Section 302 Report, 11816-11821 [2011-4717]

Agencies

• Library of Congress
• Copyright Office

[Federal Register Volume 76, Number 42 (Thursday, March 3, 2011)]
[Notices]
[Pages 11816-11821]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4717]


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LIBRARY OF CONGRESS

Copyright Office

[Docket No. RM 2010-10]


Section 302 Report

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of Inquiry.

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SUMMARY: Congress has directed the Copyright Office (``Office'') to 
prepare a report addressing possible mechanisms, methods, and 
recommendations for phasing out the statutory licensing requirements 
set forth in Sections 111, 119, and 122 of the Copyright Act. This 
notice seeks comment on marketplace solutions to replace the use of the 
statutory licenses for the retransmission of over-the-air broadcast 
signals, suggestions for ways to implement market-based licensing 
practices, and legislative and regulatory actions that would be needed 
to bring about these changes.

DATES: Comments due 45 days after date of publication in the Federal 
Register. Reply comments due 75 days after date of publication in the 
Federal Register.

ADDRESSES: All comments and reply comments shall be submitted 
electronically. A comment page containing a comment form is posted on 
the Copyright Office Web site at https://www.copyright.gov/docs/section302. The Web site interface requires submitters to complete a 
form specifying name and organization, as applicable, and to upload 
comments as an attachment via a browser button. To meet accessibility 
standards, all comments must be uploaded in a single file in either the 
Adobe Portable Document File (PDF) format that contains searchable, 
accessible text (not an image); Microsoft Word; WordPerfect; Rich Text 
Format (RTF); or ASCII text file format (not a scanned document). The 
maximum file size is 6 megabytes (MB). The name of the submitter and 
organization should appear on both the form and the face of the 
comments. All comments will be posted publicly on the Copyright Office 
Web site exactly as they are received, along with names and 
organizations. If electronic submission of comments is not feasible, 
please contact the Copyright Office at 202-707-0796 for special 
instructions.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Assistant General Counsel, 
or Tanya M. Sandros, Deputy General Counsel, Copyright GC/I&R, P.O. Box 
70400, Washington, DC 20024. Telephone: (202) 707-8380. Telefax: (202) 
707-8366 or by electronic mail at bgol@loc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    There are three statutory licenses in the U.S Copyright Act 
governing the retransmission of distant and local television broadcast 
station signals. The cable statutory license, codified in Section 111 
of the Act, permits a cable operator to retransmit both local and 
distant radio and television station signals to its subscribers who pay 
a fee for cable service. The satellite carrier statutory license, 
codified in Section 119 of the Act, permits a satellite carrier to 
provide distant broadcast television station signals to its 
subscribers. Satellite carriers may also retransmit local television 
station signals into the stations' local markets on a royalty-free 
basis pursuant to the Section 122 statutory license. Use of this 
license is contingent upon the satellite carrier complying with the 
rules, regulations, and authorizations established by the Federal 
Communications Commission (``FCC'') governing the carriage of local 
television station signals. See 17 U.S.C. 122(a)(2).
    Sections 111, 119, and 122 operate in place of transactions that 
would otherwise be left to the open marketplace. They allow cable 
operators and satellite carriers to retransmit the television broadcast 
content carried on local and distant broadcast signals without having 
to incur the transaction costs associated with individual negotiations 
for such programming. In exchange for the statutory right to publicly 
perform copyrighted broadcast programming, the users of the Section 111 
and Section 119 licenses pay royalties in accordance with the separate 
rate structures set forth in the law. Larger cable operators pay a 
percentage of royalties based upon the gross receipts generated by a 
cable system, while satellite carriers pay royalties on a per 
subscriber, per signal, per month basis. Cable operators and satellite 
carriers must file Statements of Account (and pay royalty fees) every 
six months with the Office and report which broadcast signals they have 
retransmitted.
    Under the statutory licenses, local and distant broadcast 
television stations transmit a variety of programming, including 
network and syndicated programming, movies, sports programming, local 
news broadcasts, noncommercial shows, religious material, and music of 
all types. The cable operators and satellite carriers pay royalties at 
the rate set forth by law. These royalty fees are collected by the 
Copyright Office and invested in government securities until the time 
that copyright owners can seek and participate in the process of 
allocating such fees. Under Chapter 8 of the Copyright Act, the 
Copyright Royalty Judges (``CRJs''), not the Office, are charged with 
authorizing the distribution of the royalty fees and adjudicating 
royalty claim disputes arising under Sections 111 and 119 of the 
Act.\1\
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    \1\ Copyright owners who have historically claimed a share of 
the statutory royalties are as follows: (1) ``Program Suppliers'' 
(commercial entertainment programming) (2) ``Joint Sports 
Claimants'' (professional and college sports programming); (3) 
``Commercial Television Claimants'' (local commercial television 
programming); (4) ``Public Television Claimants'' (national and 
local noncommercial television programming); (5) ``National Public 
Radio'' (noncommercial radio programming); (6) ``Devotional 
Claimants'' (religious television programming); (7) ``Music 
Claimants'' (musical works included in television programming); and 
(8) ``Canadian Claimants'' (Canadian television programming).
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    Prior to the enactment of the Copyright Act of 1976, U.S. copyright

