Music Industry Reaches Deal on Some Digital Royalties

Authored by Mark Hefflinger on September 23, 2008 - 8:13am.

Washington - The major record labels, music publishers and large webcasters on Tuesday announced a breakthrough agreement on royalty payments for interactive streaming and limited digital downloads, which will for the first time see mechanical royalty payments on these services. Under the agreement, which was submitted as draft regulations to the Copyright Royalty Board, providers of limited download and interactive streaming services -- including subscription and ad-supported services -- will generally pay a mechanical royalty of 10.5% of revenue, with minimum payments in certain circumstances.

Parties to the agreement included the Digital Media Association, representing large webcasters; National Music Publishers Association (NMPA); Recording Industry Association of America (RIAA); Nashville Songwriters Association International; and the Songwriters Guild of America.

The agreement also states that non-interactive, audio-only streaming services do not require reproduction or distribution licensed from copyright owners, and permits the use without payment of certain kinds of promotional streams.

"This historic agreement is the foundation for a new generation of music distribution," said NMPA president and CEO David Israelite.

"Innovative music services will enjoy a more stable business environment because of this agreement and that will benefit music fans and music creators alike," said DiMA executive director Jonathan Potter.

"DiMA is particularly pleased with the agreement to end litigation and threats of litigation involving several of our member companies, so that they can focus on building innovative businesses that can effectively fight piracy, the music industry's greatest threat."

Royalty rates for physical product and permanent music downloads were not addressed in the agreement, but are still expected to be addressed in a ruling by the Copyright Royalty Judges before Oct. 2.