This story has been updated with new information and reactions from NAB, Pandora and SoundExchange.
CRB has ruled on streaming music rates; now the analysis will begin. Based on immediate reactions, the news is good for commercial radio broadcasters who stream, so-so for Pandora and not great for SoundExchange.
Late Wednesday the Copyright Royalty Judges issued their determination of royalty rates and terms to apply from Jan. 1, 2016, through Dec. 31, 2020, to “digital performance of sound recordings over the Internet by nonexempt, noninteractive transmission services (webcasters) and to the making of ephemeral recordings to facilitate those performances.” This includes stations that simulcast online as well as streamers like Pandora, iHeartRadio and the online version of Sirius XM, but not interactive services like Spotify.
The rate for commercial nonsubscription services in 2016 is $0.0017 per-performance, or 17 cents per 100 songs. That will be the rate for many radio stations following this story, who now pay 25 cents. Meanwhile the new rate for commercial subscription services in 2016 is $0.0022 per-performance. CRB did not finalize rates for the period 2017 through 2020 but said they will be adjusted based on changes in the Consumer Price Index. Note too that many public and college stations are covered under separate agreements worked out with SoundExchange (see links at bottom of this story).
(Read reactions from Future of Music Coalition, Consumer Technology Association and others.)
NAB Executive Vice President of Communications Dennis Wharton issued a statement Wednesday evening: “We are reviewing the CRB decision, but are pleased that streaming rates have begun to move in the right direction. Broadcasters want to expand into new distribution platforms; the challenge has been that rates are too high for thousands of local stations. We hope today’s decision alleviates some of the rate burden and will enable more radio stations to stream music, which will benefit artists, songwriters and our millions of listeners.”
Pandora by contrast will see a 15 percent increase. The fee for ad-supported Pandora content will move to 17 cents per 100 streamed songs for 2016, up from 14 cents this year, a rate Pandora had negotiated with the industry earlier. (The website RAIN reported that SoundExchange wanted Pandora to pay 25 cents per.) “It’s likely that increased royalty costs will force Pandora to allocate more of its revenue for artists and songwriters,” TheStreet.com wrote. But, it continued, ”While Pandora will have to adjust to increased costs, the decision removes an overhang both for Pandora executives attempting to build a business that remains something of a start-up, and for investors unsure about the Oakland-based company's long-term cost structure.” Pandora itself issued a statement calling it “a balanced rate that we can work with and grow from.”
But SoundExchange came away disappointed. “We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy. We will review the decision closely and consider all of our options.... Additionally it is deeply disappointing to see that broadcasters are being given another unfair advantage. In their terrestrial business they do not pay a dime for the recordings they use and now this $17B industry will receive an additional huge subsidy on the music they use in webcasting. ”
Meantime, rates for noncommercial webcasters will be $500 annually for each station or channel for all webcast transmissions up to 159,140 Aggregate Tuning Hours in a month, for each year in the rate term. If a noncom webcaster makes transmissions in a month above that level on any given channel or station, it will pay per-performance fees for the additional ones at a rate of 17 cents per hundred. That latter figure may be revised in the later years of the five-year term, again based on the Consumer Price Index.
The judges also determined details relating to rates for each category of webcasting service, such as minimum fee and administrative terms. CRB posted the language of their determination on its website at www.loc.gov/crb/web-iv/web-iv-terms.pdf.