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Independents Argue Streaming Rate Difference Between Them and Majors Would 'Have Disastrous Consequences'

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The fact that the Copyright Royalty Board is -- possibly -- considering setting different rates for different kinds of record labels has the independent label community up in arms.

In addition to A2IM, both Merlin and Worldwide Independent Network (WIN) have come out in support of keeping a single rate for all music suppliers, condemning those speaking in favor of a multi-tier rate payment system. So far, Sony Music Entertainment and the Universal Music Group have come out in favor of multiple rates for different music suppliers. Up until now, the CRB has confined itself to setting a single rate for all music licensors, whether a mom-and-pop indie like Mom + Pop or a major with a deep bench Columbia Records.

The Copyright Royalty Board, which is currently deliberating webcasting rates, has asked the U.S. Register of Copyrights Maria Pallante whether it can set varying royalty rates for different music suppliers.

Copyright Royalty Board Asks If It Can Set Different Rates for Suppliers: Is This About Majors vs. Indies?

While some caution that the CRB's question can be interpreted in a number of different ways, and that the CRB judges haven't made clear what they are intending, most industry executives familiar with the sudden turn of events seem to think the CRB might be considering giving the major labels, and their significant market shares, a higher rate than the independents.

"The worldwide independent industry calls for the maintenance of single rate collective licensing in the U.S. as it insures that there can be no discrimination towards artists and companies in an already highly competitive market place," according to a statement issued by WIN, the London-based trade group. "The majors continue to try and split the industry apart to leverage more for themselves at the expense of everyone else. If this is allowed to take root in the US it will have disastrous consequences for the whole industry."

Both Sony Music Entertainment and Universal Music Group filed a joint brief in support of multiple rates. In a brief obtained by Billboard that was submitted on behalf of the two majors by Matthew Oppenheim of the Washington, D.C.-based law firm Oppenheim + Zebrak LLP, the two majors argue that the language in section 114 of the U.S. copyright law supports the setting of multiple rates by using the plural in reference to "rates and terms," but they argue that a "one-size-fits-all approach would defeat the statutory requirement to consider comparability."

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The brief also says that the Judges should establish rates and terms which would have arisen from negotiations in the marketplace between a willing buyer and willing seller. Where they are diverse buyers and sellers, a marketplace negotiation wouldn't "generate a uniform rate, but a range of negotiated rates," the joint brief opines. "Setting multiple rates for different types of licensors is consistent with and furthers the statutory mandate to consider the terms of voluntary agreements only with respect to comparably situated parties."

The two majors' support for multiple rates is distressing to the independent label sector. Merlin, the organization that represents thousands of independent labels in negotiating licensing deals with digital music service issued a statement saying that it was "created to address serious concerns with the independent sector that the largest labels would abuse their dominance to create a two-class system of rights," which would lead to a system where independent labels and their artists would suffer financially to compensate for the excessive demands imposed on digital services by the big two. "Eight years on…  we see our suspicions realized and there is no more doubt about the majors' intentions, which now sit in the open, exposed for all to see," the Merlin statement continued.

It's unclear what prompted the CRB judges to ask the copyright office about multiple rates. The judges are seeking guidance from U.S. Register Pallante because when they finally make their decisions she must review their determination to see that they followed the letter of the law.

"It's bad enough that the regulatory authors are even considering one rate for the big and one rate for the small… but what is really shocking is the positioning of the two 'super majors'… supporting multiple statutory rates," the head of one large independent label tells Billboard. "If you were a detective looking for the clincher, the final piece of evidence that the super majors are no longer acting as responsible market leaders but simply lining their own pockets, you'd need look no further than this."

As noted previously, A2IM has also come out in favor of maintaining a single rate.  To see their statement click here.