Word is circulating that Rhapsody is approaching independent labels seeking an extension to their license(s) with sign-off within a week that would allow Rhapsody to use your music to beef up their non-interactive webcasting service (similar to Pandora, Slacker, SOMA-FM, etc.) where they are currently a minor player, but without the limitations that these other webcasters have to comply with that are valuable to independent labels and artists.
In the past couple of months we have been writing you about radio streaming services that are asking our A2IM music label community members to waive the sound recording royalties they would normally be receiving from SoundExchange as are paid by these webcasters (previous article). As noted in these items, every member needs to make their own business decisions.
From what we’re hearing, Rhapsody is seeking the webcaster “pureplay” royalty rates rather than using the standard Copyright Royalty Board (‘CRB”) rates (set by a government tribunal). These pureplay rates are approximately a 40% discount off of the CRB set rates and they are offered to pureplay webcasters because of certain important concessions that these webcasters agree to that are important to independent labels and artists. Rhapsody, it appears, is seeking the discounted rates without making the same concessions. For instance, we’ve heard that Rhapsody is looking to increase the number of times they can play music from the same artist in a three hour period to six times (which is double the amount allowed webcasters). This extra airplay could cannibalize recorded music sales as consumers will be able to “pick” the artists they want to hear not like a radio webcast but more nearly like an on-demand offering. Further, Rhapsody’s request appears to require the music label to represent that they control all rights and will pay any amounts due any other parties, including artists and publishers. This places an accounting burden on our members that true webcasters who comply with the compulsory licenses and pay via SoundExchange and the PROs don’t.
SoundExchange was created to protect the rights of artists and music labels and last year collected $100 million just from non-on-demand webcaster streaming services like Pandora. Pandora gets the reduced web rates as a “pureplay” webcaster because they agree to stay within the CRB rules for streaming music and pay the greater of the lower rates or 25% of their total company revenues! Based upon what we have heard Rhapsody proposes to not stay within the CRB streaming rules, will not be paying 25% of their total company revenues, and will move certain payment responsibilities currently covered by either SoundExchange or the streaming service to the music label.
Every label must come up with their own promotional and commerce plans and we respect that. We’re just suggesting to you that before agreeing to the Rhapsody plan to please consider all factors and their effects on your label’s results. If you have any business questions please contact us at A2IM.