Music Labels Save Internet Radio… and Themselves
By Anna Johnson on July 9th, 2009In a deal that has likely saved Internet radio (aka webcasting), the major music labels and online radio stations have finally agreed on new royalty rates to cover music streaming.
Following two years of negotiations, the parties have agreed that online radio stations would no longer be required to pay across-the-board royalties (which many sites said were so high as to put them out of business) but would be able to pay different rates, based on their size and business model.
The new agreement replaces a 2007 ruling that all ‘webcasters’ needed to pay a fee, set to increase to 0.19 cents per song next year, each time they streamed a song for a listener.
Whereas the 2007 agreement was such that sites struggled to generate enough from advertising revenues and/or subscription fees to cover royalties, the new deal appears to be much more fair.
Applying from 2006 through 2015 for big sites and through 2014 for smaller sites, the new deal will require webcasters with significant advertising revenue, such as Pandora or Slacker, to pay the greater of 25 percent of revenue or a fee each time a listener hears a song, starting at .08 cent for songs streamed in 2006 and increasing to .14 cent in 2015.
Small sites with less than $1.25 million in revenue, such as AccuRadio, Digitally Imported and RadioIO, will pay 12 to 14 percent of their revenue in royalties.
All stations will need to pay a minimum fee of $25,000 p.a., which they can go towards their royalty payments.
Other types of streaming sites will pay different fees and rates. For example, the U.S. Corporation for Public Broadcasting reached a deal in January 2009 under which it agreed to pay one royalty payment of $1.85 million to cover the online streams of U.S. public radio stations through 2010.
It’s good to see sane minds prevail. The fact is that the music labels need webcasters as much as the webcasters need the music labels. For the record labels to have continued squeezing Internet radio stations would have been akin to them killing the proverbial golden goose.
Source: Claire Cain Miller, “Music Labels Reach Online Royalty Deal,” The New York Times, July 7, 2009
July 10th, 2009 at 10:16 am
Michael Robertson, founder of MP3.com and the current MP3Tunes, among other ventures, disagrees. See his article here:
http://www.michaelrobertson.com/archive.php?minute_id=298
I’ve read Michael’s Minute for several years and his assessment of the ongoing online music controversies has always been accurate and thoughtful. This is yet another “settlement” that sounds good on the surface of it until you do the math.