[[Page 11817]]

law recognized only one statutory (or, as it was then called, 
``compulsory'') license, for the making and distribution of 
phonorecords of musical compositions that had already been distributed 
to the public. The 1976 Act added a number of other statutory license 
provisions, including Section 111. In 1988, Congress passed the 
Satellite Home Viewer Act, codifying Section 119 as part of the 
Copyright Act. Section 119 was designed to sunset after a period of 
five years, but Congress has reauthorized that Section four times hence 
in 1994, 1999, 2004, and again in 2010 (as noted below). Currently, 
Section 119 is due to expire on December 31, 2014. In 1999, as part of 
the Satellite Home Viewer Improvement Act (``SHVIA''), Congress enacted 
Section 122, the local-into-local license. Section 122, as well as 
Section 111, are permanent and are not subject to ``sunset'' like 
Section 119, although Congress in 2010 had updated the text of both 
sections to some degree.\2\
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    \2\ With each reauthorization, Congress has modified the terms 
and conditions of the Section 119 license and, in some cases, 
reduced its scope. For example, in 2004, Congress narrowed Section 
119 by inserting an ``if local-no distant'' provision, which 
effectively limited a satellite carrier's statutory right to carry 
distant signals in those markets where local into local service is 
offered.
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II. Section 302 of the Satellite Television Extension and Localism Act

A. Background

    On May 27, 2010, the President signed the Satellite Television 
Extension and Localism Act of 2010. See Public Law 111-175, 124 Stat. 
1218 (2010) (hereinafter ``STELA''). The legislation extended the term 
of the Section 119 license for another five years, updated the 
statutory license structures to account for changes resulting from the 
nationwide transition to digital television, and revised the Section 
111 and Section 122 licenses in several other respects. In addition, 
STELA instructed the Copyright Office, the Government Accountability 
Office (``GAO'') and the FCC to conduct studies and report findings to 
Congress on different structural and regulatory aspects of the 
broadcast signal carriage marketplace in the United States.
    Section 302 of STELA, entitled ``Report on Market Based 
Alternatives to Statutory Licensing,'' charges the Copyright Office 
with the following:
    Not later than 18 months after the date of the enactment of this 
Act, and after consultation with the Federal Communications Commission, 
the Register of Copyrights shall submit to the appropriate 
Congressional committees a report containing:

    (1) Proposed mechanisms, methods, and recommendations on how to 
implement a phase-out of the statutory licensing requirements set 
forth in sections 111, 119, and 122 of title 17, United States Code, 
by making such sections inapplicable to the secondary transmission 
of a performance or display of a work embodied in a primary 
transmission of a broadcast station that is authorized to license 
the same secondary transmission directly with respect to all of the 
performances and displays embodied in such primary transmission;
    (2) any recommendations for alternative means to implement a 
timely and effective phase-out of the statutory licensing 
requirements set forth in sections 111, 119, and 122 of title 17, 
United States Code; and
    (3) any recommendations for legislative or administrative 
actions as may be appropriate to achieve such a phase-out.

    In response to these directives, the Office now seeks comments and 
information from the public on several issues that are central to the 
scope and operation of Section 302 and critical to the Office's 
analysis of the legal and business landscapes.\3\ This Notice of 
Inquiry (``NOI'') summarizes these issues, raises a number of specific 
questions for public consideration, and invites other comments as 
appropriate and relevant.
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    \3\ The Office notes that on June 30, 2008, it submitted a 
comprehensive Report to Congress regarding the efficacy of the 
Section 111, 119, and 122 licenses. See Satellite Home Viewer 
Extension and Reauthorization Act 109 Report: A Report of the 
Register of Copyrights, June 2008 (``Section 109 Report''). The 
Office cites to the record established in the Section 109 proceeding 
throughout this inquiry.
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B. Fulfilling the Mandates of Section 302

