Source/Link



Frederick Lane, newsfactor.com Fri Oct 3, 4:15 PM ET

The Copyright Royalty Board (CRB) in Washington ruled Thursday that music publishers and artists are entitled to a royalty payment of just more than nine cents for each track sold online. In addition, the CRB established a royalty rate of 24 cents for content used as ringtones.


The ruling is the first to formally establish a rate for digital downloads. Until now, online stores such as Apple's iTunes Store had been paying the same rate paid to artists for CD tracks. The new ruling will remain in place until 2012, bringing a level of predictability to the online music industry.

The CRB's decision also brings to a close the brief but entertaining drama sparked by Apple's comments that it might shutter the iTunes Store rather than swallow a royalty rate increase. The implicit threat had received a lot of attention recently, but was derided by some analysts, who noted the Web site's strong revenues and integral role in promoting Apple hardware.

Roundup of Reactions

Although copyright holders had been asking the CRB to increase digital-music royalties from nine cents to 15 cents, the decision to extend CD royalty rates to online tracks received support from both sides of the issue.

Apple had the least to say, offering only a brief statement that the company is "pleased with the CRB's decision to keep royalty rates stable." However, Jonathan Potter, executive director of the Digital Media Association -- a trade group whose members include iTunes, Amazon.com, Best Buy, and other online music stores -- offered a broader assessment.

"During this challenging time for the music industry and digital stores and services," Potter said, "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."

The National Music Publishers Association, which had been pushing for a royalty increase, also had positive things to say about the CRB's decision.

"We are happy that the judges recognize the importance of songwriters and music publishers to the music industry," said David Israelite, president and CEO of the NMPA. "Coupled with the historic agreement announced two weeks ago, this decision represents an important milestone for the music industry. In the end, songwriters and music publishers will have incentive to create and market music, and music fans will reap the rewards."

Israelite predicted that the greater certainty flowing from the CRB's decision will help cut down on the amount of litigation and controversy surrounding the online music industry.

Streaming Audio Rates Set, Too

Susan Kevorkian, program director, consumer markets, for IDC, said, *It's a positive development that the decision has been made and the rate question resolved for now, and since rates didn't change, services aren't faced with the possibility of raising prices and alienating consumers at a time when the music industry, and music services themselves, need to attract consumers to digital-music distribution."

As Israelite noted, it has been a momentous period for online music. In addition to setting digital download rates for the first time, the CRB also endorsed the terms of a settlement of royalty rates for interactive streaming and limited download services.

One unfinished piece of business remains: negotiating royalty rates between online radio services (such as Pandora) and the royalties-collection group SoundExchange. The Senate recently approved legislation -- the Webcaster Settlement Act of 2008 -- that will extend negotiations, but there has been no word on whether the House would do the same before it adjourns. Pandora and other online radio stations have argued that they, too, will stop operating if the online radio royalty rates are too high.