(a) Royalty fees. Commencing January 1, 2018, and continuing through December 31, 2027, Licensees must pay royalty fees for all Eligible Transmissions of sound recordings at the rate of 7.5 percent of Gross Revenues.

(b) Ephemeral recordings royalty fee. (1) The fee for all Ephemeral Recordings is part of the total fee payable under this section and constitutes 5% of it. All Ephemeral Recordings that a Licensee makes that are necessary and commercially reasonable for making noninteractive Digital Audio Transmission as a PSS are included in the 5%.

(2) The minimum fee is $5,000 per year.

(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.