1. Section 302: Goals of the study
    The Office expects to achieve several goals in its report to 
Congress. First, it seeks to provide Congress with a balanced appraisal 
of the marketplace arrangements that could occupy the space left open 
if Sections 111, 119, and 122 were eliminated from the Copyright Act. 
Next, it intends to offer Congress a choice of options from which it 
might approach and repeal the statutory licenses. Finally, in order to 
provide context and points of comparison for our report, the Office 
intends to discuss the current state of licensing in the video 
programming marketplace.
2. Replacing the Statutory Licenses
    In the absence of the statutory licenses, cable operators and 
satellite carriers would need to rely on marketplace mechanisms to 
clear the public performance rights for the content transmitted by 
broadcast stations. The intent here is to explore marketplace 
alternatives that would permit cable operators and satellite carriers 
to retransmit the entire broadcast signal just as they have been 
allowed to do under the statutory licenses. The Office submits that 
there are at least three different approaches that should be considered 
in this discussion: (1) Sublicensing, (2) private licensing, and (3) 
collective licensing. The Office seeks comment on the viability of each 
of these approaches and welcomes input on other possible licensing 
options.
    a. Sublicensing. Section 302(1) of STELA directs the Office to 
study how to implement a phase-out of the Section 111, 119 and 122 
statutory licenses ``by making such sections inapplicable to the 
secondary transmission of a performance or display of a work embodied 
in a primary transmission of a broadcast station that is authorized to 
license the same secondary transmission directly with respect to all of 
the performances and displays embodied in such primary transmission.'' 
This approach involves a marketplace transaction known as sublicensing. 
Sublicensing in the context of the video program marketplace involves 
non-exclusive contractual arrangements whereby a television station, 
while negotiating licenses with copyright owners for the public 
performance of copyrighted programming in a local market, would also 
negotiate permission for the broadcast station to sublicense to third 
party distributors such as cable operators and satellite carriers. 
Sublicense agreements are essentially non-exclusive contracts that 
allow broadcast stations to convey performance rights to others in the 
distribution chain. Both the extent of the rights and the fees for 
further use could be fixed as part of the initial contract between the 
copyright owner and the broadcaster.
    In its 1997 Report to Congress entitled ``A Review of the Copyright 
Licensing Regimes Covering Retransmission of Broadcast Signals'' 
(``1997 Report''), the Office asked, as an alternative to statutory 
licensing, whether the government should require broadcast stations to 
acquire cable retransmission rights from copyright owners, and allow 
the cable operator to negotiate with the broadcast station for the 
entire signal. The Office noted that this mechanism was first suggested 
by the FCC as a marketplace alternative to the Section 111 license.\4\ 
The Office did not make

[[Page 11818]]

