Copyright Royalty Board Rejects Rate Hike for Songwriters

Authored by Mark Hefflinger on October 2, 2008 - 10:05am.

Washington - The rate that digital retailers like Apple's (NASD: AAPL) iTunes must pay songwriters and music publishers will stay the same under a decision handed down Thursday by the Copyright Royalty Board (CRB), which rejected the publishers' petition for a 66% rate hike. The decision to freeze royalty rates at 9 cents per song for songwriters and music publishers comes as it was revealed this week by Fortune magazine, that Apple said in a letter sent to the CRB last year it might shutter its iTunes music store should it have to incur any increase in music royalties that would make the store unprofitable.

The freeze also indicates that the CRB also rejected digital retailers' request to cut royalty payments to songwriters by 55%.

The CRB also established for the first time a rate of 24 cents for each ringtone subject to the mechanical license, and gave publishers the right to seek a 1.5% late fee, calculated monthly.

The board's decision also follows an agreement between digital media firms, record labels and music publishers on mechanical royalty rates for streaming and limited downloads on subscription and ad-supported services.

"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," said David Israelite, president and CEO of the National Music Publishers' Association (NMPA).

"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," said Jonathan Potter, executive director of the Digital Media Association (DiMA), which represents digital music retailers like Apple, Amazon (NASD: AMZN) and Best Buy (NYSE: BBY).

"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."