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Oct
2013

Breakage in Digital Licensing/Streaming Music Services


Posted in News by A2IM

As the music industry continues to transform from a music purchase model to a music access model a number of new services are in the process of being launched with the accompanying new licenses being presented to labels and distributors.

Certain services, such as Pandora, Sirius/XM, Music Choice, etc., are covered by compulsory statutory licenses. In general these licenses for non-interactive music streaming services, where the listener can’t pick the song, have been good for the independent music label community because all music label copyrights, whether those of the major labels or those of independent labels or artists, are treated equally and paid the same rate amount for each stream (play) of that music.  Those rates set by the Copyright Royalty Board and administered by SoundExchange. The authority of SoundExchange to aggressively pursue the best possible statutory rates and handle all of the administration, including processing and auditing, results in having a central group to protect Indie rights as the statutory rate is working and indie labels are benefiting from having a this central voice.

For music streaming services not covered by compulsory statutory licenses, those that have an audiovisual component or allow greater customer interactivity to select the songs or create playlists, a direct license is required between the music service and the copyright owner.  These services may equally be valuable to the independent music label and artist community but the deal terms are trickier.  Compensation under these agreements (generically) might include a combination of a per stream rate, revenue sharing, equity in the service, minimum guaranteed revenues, and an advance. If the advance or minimum guarantees exceed the amount earned during the licensing period the label will earn “breakage” in excess of the earned amount.

Music labels can enter into these direct licensing arrangements directly, through their music distributor or via Merlin. Under direct licenses, there are cases where independents have received less than equitable deal terms so the key for every label, whether the deal source is direct, distributor or Merlin, is to move slowly and thoughtfully and not be rushed into a deal based upon launch dates.

At the end of the day, each music label must determine for themselves their own promotional and commerce plans and we respect that entrepreneurial spirit. We’re just suggesting to you that before agreeing to any direct licenses please consider all factors and their effects on your music label’s results, now and in the future, and make an educated decision. If you have any general generic business questions please always feel free to contact us at A2IM.

Apr
2012

Copyright Royalty Board To Set Mechanical Royalty Rates For Digital Music Service Providers


Posted in News by A2IM

In a major settlement between the music industry trade associations for record labels, music publishers and digital music providers, the Copyright Royalty Board, is expected to maintain the mechanical rate structure set forth from prior proceedings concluded in 2008 while creating new rates and terms for five new digital music service categories.

The agreement, which must still be formally approved by the CRB, maintains a song rate of 9.1 cents for downloads, CDs and other physical formats, 24 cents for ringtones, and the same formulas, with limited changes, used to determine the mechanical rate for different kinds of subscription and free interactive-streaming services.  Read the full story originally published in Billboard.biz by Ed Christman HERE.

Sep
2011

The Value of a Copyright: A Letter From A2IM’s Rich Bengloff


Posted in News by A2IM

All sound recording copyrights are created equally and should be paid equally.

In my personal collection I have many recordings from independent artists of many niche genres ranging from Jazz to Blues to Americana to Classical.  I also have music from big superstar artists such as Columbia’s Beyonce.  All are stunning artists who deserve attention for their recordings.   But there is no good justification for why Beyonce’s copyrights should be compensated at a higher per play/per-use rate than the independent artists’.

This issue cuts directly to the core of A2IM’s mission:  insuring a fair marketplace for independents.  The value of a song or performance should not be determined by which music label owns the song.   If that is allowed to stand, independent labels and artists might be treated unfairly and paid a lesser amount, when there is ample proof that music fans want our music and that services that underestimate this fact do so at their own risk.