any specific recommendations regarding sublicensing in its 1997 Report.
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    \4\ 1997 Report at 24-25. In its 1989 statutory licensing study, 
the FCC stated that, in the absence of Section 111, television 
stations would be able to acquire cable retransmission rights to 
``packages'' of the programming that they broadcast. It further 
stated that cable operators could then negotiate with a single 
entity, the broadcast station, for carriage rights to each package. 
The FCC remarked that the creation of dozens of cable networks by 
the cable and content industries provided ``convincing evidence'' 
that the transactions costs associated with full copyright liability 
are quite manageable. The FCC believed that this method is efficient 
and practical. The FCC concluded that this ``networking'' mechanism 
that is so widely employed in other forms of video distribution, 
appeared well-suited to the acquisition of cable retransmission 
rights for broadcast signals as well. Id., citing 1989 FCC Study, 4 
FCC Rcd at 6712.
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    In the Section 109 Report, however, the Office did state that 
sublicensing was a possible, and reasonable, alternative to statutory 
licensing. The Office noted that it is a market-driven concept that has 
been in practice as long as cable operators have carried non-broadcast 
networks. It further noted that sublicensing has been so successful 
that there are now over 500 channels of video programming available for 
distribution in the multichannel marketplace.\5\ The Office concluded 
that Sections 111 and 119 have impeded the development of a 
sublicensing system and only when these statutory licenses are repealed 
will it be known whether sublicensing is a workable solution.
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    \5\ This point was raised by Disney in its testimony submitted 
to the Copyright Office during hearings on Section 109 of the SHVERA 
in 2007. See Section 109 Hearing Testimony of Preston Padden at 2 
(July 24, 2007).
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    Sublicensing is not an option that was viewed positively by all 
commenters in the Section 109 proceeding. In its comments, NAB argued 
that a sublicensing approach, under which broadcasters would be 
expected to acquire distant market retransmission rights and then 
license them to cable operators and satellite carriers, would not work 
as a direct substitute for the statutory licenses. According to NAB, 
broadcasters whose stations are currently retransmitted as distant 
signals, typically by a handful of systems in adjacent television 
markets, have no core financial incentive to engage in sublicensing. It 
commented that since broadcasters rely principally on advertising 
revenues, and advertisers would not assign value to potential audiences 
in a few scattered cable communities outside the station's home market, 
``there is no direct economic incentive for such broadcasters to 
undertake the cost and administrative burden of acting as a 
clearinghouse for such distant carriage rights.'' NAB Reply Comments in 
the Section 109 Proceeding at 7-8.
    NAB stated that neither the prevalence of cable networks nor even 
the rise of an after-market for the delivery of individual broadcast 
network programs supports the proposition that sublicensing would be a 
viable alternative to the statutory licenses. It commented that the 
factors relevant in those situations are not applicable to 
broadcasters, who focus their economic activities on the local market. 
NAB concluded that the fundamental economic model that drives such 
cable networks simply does not translate to the broadcast station 
context. Id.
    Issues and Questions. The Office seeks comment on whether 
sublicensing is an effective alternative to both the local and distant 
signal statutory licenses, including specifically, comments about the 
current state of sublicensing of television programming in the United 
States. For example, how does sublicensing function in the marketplace 
today, especially with regard to basic cable networks? Are broadcast 
stations truly different from cable networks as the NAB suggests? What 
percentage of the public view broadcast stations through their cable 
