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Labels, Internet radio agree to royalty deal

updated 05:20 pm EDT, Tue July 7, 2009

Online Radio Royalty Deal

Owners of Internet radio stations and music label groups struck a deal on Tuesday that should allow online outlets to continue streaming music. The agreement is now a scaling one and will ask larger stations to pay either 25 percent of their revenue or a per-track rate based on the year, ranging from 0.08 cents per song in 2006 through to 0.14 cents per song in 2015, depending on whichever is greater. Those companies that make less than $1.25 million per year will be asked to pay between 12 and 14 percent of their revenues.

Both sizes of streaming services also must agree to provide more information, including retaining their web logs for at least four years and tracking the ratings for each song for the sake of SoundExchange, the intermediary firm that distributes online royalties to the individual labels.

The deal is potentially expensive for those whose radio stations make up some or all of their business like Last.fm, SomaFM and Pandora, all of whom rely either on advertising or exclusive device deals to support their businesses. Pandora's Tim Westergren and others nonetheless view it as a much improved compromise over the original proposed plan from March 2007, which would have forced a non-negotiable 0.19 cents per song. Smaller outlets had warned they would almost certainly go out of business as the royalty rates were not only high but also backdated. In some cases, services like Pandora voluntarily shut off access to their services from outside the US to prevent future royalties from spiraling out of control.

SoundExchange executive director John Simson spun the deal by claiming that the original 0.19-cent rate would have been "appropriate and fair" but that his organization agreed to the new model in an "experimental" approach that would let companies establish a business model for online streaming music.

Critics have long attacked the push to charge royalties as an opportunistic approach, capitalizing on the shift to Internet radio to increase profits. Over-the-air radio is currently allowed to go without paying a per-song royalty, while Sirius XM is only required to pay a percentage of its revenue despite its size and the variety of channels.



By Electronista Staff
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Comments

  1. GaryK

    Fresh-Faced Recruit

    Joined: Jun 2009

    +3

    Highway robbery

    The record label groups know no bounds to their greed - 25% of the larger stations revenue! I hope that is after taxes and expenses or there are going to be a lot of internet radio stations that are going to go bust. That's alot of money for just permission to play a song, i guess the record labels feel they lost a record or in this case CD sale everytime a song is played on the internet radio.

  1. JulesLt

    Fresh-Faced Recruit

    Joined: Jul 2005

    0

    And???

    Gary - given that most of these radio stations don't employ DJs or any talk content, but do nothing other than stream music from a bunch of servers, they are nothing without content - and they aren't adding a huge amount of value to it.

    What's frightening is that they rejected the .19c per song per play rate because they can't make that work - that shows you how low ad-revenue on the internet actually is (unless you're Google taking your cut from billions of ad-hits).

  1. TomSawyer

    Fresh-Faced Recruit

    Joined: Jan 2008

    +2

    FREE advertising

    Since internet stations are streaming (not an on-demand jukebox) the Labels should be paying them instead. Since they are giving the listeners exposure to, and the potential impulse to buy, songs they may not have heard through other means.

  1. LouZer

    Fresh-Faced Recruit

    Joined: Nov 2000

    +2

    hey

    It could be worse. They seemed to have dropped the 'per song, per listener' request, which was just plain stupid.

    I just never understood why internet radio should pay anything different than terrestrial radio stations.

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