Recording Sat, November 22, 2008

In a breakthrough that will facilitate new ways to offer music to consumers online, the Digital Media Association (DiMA), the National Music Publishers’ Association (NMPA) and the Recording Industry Association of America (RIAA), together with the Nashville Songwriters Association International (NSAI) and the Songwriters Guild of America (SGA) have announced an agreement on how music creators will be compensated for music distributed through certain online models.

The agreement, in the form of draft regulations submitted to the Copyright Royalty Judges, proposes for the first time mechanical royalty rates for interactive streaming and limited downloads, including for subscription and ad-supported services.

The agreement proposes a flexible percentage of revenue rate structure, with minimum payments in certain circumstances.

Limited download and interactive streaming services will generally pay a mechanical royalty of 10.5 percent of revenue, less any amounts owed for performance royalties. In certain instances, royalty-free promotional streaming is allowed.

Outside the scope of the draft regulations, the parties confirmed that non-interactive, audio-only streaming services do not require reproduction or distribution licenses from copyright owners.

The agreement does not address royalty rates for physical product or permanent music downloads.

The Copyright Royalty Judges are expected to issue a ruling on those rates on or before October 2.

“This agreement provides a flexible structure to support innovative business models in the digital music marketplace that will benefit music fans, creators and online services,” said Mitch Bainwol, Chairman and CEO, RIAA. “The agreement demonstrates that our industries can work collaboratively to solve complex issues.”

Agreement Facts:
• The agreement proposes mechanical royalty rates that cover both limited downloads and interactive streaming, including when offered by subscription and ad-supported services. 
• The percentage rate structure in the agreement provides much-needed flexibility for new business models. 
• The agreement permits the use without payment of certain kinds of promotional streams, in the interest of encouraging paid uses of musical compositions.
• The agreement confirms that the mechanical licenses issued under its provisions will include all reproduction and distribution rights necessary to provide the licensed limited downloads or interactive streams.
• Outside the scope of the draft regulations, the parties confirmed that non-interactive, audio-only streaming services do not require reproduction or distribution licenses from copyright owners.

For more information:
Recording Industry Association of America (RIAA) Website