and satellite subscriptions rather than directly over the air? If most 
of the public accesses television stations through multichannel video 
programming distributors, would this provide an incentive for the 
broadcasters to take another look at sublicensing the content for 
secondary transmission? Are there sublicensing examples from other 
countries that may be used as models in this regard? The Office also 
welcomes any scholarly articles on sublicensing audiovisual content or 
related issues that will inform the debate.
    b. Private Licensing. Another possibility is that interested 
parties would develop and choose to engage in forms of direct licensing 
in the event statutory licensing were eliminated. Under this option, a 
cable operator or satellite carrier would negotiate with each copyright 
owner of a specific broadcast program for the right to perform the work 
publicly. On this point, it is important to note that the current 
distant signal licenses do not bar such arrangements. Copyright owners 
and cable operators have always been free to enter into private 
licensing agreements for the retransmission of distant broadcast 
programming. The Copyright Office has, in fact, accepted the use of 
private licensing in lieu of the cable statutory license to clear the 
public performance rights for broadcast content carried on the 
signal.\6\ On this point, the Office notes that there are public 
records in the Copyright Office noting the existence of private 
copyright license agreements between television station group owner 
Entravision Communications Corporation and cable operators in Rhode 
Island for the carriage of broadcast content transmitted by WUNI-TV.\7\ 
Broadcast stations that own the rights to the programs they transmit 
have also negotiated programming agreements with satellite carriers 
outside the context of Section 119. For example, DirecTV reported that 
it has entered into agreements for the retransmission of broadcast 
programming transmitted by certain television stations in Puerto Rico. 
See Section 109 Report at 86. Nevertheless, the private licensing of 
broadcast content has not been widespread because cable operators and 
satellite carriers have grown accustomed to using the statutory 
licenses and few broadcast stations own all the rights to the 
programming carried on their signals.
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    \6\ See Policy Decision Concerning Status of Low Power 
Television Stations, 49 FR 46829, 46830 (Nov. 28, 1984) (``If 
copyright owners and cable systems uniformly agree that negotiated 
retransmission consents supersede the compulsory license 
requirements, the Copyright Office has no reason to question this 
interpretation provided that the negotiated license covers 
retransmission rights for all copyrighted works carried by a 
particular broadcasting station for the entire broadcast day for 
each day of the entire accounting period.'').
    \7\ See Letter to Faye W. Eden, Coxcom Inc., from Donna M. 
Thacker, Sr. Licensing Examiner, U.S. Copyright Office, dated March 
30, 2002 (acknowledging that WUNI has been carried by Cox under a 
private licensing agreement) (letter on file with the Licensing 
Division of the Copyright Office).
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    Under one possible private licensing model, the copyright owner and 
either the cable system or satellite carrier would enter into a written 
agreement covering the public performance right for the copyrighted 
work. The statutory license would be replaced with a marketplace-based 
license from a single individual or entity that has the right to 
authorize the retransmission of the copyrighted content carried on the 
broadcast signal, such as in the case of WUNI-TV, noted above. The 
Office seeks comment on whether privately negotiated copyright 
licenses, of the type described above, are a plausible and effective 
marketplace alternative to the three existing statutory licenses. To 
gauge the practicality of private licensing options, the Office seeks 
comment on how many private copyright licenses currently exist and how 
they function. Moreover, the Office seeks comment on whether there are 
any successful private licensing models in operation outside the United 
States that the Office may examine for purposes of this inquiry.

