After about 5 years of legal actions, a review by the Copyright Royalty Board (CRB) in 2007, and yet more appeals and lobbying to the US government, there is a new royalty deal on the table for people and businesses which offer web radio services.
The deal came out this week from SoundExchange, which has full negotiating rights and collects royalties mostly for record labels and artists.
The sticky problem has always been that people have been enthusiastically running web radio from their living rooms for years, and they always felt that previous attempts at setting royalties meant that they would have to give up or operate illegally.
The new deal only applies to business which operate as ‘pureplay’ commercial webcasters, covering royalties for the Internet streaming of sound recordings, which are based on a percentage of revenue.
The price of taking the new royalty is that the commercial webcaster must drop out of the existing appeal and any other negotiations going on, against existing or future Webcasting royalties, until 2015.
The agreement, under the Webcaster Settlement Act of 2009, gives ‘pureplay’ webcasters the option of electing an alternative set of rates and terms to those issued by the Copyright Royalty Board (CRB) in 2007. The experimental formula includes revenue sharing for most services, and more robust reporting requirements, in exchange for a discount on per stream rates. The royalty rate for large operations making money out of web casting will be a flat 25% of revenues, and of course for those not making any or much revenue, there is an annual minimum royalty.
‘More than two years in the making, this is an agreement we’re proud of because it shows that both sides can address the business concerns of the webcasters while giving artists and copyright holders the potential to share in the revenue growth of webcasters,’ said John Simson, Executive Director of SoundExchange. ‘It’s a creative, groundbreaking approach that we wanted to try, and we hope it will work well for everyone involved ‘ the artists, labels and eligible webcasters.’
This agreement accommodates the specific characteristics of a distinct class of webcasters whose predominant form of business and revenue generation is the streaming of sound recordings under a government license – hence the term ‘pureplay.’
The new system breaks webcasters into three layers, large, small (under $1.25 million revenues) and bundled, syndicated or subscription services.
The larger pureplay services will be offered 25% of total revenue as a deal; small pureplay webcasters can opt for a percentage of revenue or a percentage of expenses whichever is the larger; bundled, syndicated or subscription services will pay per-performance fees that are the same as those contained in an earlier agreement. All categories would have an annual minimum fee of $25,000.
‘What we found is that some webcasters use music to attract consumers and are able to generate revenue in many different ways. However, by virtue of the fact that the lion’s share of pureplay webcasters’ revenues come from playing music, we felt they faced unique business circumstances but that there was also an opportunity for artists and copyright holders and we wanted to address those issues,’ said Simson. ‘We believe the rates the CRB set were appropriate and fair. However, by incorporating an experimental approach whereby artists and copyright holders share in the growth of pureplay services, it gives certain pureplay webcasters the opportunity to flesh out various business models and the creators of music the opportunity to share in the success their recordings generate.’
The per performance rates begin at $0.0008 per track for tracks played back in 2006 and rise slightly each year at varying rates for each class. There is also a provision for discounted back payments to 2006.
Small webcasters will be asked to pay 12% of the first $250,000 in revenue and 14% above $250,000, for tracks played between 2006-2008, or 7% of expenses, whichever is higher.
It’s tough to see whether that will put an end to the war between webcasters and record labels, but it sounds like the basis for some of them to settle with the labels at least.