The Nashville Songwriters Association International, along with the California and Texas Songwriters Associations, worked on these issues for years, and NSAI was a participant in the Copyright Royalty Board proceedings. NSAI President Steve Bogard and other NSAI songwriter-members were actual witnesses in these proceedings.
The bottom line is great news for songwriters -- from mechanical royalty income streams (including a percentage share of revenue, which includes subscription fees and AD DOLLARS) to a very healthy raise on ringtones.
NSAI will assist in hosting a “Town Meeting” for songwriters, music publishers and the Nashville music community in a few weeks to explain specifically what the agreement and ruling means. In the meantime, click the headline above for more information and greater explanation.
Thanks to everyone for all the hard work over the past months and years to make these new royalties and rates a reality because:
“It All Begins With A Song!”
Susan Butler’s Music Confidential
For related articles go to www.MusicConfidential.biz
c. 2008 Butler Business & Media LLC All Rights Reserved. Used with permission.
CRB SETS U.S. PUBLISHING RATES
By Susan Butler
The Copyright Royalty Board has just set (Oct. 2) U.S. royalty rates for the reproduction of compositions that have been previously recorded and released in the United States. Known most commonly as the statutory mechanical rate under the section 115 compulsory license, the rates set for the next five years would seemingly not make publishers, labels or digital services jump for joy. But then again, the rates certainly avoided potential doomsday scenarios for publishers and, if not challenged, would remove some financial uncertainty involved with expanding digital music offerings.
PHYSICAL UNITS & PERMANENT DOWNLOADS
Despite an increasing penny mechanical rate for physical goods (like CDs) roughly every two years over the last 20 years or so, the CRB instead kept the 2006-2007 rate for the next five years (through 2012): the greater of 9.1 cents per track or 1.75 cents per minute of playing time. This is far short of music publishers’ proposal of the greater of 12.5 cents per track or 2.4 cents per minute of playing time for physical products and, for permanent downloads, the greater of 15 cents per track or 2.9 cents per minute of playing time -- to be periodically adjusted to reflect changes in the consumer price index.
Nevertheless, as music prices fall, the new rates aren’t the potentially bottomless pit that publishers could have faced if rates were a percentage of wholesale revenue or some other revenue formula – especially if there were no minimum rate due.
From the labels’ perspective, the penny rate per song presents challenges as the companies look toward a future of a variety of bundled offerings at consumer-friendly prices. Labels proposed that rates be set at 9% of wholesale revenues for physical goods and permanent downloads and 15% for ringtones. To the benefit of labels, however, the new rates are closer to the high end of their proposed alternative penny rate -- a range of 3.6 cents to 9.45 cents per track depending on the wholesale price for physical goods and permanent downloads. And the rates are essentially frozen at past rates for the next five years.
Publishers are very happy about the new ringtone rates. This is the first time a rate for such use has been set.
The CRB set a statutory rate of 24 cents per ringtone. Publishers proposed the greater of: 15% of revenues for the products or services, 1/3 of the total content cost paid by digital services for the reproduction right and master recording rights (i.e., 1/3 of the total amount digital services pay to record labels for the recording and the compulsory mechanical license) or 15 cents per ringtone.
Labels proposed 15% of wholesale revenues or, alternatively, 18 cents per ringtone. Digital services proposed the greater of 6% of certain types of receipts or 4.8 cents per track for singles (3.3 cents for tracks sold as part of a bundle).
INTERACTIVE STREAMS & LIMITED DOWNLOADS
The judges have not yet formally adopted the settlement reached among publisher, label and digital service groups setting a formula for calculating rates for interactive streams and limited downloads (Music Confidential, Issue 12, Sept. 25). Following copyright law, the CRB on Oct. 1 published the settlement for comments by anyone who may be affected by the settlement.
Comments are due by Oct. 31. According to a government source, it is unlikely that the judges would dramatically change the settlement based on one or a few challenges since anyone affected by the rates had the opportunity to fully participate in this rate-setting proceeding, which began two years ago. In other words, it’s unlikely that one bad apple can upset the apple cart, especially after the parties to the proceeding have already likely spent hundreds of thousands of dollars fully participating in this proceeding.
For the first time, the judges set a late fee that publishers may charge for late royalty payments. The fee is 1.5% of the amount due, per month, from the date payment was due.
REVENUE BASE REJECTED
It is no big surprise that the judges did not adopt a percentage-of-revenue rate like the rates set in European territories. Measuring how often a song is reproduced and distributed via physical goods or permanent downloads is relatively easy to measure. The American view seems to be that a percentage-of-revenue model is generally more helpful when use of the copyrighted work cannot be easily measured or the value of the use can’t easily be reflected in a penny rate.
It will be a few more months before everything is all formally wrapped up, unless there is an unexpected, substantial challenge to the decision. And the possibility of finally putting these issues to rest has most rights holders and digital services gnawing at the bit ready to move onto the next phase: cleaning up old legislation that makes licensing more difficult than necessary and delving into even more potentially lucrative digital music offerings.
