In April it was announced that a settlement had been reached between the Recording Industry Association of America, the National Music Publishers Association and the Digital Media Association, among others, regarding mechanical copyright royalty rates for physical record sales as well as several several new forms of digital distribution. Under the Copyright Act, the right to make mechanical reproductions of a composition is compulsory and subject to a statutorily proscribed rate. The Act also provides for the appointment of a Copyright Royalty Board (“CRB”) that is to hold rate proceedings every five years in order to evaluate the current statutory royalty rates. The CRB is authorized under the Copyright Act to adopt “some or all” of the terms negotiated by the participants in a rate proceeding. The new royalty rates recently proposed by the CRB represent the result of such negotiations. The public is invited to submit comments electronically regarding the rates before June 18, 2012. A full text of the proposal published in the Federal Register can be found here. The proposal establishes royalty rates for five new categories of music services:
- Paid Locker Services – subscription-based music locker services that provide on-demand streaming and downloads, such as Apple’s iTunes Match or Google Play’s music service, will pay a 12% of revenue, 20.65% of the total cost of content or 17 cents per subscriber, whichever is greater.
- Purchased Content Lockers - services that offer free online cloud storage for purchased music, such as iCloud or Google Music, will pay 12% of revenue or 22% of the total cost of content, whichever is greater.
- Mixed Service Bundles – music services offered with a non-music product, such as a cell phone plan that includes a music service, will pay 11.35% of revenue or 21% of the total cost of content, whichever is greater.
- “Limited” Interactive Services – subscription-based music services that limit the content offered to specific genres playlists, such as Pandora One, will pay 10.5% of revenue, 21% of the total cost of content or 18 cents per subscriber, whichever is greater.
- Music Bundles – services that offer digital music content together with a physical album, such as a download included with the purchase of a CD, will pay 11.35% of revenue or 21% of the total cost of content, whichever is greater.