The statutory license for non-on demand streaming administered by SoundExchange insures this equitable treatment by services like Pandora, Slacker, SomaFM, Sirius/XM, FM Radio simulcasts, etc. for streaming radio.  Beyonce has a broader audience than most independent artists so her music is acquired or played/accessed more frequently and as a result, Beyonce and her label receive more income than some independent artists or their labels but not because Beyonce’s music receives a higher per play royalty rate.  That should be the compensation differentiation.  For sales of music, both independent labels and majors have the same iTunes menu options made available to them for pricing their music ($0.99 or $1.29 per track, $9.99 or $11.99 per album, etc.) with the same corresponding wholesale prices.  These parity examples, as well as many others, underscore that the recognition of the equal value of all recorded musical works on a per song/per access basis has precedent, is valid, and works.

Sometimes services come to our members seeking lower rates for the use of their music, noting the promotional value of their services or other “special opportunities”; there are examples of these types of requests elsewhere on the A2IM website. As always, A2IM reminds every member label that they have their own business plan and that they must make their own individual decisions as to what is best for their label. The purpose of this item is to suggest to our members that that they think about this “value of a copyright” paradigm when making these decisions. For example should any radio service, over the air or digital streaming, ‘threaten’ to not play your music on their service unless you do a deal on their terms, you might want to remind them of all the competition for ears that radio services face and confidently remind the person delivering the threat that the programmers that WIN play the very best music and that the programmers that LOSE play music based upon the instructions of back office paper pushers.

Just a thought for today, as always all should think through the best path for their businesses and make the best decisions for their individual label’s and their artists circumstances.

Aug
2011

Statutory Rates Versus Direct Licenses for Digital Music Streaming


Posted in News by A2IM

An ongoing discussion in our community has been whether the independent music label community members are better off with statutory rates available to all labels or direct licenses, which need to be negotiated individually by each label or their distributor.  This has been highlighted by certain services such as Rhapsody seeking direct licenses for non-interactive streams from music labels.  Now we have heard on an unsolicited basis from members that Sirius XM Radio is contacting A2IM music label members seeking direct licenses instead of paying the statutory royalty rate to SoundExchange as available through the compulsory license.

SoundExchange was created to protect the sound recording copyrights of artists and music labels and last year collected $250 million from non-on-demand streaming services like Pandora, Music Choice and Sirius/XM. SoundExchange is an advocate for the highest possible royalty rates for non-interactive digital music streaming services (services like Pandora, Slacker, SomaFM, etc.)  and then SoundExchange administers the collection and distribution of those royalties. SoundExchange is a not-for-profit governed by a board of artist and music label representatives.  A2IM’s President Rich Bengloff is on the board, as are two other independent label representatives and fellow A2IM members

In general statutory licenses have been good for the independent music label community as statutory licenses insure that all music label copyrights, whether those of the major labels or those of independent labels or artists, are treated equally and paid the same rate amount for each stream (play) of that music. Under direct licenses there are cases where independents have received less than equitable rates. The authority of SoundExchange to aggressively pursue the best possible statutory rates and handle all of the administration, including processing and auditing, results in having a central group to protect Indie rights as the statutory rate is working and indie labels are benefiting from having a this central voice.

Member have been calling to ask about the SoundExchange statutory license so we just want to advise our members that the Copyright Royalty Board (“CRB”) set SoundExchange rate for 2011 is 7.5% of revenues and for 2012 will be 8% of revenues and for years subsequent to 2012 SoundExchange will be seeking a rate increase over the 8% of revenues rate in the CRB rate hearing. The SoundExchange statutory license covers non-interactive streaming and does not cover interactive uses of music such as on-demand streaming, downloads of music and other consumer interactive uses, which uses typically have a higher royalty value in the market place.  It should also be noted, in addition to these rate considerations, that the effect on other revenue streams of these interactive streams has been the subject of numerous research reports; some noting interactive streams of music may in some cases have a revenue replacement effect while non-interactive digital broadcasts of music in many cases may prove to be promotional and lead to increased revenues from other sources.

