephemeral recordings by preexisting subscription services. (a) Royalty fees. (b) Ephemeral recordings royalty fee. (2) The minimum fee is $5,000 per year. § 382.11 Calculation of gross revenues for PSS. (a) Gross revenues are monies derived from the operation of the programming service of the Licensee and are comprised of the following: (1) Monies received by Licensee from Licensee's carriers and directly from residential U.S. subscribers for Licensee's programming service; (2) Licensee's advertising revenues (as billed), or other monies received from sponsors, if any, less advertising agency commissions not to exceed 15% of those fees incurred to a recognized advertising agency not owned or controlled by Licensee; (3) Monies received for the provision of time on the programming service to any third party; (4) Monies received from the sale of time to providers of paid programming such as infomercials; (5) Where merchandise, service, or anything of value is received by Licensee in lieu of cash consideration for the use of Licensee's programming service, the fair market value thereof or Licensee's prevailing published rate, whichever is less; (6) Monies or other consideration received by Licensee from Licensee's carriers, but not including monies received by Licensee's carriers from others and not accounted for by Licensee's carriers to Licensee, for the provision of hardware by anyone and used in connection with the programming service; (7) Monies or other consideration received for any references to or inclusion of any product or service on the programming service; and (8) Bad debts recovered regarding paragraphs (a)(1) through (7) of this section. (9) Revenues described in paragraphs (a)(1) through (8) of this section to which Licensee is entitled but which are paid to a parent, subsidiary, division, or affiliate of Licensee, in lieu of payment to Licensee but not including payments to Licensee's carriers for the programming service. (b) Gross Revenues exclude affiliate revenue returned during the reporting period and bad debts actually written off during reporting period. Subpart C—Preexisting Satellite Digital Audio Radio Services (SDARS) § 382.20 Definitions. In this subpart: Directly-Licensed Recording Reference Channels [83 FR 65265, Dec. 19, 2018, as amended at 84 FR 32313, July 8, 2019] § 382.21 Royalty fees for the public performance of sound recordings and the making of ephemeral recordings by SDARS. (a) Royalty fees. (b) Ephemeral recordings royalty fees. (2) The minimum fee is $5,000 per year. § 382.22 Calculation of Gross Revenues for SDARS. (a) Gross Revenues are: (1) Revenue recognized by the Licensee in accordance with GAAP from the operation of an SDARS and comprised of the following: (i) Subscription revenue recognized by Licensee directly from U.S. subscribers for licensee's SDARS; and (ii) Licensee's advertising revenues, or other monies received from sponsors, if any, attributable to advertising on channels other than those that use only incidental performances of sound recordings, less advertising agency and sales commissions. (2) Revenues set forth above to which Licensee is entitled but which are paid to a parent, wholly-owned subsidiary, or division of Licensee. (b) Gross Revenues exclude: (1) Monies or other consideration attributable to the sale and/or license of equipment and/or other technology, including but not limited to bandwidth, sales of devices that receive the Licensee's SDARS and any shipping and handling fees therefor; (2) Royalties paid to Licensee for intellectual property rights; (3) Monies or other consideration received by Licensee from the sale of phonorecords and digital phonorecord deliveries; (4) Sales and use taxes; (5) Credit card, invoice, activation, swap and early termination fees charged to subscribers and reasonably related to the Licensee's expenses to which they pertain; (6) Bad debt expense; and (7) Revenues recognized by Licensee (or otherwise received by Licensee if no GAAP “recognition” principles are applicable) for the provision of: (i) Current and future data services offered for a separate charge ( e.g., (ii) Channels, programming, products and/or other services offered for a separate charge where such channels use only incidental performances of sound recordings; (iii) Channels, programming, products and/or other services provided outside of the United States; and (iv) Channels, programming, products and/or other services for which the performance of sound recordings and/or the making of Ephemeral Recordings is exempt from any license requirement or is separately licensed, including by a statutory license and, for the avoidance of doubt, webcasting, audio services bundled with television programming, interactive services, and transmissions to business establishments. § 382.23 Adjustments to royalty fee. (a) Reduction for Direct License Share. (1) The Direct License Share reduction is available to a Licensee only if— (i) The Reference Channels constitute a large majority of and are generally representative of the music channels offered on the Licensee's SDARS; and (ii) The Licensee provides the Collective, by no later than the due date for the relevant payment under § 382.3(d), a list of each Copyright Owner from which the Licensee claims to have a direct license of rights to Directly-Licensed Recordings that is in effect for the month for which the payment is made and of each sound recording for which the Licensee takes the reduction, identified by featured artist name, sound recording title, and International Standard Recording Code (ISRC) number or, alternatively to the ISRC, album title and copyright owner name. Notwithstanding § 382.6, the Collective may disclose such information as reasonably necessary for it to confirm whether a claimed direct license exists and claimed sound recordings are properly excludable. (2) To arrive at the percentage allocable to the Direct License Share for each month, the Licensee shall divide the internet Performances of Directly-Licensed Recordings on the Reference Channels by the total number of internet Performances of all sound recordings on the Reference Channels. In no event shall the Direct License Share be an amount greater than the result of dividing the number of plays of Directly-Licensed Recordings on the SDARS by the total number of plays of all sound recordings on the SDARS. (b) Definition of Performance. (1) Except as discussed in paragraph (c)(2) of this section, a Performance is an instance in which any portion of a sound recording is publicly performed to a listener within the United States by means of a Digital Audio Transmission ( e.g., (2) An instance in which a portion of a sound recording is publicly performed to a listener within the United States by means of a Digital Audio Transmission is not a Performance if it both: (i) Makes no more than incidental use of sound recordings including, but not limited to, brief musical transitions in and out of commercials or program segments, brief use during news, talk and sports programming, brief background use during disk jockey announcements, brief use during commercials of sixty seconds or less in duration, or brief use during sporting or other public events; and (ii) Does not contain an entire sound recording and does not feature a particular sound recording of more than thirty seconds (as in the case of a sound recording used as a theme song), except for ambient music that is background at a public event. [83 FR 65265, Dec. 19, 2018, as amended at 84 FR 32313, July 8, 2019]