Music Industry Groups, Digital And Cellular Interests Reach Royalty Deal
April 11, 2012 at 3:50 PM (PT)
Groups representing the labels, publishers, artists and songwriters have agreed to what they call a "historic" royalty deal with digital music services and cellular phone companies, "setting mechanical royalty rates and standards that supports a slate of new cutting-edge business models to help consumers access and enjoy music."
The agreement between RECORDING INDUSTRY ASSOCIATION OF AMERICA (RIAA), NATIONAL MUSIC PUBLISHERS’ ASSOCIATION (NMPA) and DIGITAL MEDIA ASSOCIATION (DiMA) fully resolves the Copyright Royalty Board (CRB) Rate Proceeding under Section 115 of the Copyright Act. The new pact, which HYPEBOT.COM linked to, keeps the current song rate of 9.1 cents for downloads, CDs and other physical formats, 24 cents for ringtones, and the same formulas, with limited changes, used to determine the mechanical rate for different kinds of subscription and free interactive-streaming services.
What's more, new rate formulas for five new digital business models have been established:
* For paid locker services such as iTUNES, music publishers will get a mechanical rate of 12% of revenue or 20.65% of total content cost or 17 cents per subscriber, whichever is greater.
* For digital lockers that provide free cloud storage with a download purchase, music publishers will get 12% of revenue or 22% of the total cost of content, whichever is greater.
* For mixed bundles that incorporates a music service into a cell phone services subscription rate, music publishers get 11.35% of revenue or 21% of total content cost, whichever is greater.
* For a limited interactive service that offers limited amounts of music to certain genres or playlists that can be accessed at a lower price, music publishers will get 10.5% of revenue or 21% of total cost or 18 cents per subscriber, whichever is greater.
* For music bundles that offers a download with the sale of a CD album, music publishers will get 11.35% of revenue or 21% of total content cost.
"This is a historic agreement that reflects our mission to make it easier for digital music services to launch cutting-edge business models and streamline the licensing process," RIAA Chairman/CEO CARY SHERMAN said. "This is a major win for consumers, the music community, and entrepreneurs and investors in new music services. Getting to an agreement was a challenge, and I want to thank STEVE MARKS, our lead negotiator, for his persistence and creativity in getting a deal done."
"Today’s agreement is not only an important show of industry cooperation, but a testament to the value of the creative content being provided to consumers," NMPA Pres./CEO DAVID ISRAELITE added. "This agreement represents the culmination of months of discussions among the music industry, digital service providers and technology companies, and will provide more consumer choice with respect to when and how to access music while ensuring songwriters and music publishers continue to thrive in the digital age."
"From the advent of Internet radio services, to online music stores, on-demand streaming and more recently, cloud-based music services, digital media providers thrive on creating new ways for fans to enjoy more music whenever and wherever they want," DIGITAL MEDIA ASSOCIATION Exec. Dir. LEE KNIFE stated. "Today’s agreement paves the way for our members to continue developing exciting new business models that satisfy consumers, create greater revenue opportunities for music creators and effectively fight piracy, the music industry’s greatest threat."
Music business association NARM Pres. JIM DONIO offered his perspective in a statement that read: "NARM and digitalmusic.org applaud the RIAA, NMPA and DiMA on reaching an agreement on mechanical royalty rates intended to cover current music formats and new product and service categories. The standardizing of rates and terms encourages innovation and fosters growth of new digital and physical products and services in the marketplace, giving consumers more choices around the music they love. Our members look forward to engaging in the next steps of this process as they look at how these new rates and terms will figure into their own visions for the next decade of creative and competitive music delivery."
Awaiting More Reaction
PANDORA, which pays royalties that, according to DIGITAL MUSIC NEWS, comprise almost 37% of SOUNDEXCHANGE's total revenue, is not impacted by this new agreement. "The agreement announced today relates to so called 'mechanical rights' and has no effect on PANDORA and other services that are focused on Internet radio streaming," PANDORA CEO JOE KENNEDY told ALL ACCESS. But services that offers music locker services, cloud storage or music through mobile phones will undoubtedly be impacted. ALL ACCESS has contacted several of those parties, all of whom have yet to respond, although a couple said they were still studying the terms of the new deal.
The 25-page proposed agreement will be submitted to the CRB by the various parties and resolves the pending mechanical royalty rate proceedings without litigation. The agreement covers 2013-2017 and must be formally be approved by the CRB. It establishes a royalty rate category for these new business models and rolls forward, with limited changes, all existing rates and terms for CDs and downloads.