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FOR IMMEDIATE RELEASE
October 2, 2008
NMPA Hails Copyright Board’s Rate Decision
Positive Result for Songwriters and Music Publishers
WASHINGTON, D.C. – The Copyright Royalty Board announced today, new mechanical rate terms for physical products (such as CDs), permanent downloads (such as iTunes) and ringtones. Songwriters and music publishers will be paid a rate of 9.1 cents for digital downloads. The CRB judges also ruled that the rate for physical products will remain at 9.1 cents. Each will be subject to an overtime rate. The CRB judges also established for the first time a rate of 24 cents for each ringtone subject to the Section 115 mechanical license. Furthermore, music publishers will have the right to seek a 1.5 percent late fee, calculated monthly.
David Israelite, President and CEO of the National Music Publishers’ Association – which represented songwriters and music publishers before the Board – 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,” said Israelite. “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.”
The announcement is the culmination of a trial that began in January, and marks the first time the Board has established mechanical royalty rates for songs distributed digitally.
The Board also adopted the terms of an 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). Details of that agreement between 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) were announced last week.
The music publishers and songwriters were represented in the trial by the NMPA, along with NSAI and SGA.
Steve Bogard, NSAI President, said, “The Nashville Songwriters Association International (with the California and Texas Songwriters Associations,) is pleased that the Copyright Royalty Board has chosen to recognize the personal investment and contribution of songwriters to the American music industry. The United States, the source of so much of the world’s great popular music must lead the way in compensating creators for their work and making it possible for our publishing partners to continue to invest in the nurturing and development of great young songwriting talent. NSAI believes that in the long run this decision is in the very best interests of consumers, digital media content providers, and the entire music industry.”
Rick Carnes, President of SGA, said, "The CRB has confirmed the proposal of rates for interactive streaming and limited downloads formulated cooperatively by songwriters, music publishers, the recording industry and the digital media groups, which will clarify the licensing of this growing area of digital commerce and provide needed royalty payments to songwriters. The Songwriters Guild of America is gratified that the CRB has adopted these rates, which will assist music creators in their quest to make a living from their profession.
Carnes added, “Today, the CRB also faithfully implemented U.S. copyright law by giving songwriters the ability to earn a fair return on their works. As so many songwriters testified during this process, our community has been struggling to keep our profession alive, and the CRB's decision could not have come at a more important time.”
“Today’s announcement is the culmination of months and months of tireless work by staff and outside counsel on behalf of music publishers and songwriters, and I want to acknowledge and thank them for their commitment,” Israelite said.
About the NMPA
Founded in 1917, the National Music Publishers’ Association (NMPA) is a trade association representing American music publishers. The NMPA’s mandate is to protect and advance the interests of music publishers and their songwriter partners in matters relating to the domestic and global protection of music copyrights.
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From Billboard Magazine
Copyright Royalty Board Issues Decision
By Ed Christman, N.Y.
October 02, 2008
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.
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From Wired Blog Network
Songwriters Submit Agreement to Copyright Royalty Board
By Eliot Van Buskirk
September 24, 2008
Songwriters, record labels, and webcasters have reached an agreement on mechanical royalties for songs played on web radio services. However, the "disastrous" performance royalty that threatens to drive Pandora and other webcasters out of business remains in effect.
Interactive webcasters and companies that offer music subscription services will pay 10.5 percent of their revenue to songwriters and publishers minus any performance royalties already being paid to labels. The move comes as part of music publishers' drive to start collecting mechanical royalties for compositions played online after giving online radio a free pass while business models developed.
"This historic agreement is the foundation for a new generation of music distribution," stated president and CEO of the National Music Publishers' Association David Israelite. "This agreement will ensure that songwriters and music publishers continue to thrive in the digital age." RIAA chairman and CEO Mitch Bainwol also waxed enthusiastic in the announcement, as did representatives of every other organization involved -- the Digital Media Association (webcasters), the Nashville Songwriters Association International, the label EMI and the Songwriters Guild of America.
For once, it appears, these various parties have agreed on something. All that remains is for the Copyright Royalty Board to stamp its approval on the agreement. This marks the first time a mechanical royalty rate has been set for music webcasters. As opposed to performance royalties, which cover specific recordings, these mechanical royalties deal with compositions created by songwriters.
The agreement covers "limited downloads" (as offered by subscription services such as Rhapsody) and songs streamed as part of interactive streaming services such as MySpace's new playlist feature. In certain promotional scenarios, no royalty need be paid to songwriters and publishers as part of the agreement, which all sides tout as offering sufficient flexibility to allow new business models to survive and thrive. In addition, parties to the agreement determined that webcasters will not owe distribution or reproduction royalties to songwriters and publishers for copies of songs cached on servers as part of the streaming process.
In cases where webcasters and subscription services owe 10.5 percent or more of their revenue to labels and performers as part of the performance royalty determined by the Copyright Royalty Board last year, it appears webcasters will owe nothing to songwriters and publishers. In cases where those royalties aren't quite so steep, they'll pay the difference to songwriters and publishers. This should allow enough flexibility for streaming and subscription services to keep doing what they do while still compensating songwriters and publishers.