Germany's mechanical royalty rates dispute has been settled. A long-running conflict between German authors' right society GEMA and the national IFPI affiliate came to an end yesterday (May 18) when a

Germany's mechanical royalty rates dispute has been settled.

A long-running conflict between German authors' right society GEMA and the national IFPI affiliate came to an end yesterday (May 18) when an arbitration tribunal deadline passed without appeal.

GEMA has challenged the IFPI since the labels body sought to reduce the royalty rate on mechanicals early last year. On behalf of German labels, the IFPI announced in January 2004 that they would seek to reduce the rate to 5.6%; the IFPI later increased its proposed rate to 6.6%.

The arbitration tribunal of the German Patents and Trademarks Officer ruled last month that the mechanical royalty rate would remain fixed at its current level of 9.009% of published price per dealer (PPD). In the absence of an appeal, that rate will now apply.

GEMA chairman Reinhold Kreile today welcomed resolution of the issue. "A costly legal dispute lasting years has been avoided," he says.

Since the dispute began, the difference between the previously agreed-upon mechanical rate and the new rate has been held in escrow by the record companies. GEMA says it will take all the necessary measures to ensure that the remunerations withheld will be promptly paid out to rights holders. Sources familiar with the dispute suggest that GEMA will receive back payments of €40 million ($50 million).

"At first glance, the arbitration tribunal's decision appears to be a success for GEMA. However, in the long term, it will harm us all," comments Sony BMG Germany managing director Rolf Gilbert.

The German IFPI body declined to comment.

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