Yesterday The Digital Media Association (DiMA) came to an agreement with several associations that represent songwriters, publishers and record labels regarding royalty rates for interactive streaming music and limited downloads. Up until recently there was no royalty base for these online distribution forms, but now all the parties involved have agreed to 10.5% of revenues (after other royalties are calculated).
Although this is a good step towards some kind of organized royalty structure, there is still a lot of work to be done. For example; the issue of “performance” royalties from internet radio is not covered with this agreement. The current agreement is for mechanical royalties from “interactive streaming and limited downloads”. Meaning this will affect companies which allow users to pick the songs they want to listen to. For songwriters and publishers do benefit from this new agreement, however record companies and performing Artists don’t. That issue is still on the table.
With so many Artists now going the independent route and now having a set royalty rate to work with, it’s easy to see why the record companies are pushing hard to get their piece of the pie. But it may not be as easy for them.
Many of the internet radio broadcasters that the record companies are fighting are the same ones that play music through terrestrial radio stations. Those stations do not pay any performing royalties to record companies (they pay those royalties to performing rights organizations like BMI & ASCAP). So they’re asking the record companies, “Why should we pay you performance royalties for our online shows when we’ve never had to pay you for our terrestrial shows”?
This problem that the record companies are facing can be account to the relationship both industries developed years ago. Back to the days when record execs use to pay radio station owner and personalities “payola” money to have their songs played. Through the history of that relationship it was well understood that radio was “THE” best form of promotion for a record company’s music, so the labels never asked them to pay any money. Now with so many other promotional and distribution outlets via the web, the labels are trying to create a separate identity between terrestrial and the online stations.
They could probably try to ask the courts for performance royalties from online stations that don’t have terrestrial broadcasting, but that a very hard fight and personally I don’t think it will happen.
Another good thing that this new agreement has brought about is that companies like RoyaltyShare will now be able to make collection of these royalties much easier. Because of the new set royalty rates, these companies can provide new platforms that make it easy for publishers to track the plays of their songs, while also helping digital music services keep accurate accounting of the royalty payables.
