Music Industry Groups Await Judgment On Breakthrough Royalty Agreement

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Music industry groups in the United States recently struck what they call an “historic” agreement on mechanical royalty rates and standards in a digital age. Now, they are awaiting final approval on the agreement.

The Recording Industry Association of America (RIAA), National Music Publishers’ Association (NMPA), and Digital Media Association (DiMA) filed an industry-wide agreement that they said “fully resolves” the Copyright Royalty Board (CRB) Rate Proceeding under Section 115 of the US Copyright Act.

The industry announcement and submission of the 25-page agreement came on 11 April. According to industry sources, the Copyright Royalty Judges must issue a final determination no later than 15 days before the expiration of current statutory rate and terms, which is on 1 January 2013.

The timing of the decision is at the discretion of the judges, and one of the judges recently stepped down, with a new justice expected to join in May, the source said.

Industry is “hopeful” that the Board determination will come soon, since the agreement is collaborative. The agreement covers the period from 2013 to 2017.

“The agreement simplifies licensing burdens for digital music and, we believe, enables music entrepreneurs to develop new business models since they can now have more cost certainty for mechanical rights,” Amy Lee of the NMPA told Intellectual Property Watch. “This is good news for music fans everywhere (and music entrepreneurs).”

Newly created royalty-rate categories reflect newly developed music services, such as music lockers, and “anticipates soon-to-come offerings,” she said.

“From the songwriters and music publisher perspective, we believe the agreement will help songwriters and music publishers benefit from the growing digital music market,” said Lee.

According to RIAA, the agreement, submitted in the form of draft regulations, “proposes for the first time mechanical royalty rates for interactive streaming and limited downloads, including for subscription and ad-supported services. The agreement proposes a flexible percentage of revenue rate structure, with minimum payments in certain circumstances.”

“Limited download and interactive streaming services will generally pay a mechanical royalty of 10.5 percent of revenue, less any amounts owed for performance royalties,” RIAA said. “In certain instances, royalty-free promotional streaming is allowed.”

Non-interactive, audio-only streaming services “do not require reproduction or distribution licenses from copyright owners,” the association said. And the agreement “does not address royalty rates for physical product or permanent music downloads.”

Highlights of the agreement (from the industry press release):

“The settlement provides for the development of new digital music services and business models offering music to consumers by creating new rates and terms under Section 115 for five new categories, which include:
• Mixed service bundles (for example, a locker service, limited interactive service, downloads or ringtones combined with a non-music product such as a mobile phone, consumer electronics device or Internet service)
• Paid locker services (subscription-based locker providing on-demand streaming and downloads)
• Purchased content lockers (a free locker functionally provided to a purchaser of a permanent digital download, ringtone or CD where the music provider and locker have an agreement)
• “Limited offerings” (subscription-based service offering limited genres of music or specialized playlists)
• Music bundles (bundling music products such as CDs, ringtones and permanent digital downloads)”

The agreement “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,” they said.

Statements of support were issued by the proponents, and are as follows:

Lee Knife, Executive Director, DiMA:
“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,” Knife said. “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.”

David Israelite, President and CEO, NMPA:
“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,” said Israelite. “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.”

Cary Sherman, Chairman and CEO, RIAA:
“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,” said Sherman. “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.”

William New may be reached at

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