[[Page 11819]]

    Finding Copyright Owners. The Office recognizes that private 
licensing may be difficult when there are multiple copyright owners in 
the marketplace. There are thousands of hours of programming broadcast 
by television stations on a weekly basis.\8\ Before private 
negotiations can commence, cable operators and satellite carriers must 
be able to identify the rights holders to the programs carried by 
broadcast stations. This daunting task has been ameliorated by the 
existing statutory licensing systems, but it would have to be 
confronted if Sections 111, 119, and 122, were repealed.
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    \8\ Recent press reports indicate that seven companies (CBS, 
Disney, Discovery, Fox, NBC Universal, Time Warner, and Viacom) 
account for 90% of all the professionally produced video that people 
watch. See David Lieberman, Web and Other Options are Shaking Up How 
We Watch TV, USA TODAY, https://www.usatoday.com (Jan. 3, 2011). 
However, there are an indeterminable number of copyright owners who 
own the 10% of video programming not produced by the top seven.
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    On this point, the Office notes that certain parties are working on 
an extensive video program cataloging effort to identify the universe 
of audiovisual content available to the public. According to trade 
press reports, a new international coalition announced the launch of 
the Entertainment Identifier Registry (``EIDR''), a non-profit global 
independent registry that provides a uniform approach to cataloging 
movies, television shows, and other commercial audiovisual assets, with 
unique identifiers (``IDs''). The registry is set up as an industry 
resource to help streamline digital commerce and simplify consumer 
transactions.\9\ The Office seeks comment on this effort and ask 
whether such a registry could be used to facilitate private copyright 
clearances by quickly identifying the copyright owner(s) associated 
with the rights to a particular broadcast program and perhaps serve as 
a clearing house for use of the work based on rate schedules 
established by copyright owners. If the EIDR is inapt for identifying 
the owners of broadcast content for retransmission purposes, the Office 
seeks comment on possible alternatives that would perform the same 
function.
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    \9\ See Leading Entertainment Companies Create Registry for 
Movie and Television Content, GlobalNewsWire.com (Oct. 27, 2010), 
https://www.globenewswire.com/ (``Members of EIDR will have open 
access to the registry and/or be able to supply their content to the 
registry for identification. For content distributors, access to 
unique IDs will help eliminate confusion between assets with the 
same name or different cuts of the same video, helping to ensure 
that the right products are being distributed to the consumer. For 
content producers, the ability to register all of their assets will 
help simplify their post-production process and potentially lead to 
greater distribution of their products. Other companies in the 
supply chain can benefit from a streamlined communication process 
between their suppliers and distributors.'')
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    In the Section 109 Report proceeding, the record revealed that 
cable operators were carrying, on average, two to three distant signals 
per system. See Section 109 Report at 51. The Office seeks comment on 
whether this information is still accurate or whether recent trendlines 
indicate either a decrease or increase in the number of distant signals 
carried. If the number of distant signals is low, then it may not be so 
burdensome to negotiate private license agreements with the copyright 
owners of the programming carried on this finite set of signals, if the 
owners of the copyrighted content could be easily identified. However, 
the Office recognizes that both cable operators and satellite carriers 
may have a heavier burden if they have to negotiate for the public 
performance rights of content on local broadcast signals, in the 
absence of Sections 111 and 122, given that there are nearly 1,800 full 
power television stations in the 210 markets across the United States. 
The Office notes, however, that hundreds of television stations are 
affiliated with several national broadcast networks and carry similar 
daytime and primetime programming across markets. Is it practicable to 
use private licensing arrangements to clear the rights for all programs 
transmitted by local television stations? Does the presence of a 
significant amount of national network programming on local broadcast 
stations makes private licensing a more manageable task?
    Hold-ups. In the Section 109 Report proceeding, Echostar explained 
the ``hold-up'' phenomenon inherent in the rights clearance process. It 
asserted that when the last content owner in a station's broadcast 
line-up ``comes to the table'' to negotiate, this owner may have an 
unfair advantage. It stated that the copyright holder can ``hold up'' 
the negotiations by demanding excessive compensation for broadcast 
rights because without the agreement, the distributor will end up 
carrying a channel with a ``hole'' in its schedule. Echostar Comments 
in the Section 109 Proceeding at 8. The Office seeks comment on the 
extent of this problem and whether other program suppliers would see it 
as an opportunity to air their programming in the open slot. On the 
other hand, if hold-ups are, in fact, impediments to private 
negotiations, the Office asks whether this should be a reason not to 
recommend private licensing as a marketplace option and if there are 
legislative solutions that could address the problem.
    c. Collective Licensing. Collective licensing is another possible 
alternative to statutory licensing. Like private licensing, it can take 
a variety of specific forms, but in general, it would require copyright 
owners to voluntarily empower one or more third party organizations to 
negotiate licenses with cable operators and satellite carriers for the 
public performance rights for their works transmitted by a television 
broadcast station. In the Section 109 Report, the Office found that 
collective licensing was a possible marketplace solution that users and 
copyright owners may consider for the efficient disposition of the 
public performance right to broadcast television programming. Section 
109 Report at 90.
    At this time, there are no collective licensing bodies in the 
United States whose business it is to license the public performance of 
audiovisual works transmitted by television broadcast signals. However, 
there are currently three performance rights organizations (``PROs'') 
that administer the public performance right on behalf of the copyright 
owners of musical works: (1) The American Society of Composers, Authors 
and Publishers (``ASCAP''); (2) Broadcast Music, Inc. (``BMI''); and 
(3) SESAC, Inc. These organizations offer a blanket, nonexclusive 
license to users, allowing them to publicly perform the music in the 
PROs' respective repertories.
    It should be noted that ASCAP and BMI operate under government 
supervision. To protect licensees from possible monopolistic behavior 
and antitrust concerns associated with PROs, the U.S. Department of 
Justice has entered into court-administered antitrust consent decrees 
with BMI and ASCAP. Both consent decrees have been updated over time 
and are similar in scope. The consent decrees allow ASCAP and BMI to 
administer the public performance right for musical works. They also 
require the PROs to grant a public performance license on a non-
exclusive basis and deter discrimination amongst similarly situated 
licensees. The consent decrees require per-program licensing as an 
option for licensees instead of obliging everyone to purchase a blanket 
license. A significant provision in the consent decrees is the 
designation of the United States District Court for the Southern 
District of New York as a special rate court which resolves license fee 
disputes. If the PRO and the prospective licensee cannot agree on a 
reasonable fee for a proposed license, then either party can petition 
the special rate court to resolve the issue. SESAC is currently not 
bound by a consent decree, but in

