Webcasters, Copyright Holders Reach Royalty Agreement (Update2)
By Meg Tirrell
July 7 (Bloomberg) -- Internet radio companies including Pandora Media Inc. reached a 10-year music-royalty agreement with copyright holders, resolving a fight that threatened their business.
Online-radio companies will pay a per-song royalty or 25 percent of U.S. revenue, whichever is greater, for music they stream, SoundExchange, the nonprofit group for music labels, copyright holders and artists, said today in a statement.
The parties have been seeking an accord since 2007, when a government agency set rates that Web music companies said would force them to close. Uncertainty over what Internet broadcasters would finally pay has stifled industry development, said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co.
“This is what we’ve been waiting for,” Tim Westergren, founder of Oakland, California-based Pandora, said in an interview. “It’s going to allow us to survive for a long time.”
The agreement is retroactive to 2006 and runs through 2015, Washington-based SoundExchange said in the statement. The organization’s members include music companies such as Warner Music Group Corp., Vivendi SA’s Universal Music Group and Sony Music Entertainment.
The new rates for large commercial Web radio sites start at 0.08 cent per play for 2006 and increase each year to 0.097 cent in 2010 and 0.14 cent in 2015, according to SoundExchange. Original rates set by the U.S. government’s Copyright Royalty Board, which intervened when the parties couldn’t agree, started at 0.08 cent in 2006 and rose to 0.19 cent in 2010, SoundExchange said on its Web site.
‘Big Anvil’
“The big anvil all this time has been the per-song minimum,” Westergren said. “It’s been reduced enough that we’ll be able to make it.”
The old rates would have cost online sites 60 percent to 70 percent of revenue, Westergren said.
Reached under the Webcaster Settlement Act of 2009, the agreement includes different royalty plans for large and small radio sites and those that offer bundled, syndicated or subscription services. The accord for small Web-radio companies goes through 2014, SoundExchange said.
Live365 Inc., a network of online radio stations based in Foster City, California, opposes the agreement, Johnie Floater, general manager for media, said in an interview today. The new rates are less favorable for smaller Web radios, he said.
“These little DJs, which are really the diversity and the promise of the Internet, are being squeezed out,” Floater said. “Today’s announced rates raise the hurdle on these little guys even further.”
The agreement appeals to the music industry because it allows artists and copyright holders to benefit as Webcasting grows, SoundExchange Executive Director John Simson said.
“We are in the infancy of a new business and of a new type of service,” Simson said. “If they are successful we share in the upside in a very big way.”
To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net.
Last Updated: July 7, 2009 17:34 EDT |