At the end of the day, while the statutory rate has ensured equitable treatment for independents, each music label must determine for themselves their own promotional and commerce plans and we respect that entrepreneurial spirit. We’re just suggesting to you that before agreeing to any direct licenses please consider all factors and their effects on your music label’s results, now and in the future, and make an educated decision. If you have any general generic business questions please always feel free to contact us at A2IM.

Mar
2011

Rhapsody Seeking Direct Licenses For Webcast Streaming – Take a Second Breath


Posted in News by A2IM

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. (more…)

Jan
2011

Copyright Royalty Board Sets Webcasting Rates for 2011-2015


Posted in News by A2IM

On December 14th, 2010 the Copyright Royalty Board (“CRB”) issued its decision in the Webcasting III rate setting case.  A2IM has three seats on the SoundExchange board (a third of the label seats) and SoundExchange funds the rate setting proceedings on behalf of both artist and label sound recording owners.

The CRB released a 137-page opinion and, based upon our initial review, A2IM is fairly pleased with the outcome.  The CRB adopted commercial rates that are in the neighborhood of the National Association of Broadcasters (“NAB”) for AM/FM digital simulcast radio rates and the Sirius/XM Satellite rates that SoundExchange had previously negotiated in 2009 (although slightly higher in the early years and slightly lower in the latter years). Below are some of the highlights:

Rates for Commercial Webcasters: The CRB adopted the following rate structure for Commercial Webcasters:

2011: $.0019

2012: $.0021

2013: $.0021

2014: $.0023

2015: $.0023

These rates are the general commercial rates for non-simulcasting broadcasting webcasters. The CRB found that the evidence presented shows growth in the webcasting industry which supports an increase in the rate through the term, and that because growth in the industry has occurred unevenly, the rate structure should have longer periods of rate stability instead of annual increases.

Notably, the rates set by the CRB are higher or equal to the rates in the Sirius/XM WSA Agreement, except for 2015.  The Sirius/XM web rates are $.0018 (2011), $.0020 (2012), $.0021 (2013), $.0022 (2014) and $.0024 (2015).

The CRB rejected Live365’s case.  Live365 had proposed a flat rate of $.0009 for every year of the term, plus a 20% discount for aggregators.

Minimum Fee for Commercial Webcasters: The CRB also adopted a minimum fee of $500 per channel or station with a $50,000 cap for commercial webcasters based on the joint stipulation submitted by SoundExchange and Live365.

Adoption of NAB WSA Agreement: The CRB adopted the NAB Agreement as the basis of rates and terms for all simulcasting commercial broadcasters, as defined by the agreement.  Any commercial broadcaster that webcasts during the 2011 – 2015 term must pay under the rates and terms of the NAB Agreement, which are as follows: $.0017 (2011), $.0020 (2012), $.0022 (2013), $.0023 (2014), and $.0025 (2015).

Adoption of CBI WSA Agreement: The CRB adopted the CBI Agreement as the basis of rates and terms for all noncommercial educational webcasters, as defined by the agreement.  Notably, the Court rejected IBS’s objection to that settlement.

Rates for Noncommercial Webcasters:  For noncommercial webcasters that do not qualify as Noncommercial Educational Webcasters under the terms of the CBI Agreement, the CRB adopted SoundExchange’s rate proposal of $500 per channel or station with an annual cap of 159,140 ATH.  The $500 royalty rate also serves as the minimum fee for noncommercial webcasters.  Performances in excess of the ATH cap will be paid at the per-performance rates established for commercial webcasters.

Ephemeral Rate: With respect to the ephemeral rate for both commercial and noncommercial webcasters (this is the rate allocation for the server copy of the sound recording performance of which the sound recording owner gets 100% of the allocation), the CRB adopted SoundExchange’s proposed bundled rate structure, in which 5% of the statutory royalty is attributed to the ephemeral license.

Unrelated to the above it should be noted that in 2010 SoundExchange collected over a quarter of a billion U.S. dollars across all non-terrestrial platforms (webcasting, satellite, cable television, etc.).