[[Page 11820]]

2009, a class action lawsuit, which is still pending, was filed on 
behalf of local television stations alleging that SESAC is engaged in 
price fixing and other anticompetitive acts.\10\
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    \10\ Amended Complaint at 2, 35-36, Meredith Corp. v. SESAC, No. 
09-9177 (S.D.N.Y. Mar. 18, 2010).
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    Questions for the Public. The Office generally seeks comment on the 
benefits, drawbacks, costs, and operation of collective licensing 
structures for copyrighted works. Specifically, the Office seeks 
comment on the U.S. system for the collective licensing of music and 
whether there are any lessons to be learned in developing a collective 
licensing body for audiovisual works. If collective licensing of 
broadcast television content in the United States was found to be the 
appropriate marketplace replacement for Sections 111, 119, and 122, 
would oversight mechanisms like the consent decrees noted above be 
necessary? The Office also seeks input on collective licensing models 
around the world that may be relevant to our study.\11\ Finally, the 
Office asks whether there are any regulatory impediments or other legal 
issues that may prevent parties from entering into collective 
agreements.
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    \11\ The Office notes, for example, that collective licensing 
has played a crucial role in the European Union. Anke Schierholz, 
Collective Rights Management in Europe: Practice and Legal 
Framework, in European Copyright Law: A Commentary 1150 (Michel M. 
Walter & Silke von Lewinski eds., 2010); see also, Daniel Gervais, 
Collective Management of Copyright: Theory and Practice in the 
Digital Age, COLLECTIVE MANAGEMENT OF COPYRIGHT: THEORY AND PRACTICE 
IN THE DIGITAL AGE (Wolters Kluwer, 2d ed. 2010); Thomas Riis & Jens 
Schovsbo, Extended Collective Licenses and the Nordic Experience--
Its a Hybrid but is It a Volvo or a Lemon?, 33 Colum. J.L. & Arts 1, 
11 (2010).
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    d . Other Licensing Alternatives. This Notice raises specific 
questions about three marketplace approaches to licensing copyrighted 
broadcast television content in the marketplace. However, these 
identified licensing systems should not be viewed as the universe of 
possible options nor should comments be limited to these three 
approaches. Comment on other possible marketplace solutions, not 
mentioned above, that would facilitate the cable and satellite 
retransmission of programs carried by television broadcast stations, 
are encouraged.
3. Eliminating the Statutory Licenses
    The Office has two core mandates under Section 302 of the STELA. 
The first is to consider and recommend possible alternatives to the 
current statutory licensing systems in the Copyright Act, with a 
particular but not an exclusive focus on sublicensing by broadcasters. 
The second is to consider and recommend ``a timely and effective phase-
out'' of the three licenses. While this step concerns ``process'' 
rather than ``substance,'' some of the suggested approaches are keyed 
to the market-based alternatives previously discussed. That is, any 
proposals addressing the elimination of the statutory licenses would 
need to be considered in the context of specific marketplace solutions. 
Thus, the phase-out options are offered as conceptual blueprints that 
may be redrawn in light of the comments regarding the appropriate 
replacements for the existing statutory licensing systems. Moreover, 
the approaches addressed below may not be the only phase-out options 
available. As such, recommendations on other possible alternatives are 
welcome and will be considered.
    a. The Per-Station Approach. Under this plan, the respective 
statutory licenses would be unavailable where the public performance 
rights for all of the programs on a single broadcast station can be 
cleared through a single entity and carriage terms and conditions are 
made available to the distributor in a timely manner so that it is able 
to enter into a private carriage agreement. The Office believes that 
this approach closely approximates the intent of Congress as reflected 
in Section 302(1) of STELA. The Office seeks comment on whether this 
piecemeal approach is a viable ``phase-out'' option. Assuming that a 
single entity could clear the rights, would negotiations between the 
licensing entity and each cable system and satellite carrier be 
necessary? Would this option be more workable if the single entity 
holding the rights were required to establish a rate schedule based on 
criteria that would ensure uniformity of treatment among similarly 
situated cable systems and satellite carriers?
    b. The Staggered Approach. An alternative means to eliminate the 
statutory licenses is for Congress to gradually phase them out over a 
period of time. Under this approach, Congress could first eliminate the 
distant signal licensing constructs on a set date and then repeal the 
local-into-local licensing constructs a few years later. Given that 
cable operators and satellite carriers retransmit significantly more 
local broadcast stations than distant broadcast stations, this method 
would allow the cable and satellite industries more time to plan ahead 
and clear public performance rights with copyright owners of 
programming transmitted by broadcast stations in a local market. The 
Office seeks comment on this approach and its benefits and drawbacks. 
The Office seeks specific comment on whether this method would be 
considered ``timely'' as that term is used in Section 302.
    c. The Statutory Sunset Approach. Another possible approach to 
ending the statutory licensing systems for the retransmission of 
broadcast television signals is by Congressional edict. Under this 
framework, Congress would establish a hard date to repeal Sections 111, 
119, and 122 all at once. For example, Congress could enact legislation 
in January 2013 that would repeal the licenses effective as of January 
1, 2015. An alternative plan, at least for Section 119, is for Congress 
to sunset the satellite distant signal license in those markets where 
local-to-local service is available on a defined date.
    The Office notes, however, that the elimination of the statutory 
licenses on a date certain could lead to channel line-up disruptions on 
a large scale as broadcast signals would likely be dropped by cable 
operators and satellite carriers unless a workable marketplace solution 
for the retransmission of broadcast content is in place beforehand. How 
much time would be needed to establish marketplace alternatives and 
would it be necessary to have a transition period during which the 
statutory license would remain available? The Office also notes that at 
least insofar as local broadcast stations are concerned, elimination of 
the statutory licenses would be difficult to implement if the 
Communications Act's broadcast signal carriage provisions remain in 
place. Without legislation addressing the issues surrounding the 
mandatory carriage of local television signals under title 47 of the 
U.S. Code, cable operators and satellite carriers would be stuck with a 
carriage obligation without the right to retransmit the programming 
carried on those signals. The Office seeks specific comment on these 
possibilities and asks for input on what other drawbacks may result 
from the adoption of a flash cut option.

III. Licensing Models in the New Video Programming Marketplace

    As discussed below, cable operators, satellite carriers, and 
copyright owners have experimented with innovative content distribution 
strategies over the last decade. Creative licensing arrangements have 
developed alongside these new business models. The Office seeks comment 
on three new programming models: (1) Video on Demand; (2) DirecTV's 
``The 101'' linear channel; and (3) online video distribution, and asks 
how these new licensing structures work and how they

