Television's Multi-Million Dollar Secret: Claiming Retransmission Royalties for Documentaries

Approximately $270 million is collected annually in the United States for the single purpose of compensating television program copyright holders for retransmitted copies of their shows.  Copies are made through simultaneous retransmissions of free-to-air television programming over cable systems or via digital broadcast satellites.

Copyright holders of documentaries and other programs are entitled to claim retransmission royalties for their programming only if they file appropriate claims at the appropriate time.

To garner the largest possible piece of this multi-million dollar pie, producers and program suppliers rarely discuss filing retransmission royalty claims for their programming, because the more claims that are filed, the fewer royalty payments each claimant receives.

In 2009, over $178 million was collected for cable retransmissions, and more than $92 million was collected for satellite retransmissions. At the time of this writing, the US Copyright Office was still tallying 2010 royalties. Since royalties are only paid to eligible rights holders who file claims, it benefits those who know about these proceedings to keep it confidential.  This article sheds light on how to claim royalties for your documentaries.

Collections and Claiming

In the US, royalties are paid out of large distribution pools managed by the Licensing Division of the US Copyright Office. Similar entities around the globe--Screenrights in Australia; AGICOA in Switzerland for Europe; the Canadian Retransmission Collective and the Copyright Collective of Canada, among others--collect royalties for cable and satellite retransmissions in addition to other copying levies and blank tape fees.

In 2009, in the US alone, approximately 1,000 organizations filed claims to collect television retransmission royalties. Only organizations that own the copyright in the programming broadcast are entitled to claim royalties.

Television programs including documentaries aired originally on full-power broadcast TV like public television stations--not cable or satellite like Discovery or History Channel--are entitled to retransmission royalties in the United States under Sections 111 and 119 of the US Copyright Act, but only when that programming is simultaneously retransmitted via cable and/or satellite systems to distant signal subscribers. Distant signal subscribers are those who cannot receive a local TV station's broadcast signal over the air, but who can receive it via cable or satellite subscriptions.

To receive royalties, claimants must file, track and respond to pleadings at the Copyright Royalty Board (CRB). Each year, claims must be filed in July at the CRB for royalties related to the previous year's programming. Two to three years after that, royalty distribution proceedings are initiated by the CRB, which determines the percentage of royalties to be allocated to each claimants' group. Phase I of the royalty distribution proceedings takes six months. At the end of that time frame, the CRB issues its recommendation on the amounts to be allocated.

On June 29, 2010, the CRB issued a report to the Librarian of Congress regarding the distribution of the 2004-2005 cable royalty funds. The following claimant groups received the following percentages and estimated amounts from what is known as the Basic Fund. Two other funds of royalties also apply. These amounts are subject to appeal, but usually remain relatively close to the percentages and dollars noted.

TABLE 1

After the royalties are distributed to the claimants' groups, then each claimant must fight for its sliver of its group's slice of the pie. While most groups have agreed on an internal distribution methodology among their members, that is not always the case. Settling the claimants' distributions is known as Phase II of the proceedings, and it can take another year or more before the parties reach agreement. After examining Table 1, it's clear that claiming royalties benefits copyright holders.

Money Matters

Some claimants' groups pay millions of dollars annually in legal fees for their royalties. Some organizations bill individual claimants for services upfront at an hourly rate. The downside to the hourly approach is that the copyright holder pays dollars today for the promise of dollars tomorrow.

In this realm of retransmission royalties, tomorrow is typically five or more years away.  A better approach for the copyright owner is to retain legal counsel on a contingency fee basis.  That way, the copyright holder is paid first and then counsel receives its cut. While clients can negotiate contingency fee arrangements with counsel, standard rates hover one-third plus expenses.

A copyright owner can try to file these claims alone, but the filing and monitoring of these claims is complicated and time-consuming. On average, it takes five or more years to receive the full royalty distribution for a particular year's programming. The filings and follow-up can be rigorous. Six months of arbitration takes its toll.

If you were to file claims for 2010 programming in July 2011, then you most likely would not receive all of your royalties until 2016 or later. Relying on experienced counsel helps producers increase income by handling claims efficiently.

In the US, the number of households viewing your programming partially determines the royalties to which a documentary is entitled. While the distribution formulas vary among claims and parties, distributions are based on Nielsen research (primarily household viewership ratings per half hour) and Bortz Media and Sports Group studies, which focuses on the market value of programming.

Nielsen ratings and Bortz studies are each given certain weight by the CRB. Most recently, credit assigned to the market value of programming has increased, while the weight credited to Nielsen ratings has decreased. With either study, the program's ratings (in market value or in viewership) are compared to all other programs in its claimant group during the television year. Simply put, as audiences increase, so will the royalties.

Federal law mandates payment of royalties. In 1976, the US Congress passed the Copyright Revision Act, which created a compulsory license for the secondary transmission of over-the-air broadcast signals by cable television systems. Similar legislation for digital broadcast satellites followed.  The compulsory license permits subscription systems to retransmit distant broadcast station signals without first obtaining permission from each copyright owner, as long as they pay the statutorily prescribed license fees.

These compulsory payments made by cable and digital broadcast satellite operators are submitted to the Licensing Division of the Copyright Office semi-annually. Cable and satellite operators are required to pay pennies for each system's subscribers to watch your programming.  The funds paid to the Copyright Office are remitted by entities transmitting the programming once the show has been received from the broadcaster at the cable or satellite head-end for further retransmission across their systems. Those cable and satellite operators pay for the right to retransmit shows beyond the stations' broadcast coverage.

Based on the number of pay television subscribers in the US alone, these pennies add up to hundreds of millions of dollars in the royalty distributions pools each year. In fact, as the number of cable and digital satellite subscribers increase, so do the royalties.

Does Claiming Royalties Affect the Documentary's Relationship with a Broadcast Station?

No. As the rights holder, the right to claim these royalties is not affected by contracts with individual television stations or broadcast networks (unless those rights were waived). 

How Do I Protect My Rights?

 Register your work with the US Copyright Office. Negotiate a distribution contract that addresses copyright royalties. File your copyright royalty claims annually each July.

Indentify the royalties in any contract you propose to enter. When negotiating a distribution, production or syndication agreement, specifically address the question of who is entitled to claim secondary revenue. Ensure your contract clause documents, whether the creator retains the right to receive royalties, wishes to grant an exclusive license to another party, or agrees to split the royalties. When contemplating these clauses, consider consulting an attorney to determine the appropriate structure. Diligent drafting will ensure that you retain the rights to which you are entitled.

Prior to consulting an attorney or agent on contract or royalty collection issues, research entities offering such services. In the relatively refined world of compulsory licenses for retransmitted television programming, few issues have been litigated in federal court, the results of some lawsuits have had a negative lingering effect for all claimants. Learn more about claiming retransmission royalties on the CRB's website: http://www.loc.gov/crb.

Edward S. (Ted) Hammerman, Esq. is the founder of Intermediary Copyright Royalty Services.  He represents more than 100 nonfiction programmers in copyright, entertainment and transactional matters.  www.copyrightroyalties.com.