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Music GroupsBillboard.biz has reported that the Copyright Royalty Board has decided to leave unchanged the mechanical royalty for physical and digital songs and albums. In addition, the CRB set the mechanical rate at $0.24 for mastertones.
The compulsory mechanical rate for songs under five minutes is $0.091. For songs over five minutes, the rate is $.0175 per minute.
Article at CNET on the Senate's passage of HR 7084. The act passed the House on Sunday. Next is the president. The legislation allows webcasters to private negotiate with sound recording owners for performance royalties lower than those set last year by the Copyright Royalty Board. Pandora expressed its happiness at its blog.
Let the speculation begin. The Copyright Royalty Board is expected to announce on Thursday its decision on updated mechanical royalties. The new rates will apply to rates paid to publishers for CD sales, digital downloads and ringtones.
iTunes, as recounted in this article by Fortune's Devin Leonard, has threatened to shut down iTunes rather than shoulder the higher royalty rate. Nobody really believe that, nor does anybody believe iTunes is merely a breakeven venture, but Apple has made its position very clear.
In reality, a higher royalty rate would have many implications aside from pressure for higher music prices. Short of higher prices, which would be difficult to do in today's retail climate, new mechanicals would result in labels searching for ways to soften the pain of higher payouts to publishers.
What ever happens, there is little chance of the sort of major disruptions that are being and will be predicted this week. Consumers will not notice many changes from their end. A slight increase in mechanicals is like an increase in the minimum wage. Small businesses and corporate America warn of impending doom, but the economy absorbs the increase and we all live to see another day.
Extra credit: This October 2007 Billboard interview with Chief Copyright Royalty Judge James Sledge has a good amount of background on the CRB.
There was a high level of drama this weekend as supporters of Internet radio, spurred by a plea from Pandora, voiced their support for the law passed by the House on Saturday. The Webcaster Settlement Act authorizes SoundExchange to negotiate new royalty agreements for Internet radio through February 15, 2009.
A few days ago the bill faced objections from the National Association of Broadcasters (NAB) and its passage was in doubt. It appears the efforts of a Congressman, not a Pandora-led campaign, led to to bill's passage. The NAB dropped its objections over the weekend after a meeting with Rep. Howard Berman, Chairman of the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property.
In a press release issued by many of the involved parties, SoundExchange director John Simson expressed his pleasure with the bill's passage. "This bill favors all webcasters and simulcasters – large and small," he said. "It paves the way for SoundExchange to use the coming months to pursue helpful solutions that allow all services to focus on business development."
"We're not done," wrote Pandora's Tim Westergren, who loudly championed the bill as the NAB's opposition appeared. We still need to get the bill through the Senate, which looks like it will be voting on the bill on Monday."
Negotiations outside of the rates set by the CRB may save much of Internet radio. Labels and artists, I honestly believe, understand as much and appreciate the valuable role webcasters play. Killing off Internet radio services would not be in labels' best interest. The record industry's unflinching stance was mistakenly considered by many to be ambivalence about webcasting's future. The better interpretation is the record industry was wary of giving away too much but was going to negotiate sooner or later. Now the predictable outcome will happen and both sides can work to agree upon royalty rates that are in the best interests of all parties.
Background reading: The Future of Music Coalition's statement on CRB's new royalty rates.
In an agreement that ends some cases of litigation and encourages new ways for consumers to listen to music online, a number of key industry groups have reached an agreement on digital royalties and have sent the recommendations to the Copyright Royalty judges. (Read DiMA's press release here.) This agreement was necessary to encourage new models without scaring away current and future entrepreneurs and enthusiasts.
The Digital Media Association (DiMA), the National Music Publishers’ Association (NMPA), the Recording Industry Association of America (RIAA), the Nashville Songwriters Association International (NSAI) and the Songwriters Guild of America (SGA) have agreed upon a framework for compensating creators and owners for music streamed through certain music models. The agreement does not cover royalties on permanent downloads of physical product. The agreement does end litigation or threat of litigation against some DiMA members.
The RIAA's Mitch Bainwol called the agreement "flexible" while the NMPA's David Israelite called it "historic." The press release lacks many specifics but does give a broad overview of the agreement. Limited downloading and interactive streaming services will usually pay 10.5% of revenue less any amounts owed for performance royalties. (Note: I accidentally typed "non-interactive" originally. Those services are not covered under this agreement.) The amount payable is flexible and in some cases can be a minimum payment. In addition, the groups agreed that non-interactive services do not need reproduction or distribution licenses from copyright owners. Royalty-free, promotional streaming will be allowed in certain cases.
As interactive (user-chosen) streams now have an agreement, Internet radio services, which uses non-interactive streams, is may feel more optimistic about their situations. After the Copyright Royalty Board announced new non-interactive rates in March of 2007, there was great concern that some music services would be unable to pay current and especially future rates. Yahoo and AOL mulled dropping their online radio services. Pandora warned the new rates would "end internet radio, period," and heated up the PR campaign last month.
The Digital Media Association (DiMA) and the National Association of Recording Merchandisers (NARM) asked a federal court today to rule that digital stores' 30-second audio clips are fair use. The effort stems from the position of performing rights organizations (ASCAP, BMI and SESAC) that those clips merit public performance royalties paid to songwriters and publishers.
"If ASCAP succeeds in pressing its demand for a new payment for these previews," said Jonathan Potter, Executive Director of DiMA, "Internet music retailers would be disadvantaged simply because they are selling online, and songwriters and music publishers would be getting a royalty for the preview on top of the appropriate and well-deserved royalty that is paid when the music itself is sold."
It's understandable that every party seeks every royalty it can get, but I believe adding an expense to brief audio clips -- which are totally promotional in nature -- puts an unfair burden on a retailer. Download stores do a service to songwriters and publishers by allowing consumers to preview tracks.
