The Copyright Royalty Board is standing pat with the 9.1 cents mechanical royalty song rate for both physical and digital albums, sources say. Meanwhile, it is setting the mastertone rate at 24 cents, according to sources.
The Board also adopted the terms of a historic industry settlement on rates for two other types of services – interactive streaming (such as some Napster services) and limited downloads (such as Rhapsody To Go). In that agreement between National Music Publishers Assn. (NMPA), the Nashville Songwriters Association International (NSAI), the Songwriters Guild of America (SGA), the Recording Industry Association of America (RIAA) and the Digital Media Association (DIMA) the settlement agreed upon, in general, a mechanical royalty rate at 10.5% of revenues, less composition performance royalties, for interactive streaming and limited downloads.
Furthermore, music publishers will have the right to seek a 1.5 percent late fee, calculated monthly.
The physical and digital album rates and the mastertone rates are retroactive back to Jan. 1 of this year, while the settlement goes back seven years. The 10.5% rate applies to this year and an 8.5% rate applies for the preceding six years. This is the first mechanical right royalty proceedings since the development of legal online music services and, until now, all payments of been negotiated in anticipation of such a ruling by the CRB.
The National Music Publishers’ Association, Recording Industry Assn. of America, and the Digital Media Association all issued press releases saying they are happy with the decision. David Israelite, president and CEO of the National Music Publishers’ Association, hailed the decision as a positive development for all songwriters and music publishers.
“We are happy that the judges recognize the importance of songwriters and music publishers to the music industry,” Israelite said. “Coupled with the historic agreement announced two weeks ago, this decision represents an important milestone for the music industry. These events will bring clarity and order to an environment that for the past decade has been hampered by litigation and uncertainty on all sides. In the end, songwriters and music publishers will have incentive to create and market music, and music fans will reap the rewards.”
Jonathan Potter, executive director of the DiMA, which represents online music stores, said, “During this challenging time for the music industry and digital stores and services, we are pleased with the CRB’s decision to keep royalty rates stable for the next five years. Keeping rates where they are will help digital services and retailers continue to innovate and grow for the next several years, which will benefit songwriters, artists, labels and publishers.”
Likewise, the RIAA also gave the CRB a thumbs up. “We’re pleased that this decision freezes the current rate for CDs and digital downloads for the five year term,” said RIAA chairman and CEO Mitch Bainwol in a statement. “No party got everything it wanted, yet at the end of the day, the certainty provided by this ruling is beneficial.”
Indeed, the album mechanical rate for digital is 44.4% more than what DIMA proposed, 6% of wholesale, which for a $7.00 album would be 6.3 cents per track. It is almost 40% short of the 15 cents per track rate sought by the NMPA. The rate also falls 28% short of the 12.5 cents the organization was proposing for physical albums.
“The most important thing is we kept the penny rate,” Israelite says. “We are very pleased we kept the penny rate intact; we didn’t want to move to a percentage rate.”
He says he is also very pleased with the 24 cent mastertone rate, which is substantially higher than the 15 cent minimum the NMPA proposed, even if it is somewhat short of 15% of retail, which for a $1.99 download would be 30 cents.
Bainwol’s statement added, “The destinies of music publishers and recorded music businesses are linked. It remains essential that we work together to ensure a vibrant music marketplace for both music fans and music creators. We look forward to working with our publishing, songwriter and digital music service partners to continue developing an ever-expanding array of exciting new models.”
Now that the U.S. Copyright Royalty Board has made its determinations, involved parties will have 15 days to request a rehearing, while the Register of Copyrights will have 60 days to review the decision for legal error. By the end of the latter period, the Librarian of Congress will publish the determination in the Federal Register. Once the ruling appears in the Federal Registrar, unhappy parties have 30 days to file an appeal.
