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New Rates “Aren’t Exactly a Lump of Coal”

Reactions from Future of Music Coalition, CTA and others to new streaming rates

Reactions continue to roll in to new streaming royalty rates for many webcasters as announced by the Copyright Royalty Board. The ruling affects many commercial radio stations that stream, as well as services like Pandora.

Gary Shapiro, president/CEO of the Consumer Technology Association, said the news provides “valuable certainty” to the Internet radio industry.

He said the decision “strikes a necessary balance — one that leaves music makers with a raise,while opening endless opportunities to invest in the Internet radio ecosystem. … These investments will bring untold innovation and competition into the emerging online radio industry, leaving listeners with more options for discovery and artists with more opportunities to connect.”

Reaction was cautious from the Future of Music Coalition, which advocates for artist compensation.

“These rates aren’t exactly a lump of coal,” wrote CEO Casey Rae. “Over the past decade, we’ve seen billions of dollars in revenue generated by the explosive growth in webcasting. The new rates will allow artists and independent labels to participate in this success at a higher level.”

Rae welcomed the “healthy” rate increase from non-subscription Internet radio service, but FMC criticized the impact on radio. “It … appears that by combining pureplay and commercial rates, incumbent broadcasters will receive a sizable reduction in royalty obligations for their digital transmissions.” FMC believes commercial radio has an unfair advantage already in being exempt from performance royalties. “Artists and their allies should push back on consolidated corporate FM getting yet another unfair advantage.” And the group is concerned that there does not appear to be a distinction in rates for small commercial webcasters.

(Read reactions from NAB and SoundExchange here.)

Entertainment attorney Jay Rosenthal of Mitchell Silberberg & Knupp, who often represents music publishers, called the ruling “a thoughtful exercise in price fixing micro-management.” He said the rate for ad-supported free streams rose by 21.4 percent for 2016 but the rate for paid streams declined.

“By doing this, the CRB seems to be incentivizing services to move their business model from free streaming models to subscription models. But in both cases, the resulting rates are significantly less than what the content owners wanted.” He said the plan to base future changes on consumer prices “does bring some uncertainty to the expectations of the content owners.” In the end, he said, “each side got something, but the content owners are probably a bit more disappointed than the services.” The ruling is unlikely to dampen the services’ desire to move toward more direct licensing.

(Read about the impact on Pandora here.)

Looking forward, David D. Burns of law firm Pillsbury Winthrop Shaw Pittman wrote in its newsletter, “The precise reasoning behind the CRB’s decision will not be publicly available until after the parties to the proceeding have had an opportunity to review the CRB’s written opinion to determine whether any confidential information should be redacted before it is released to the public. While the parties will have the right to petition the CRB for reconsideration, and to appeal the decision to the U.S. Court of Appeals, such appeals generally are an uphill battle. As a result, webcasters and record labels are likely to have to live with the result of today’s decision for the next five years.”