The U.S. Copyright Royalty Board just raised — by 20% — the rates that non-interactive webcasters must pay to rights holders.
Starting January 1st, 2016, internet radio services such as Pandora, Sirius, iHeartRadio, and Live365 will have to pay $.17 per 100 spins.
That’s lower than SoundExchange had hoped (they were shooting for 25¢), but higher than Pandora wanted (they’ve been lobbying for an 11¢ rate).
“We’ll always support a higher rate, but we’re glad to see these rates moving in the right direction for all artists,” says CD Baby CEO Tracy Maddux. “We’ll continue to advocate for fair participation of artists and songwriters in the monetization of online radio.”
Is the new royalty rate enough?
When it comes to ONLINE radio, the middle ground struck by the Royalty Board might be the best thing for indie artists.
Rob Filomena, CD Baby’s Director of Music Publishing, explains:
Pandora and other webcasters have become a core revenue source for many small labels and independent artists. I believe this rate decision achieves the dual goal of increasing compensation while also maintaining the viability of statutory licensing and the transparency it provides to artists.
The CRB had to strike a delicate balance between providing right holders with compensation that reflects the tremendous value creators bring to digital music services like Pandora, while also keeping rates manageable enough to allow webcasters to remain paying contributors to the overall music economy.
I believe they’ve given both sides a win here.
So what might happen if webcasters such as Pandora decide the statutory rate is too high?
If the statutory rate threatens the viability of their business model, the licensee may approach rights holders and negotiate more favorable terms in exchange for benefits such as promotion.
You know what that means — webcasters will attempt to license music directly, starting with the majors.
Historically, Pandora has avoided business dealings with the music industry in favor of the flexibility the statutory license provides. But they’ve also been bracing themselves for a higher rate ruling for some time, meaning they’ve laid the groundwork for direct licensing deals and have promotional consideration, data insights, and other things to trade in exchange for more favorable terms directly from rights holders.
Higher statutory rates increase the incentive for them to pursue this direct licensing strategy and I’m concerned that a long term effect of higher statutory rates may be a weakening of the usefulness of the statutory license to big webcasters who contribute much of the value to the non-interactive economy.
If webcasters bypass statutory licensing, artists might lose… a lot
A move away from the statutory license by Pandora and other webcasters would put artists who do not control their masters in a weakened position.
“The Statutory license mandates by law that 50% of the royalty be paid directly to the Featured Artist and backing musicians, with the other 50% going to the owner of the sound recording,” says Filomena. “Direct licensing has no such mandate, and it’s unclear how — or even if — artists would be paid under a direct agreement.”
The compromise struck in this recent ruling may mean we won’t have to worry about that eventuality.
What’s your take?
Online radio has become a significant revenue source for artists, and we applaud the board’s decision to raise the statutory rate for non-interactive plays. All artists should be fairly compensated for their work, and this royalty rate change is a step in that direction.
What do you think about the Copyright Royalty Board’s decision? Let us know in the comments below.
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