[[Page 11821]]

benefit all stakeholders in the distribution chain. This information 
will help the Office understand how the video programming marketplace 
functions and the kinds of licensing arrangements that drive the online 
market.
    Video-on-Demand. Over the past decade, cable operators have offered 
video-on-demand (``VOD'') services over their platforms. VOD allows 
subscribers to select and view individual television programs and 
movies, for free or for a fee, on an a la carte basis any time during 
the day. The Office seeks comment on how copyright owners license 
content for VOD distribution, and the extent to which it might obviate 
the need for continued operation of the section 111, 119 and 122 
statutory licenses.
    Linear Channel Packaging. DirecTV currently offers to its 
subscribers ``The 101,'' a satellite channel carrying older, or 
recently cancelled, broadcast and cable programming. In contrast to 
VOD, which permits subscribers to select and choose individual program 
offerings, the 101 is a linear channel designed and structured by 
DirecTV that is available to its customers on a 24 hour/7 days a week 
basis. The Office seeks comment on how DirecTV obtains and licenses 
content for The 101, and the extent to which such services might 
obviate the need for continued operation of the section 111, 119 and 
122 statutory licenses.
    Online Video. It is likely that more and more television 
programming will migrate to the Internet in the years ahead. Broadcast 
content is now widely available to consumers through streaming video 
services and per-program downloads available at Apple's iTunes store 
and other outlets. In fact, some estimate that fifty percent of 
broadcast network content is available on online platforms the day 
after it airs on television.\12\ Many of these shows have been 
available for free online for a number of years through Web services 
such as Hulu.com or directly from the network's Web site. Is the 
television marketplace entering an era when the current statutory 
licenses are no longer needed because all broadcast programming is 
becoming available online?
---------------------------------------------------------------------------

    \12\ How Much Network Programming Was Actually ``On Online'' 
This Season? Clicker Blog, https://www.clicker.com (July 13, 2010).
---------------------------------------------------------------------------

    In addition to the pantheon of free online video services, there 
are two burgeoning types of subscriber-based streaming television 
models that have gained notoriety in the marketplace. First is the ``TV 
Everywhere'' model where cable/satellite subscribers who can confirm 
their TV subscription through an online registration process, can watch 
live cable programming on the Web just as it appears on TV for no 
additional charge.\13\ The second model is exemplified by online 
subscription services such as Hulu Plus and Netflix that allow 
subscribers to watch television shows and motion pictures online by 
paying a monthly fee directly to the service, without the need to be a 
cable or satellite subscriber.\14\ And, it is worth noting that the 
broadcast industry is also taking part in the development of a secured 
online distribution system, powered by Syncbak, which will enable the 
online viewing of local television signals in their local markets.\15\
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    \13\ Comcast will begin to stream live content from Time 
Warner's cable networks later this year under their TV Everywhere 
licensing agreement. See Todd Spangler, Comcast, Turner Broaden TV 
Everywhere Pact to Cover Live Streaming, https://www.broadcastingcable.com (Feb. 2, 2011). There are no press reports 
indicating whether or when cable operators will be carrying 
broadcast content under the TV Everywhere plan.
    \14\ Hulu management has recently discussed recasting the 
service as an ``online cable operator'' that would use the Internet 
to send live television channels and video-on-demand content to 
subscribers. See Sam Schechner and Jessica Vascellaro, Hulu Reworks 
Its Script as Digital Change Hits TV, Wall Street Journal, January 
27, 2011.
    \15\ Syncbak's proprietary authentication technology 
synchronizes broadband and broadcast delivery of television, 
creating a means for viewers to watch broadcast content in real-time 
on any broadband enabled device. See https://www.syncbak.com. Syncbak 
offers a technical solution to the Internet delivery of broadcast 
stations; it is not an agent for clearing the public performance 
rights for programs carried on such stations.
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    Questions for the public. The Office seeks comment on how broadcast 
content is licensed for distribution over the Internet and what types 
of business models are likely to succeed in the online space. Further, 
the Office seeks comment on whether the TV Everywhere effort and 
popular services, such as Hulu and Netflix, will eventually offer live 
broadcast signals to their subscribers with a broadband connection. If 
so, we ask what licensing models might be used to clear the public 
performance rights for programs carried by television broadcast 
stations for online distribution, by aggregators like Hulu, or through 
technological solutions, as exemplified by Syncbak, and whether these 
alternative means of obtaining access to broadcast programming will 
vitiate the rationale underlying the Section 111, 119 and 122 statutory 
licenses.

IV. Conclusion

    The Office hereby seeks comment from the public on the factual and 
policy matters related to the study mandated by Section 302 of the 
Satellite Television Extension and Localism Act of 2010. If there are 
any additional pertinent issues not discussed above, the Office 
encourages interested parties to raise those matters in their comments. 
In addition, the Office is considering having a roundtable or formal 
hearing on the matters raised in this NOI in June 2011. An announcement 
of such a proceeding, if it were to occur, will be provided by public 
notice in the future.

    Dated: February 25, 2011.
Maria A. Pallante,
Acting Register of Copyrights.
[FR Doc. 2011-4717 Filed 3-2-11; 8:45 am]
BILLING CODE 4110-30-P