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New royalty for music played online

Wednesday, October 15th, 2008

On September 23, 2008, songwriters, publishers, record labels and digital music services announced they had finally reached an agreement on mechanical royalties for songs played on online music services. It only took about 8 years for them to figure it out…

Called a “breakthrough that will facilitate new ways to offer music to consumers online,” the voluntary agreement crafted by the Digital Media Association (DiMA), the National Music Publishers’ Association (NMPA), the RIAA, the Nashville Songwriters Association International (NSAI) and the Songwriters Guild of America (SGA) ended the longstanding dispute about mechanical royalties for interactive streaming and limited downloads.

The agreement must be still be approved by the Copyright Royalty Board to take effect, and states that limited download and interactive streaming services will pay a mechanical royalty of 10.5 percent of revenue, less any amounts owed for performance royalties. In certain instances, royalty-free promotional streaming is allowed.
The agreement tries to solve the dispute about what invokes a mechanical royalty in the digital environment, and permits certain kinds of promotional streams without payment, and agrees that webcasters will not owe mechanical royalties for non-interactive, audio-only streams.

The statutory mechanical royalty rate is currently 9.1¢ per song, unless you negotiate with the publisher directly and come up with a different rate.
With physical product, calculating the mechanical royalty using the statutory rate calculated by: # of songs on CD x # CDs manufactured x 9.1¢. But calculating mechanical royalties in the digital environment is more complicated because of considerations like what type of use (download, live stream, etc.) and how each is determined online.
The agreement states that all parties agreed to a “percentage of revenue” calculation so interactive audio-only webcasters and subscription services will pay 10.5 percent of their revenue to songwriters and publishers, minus any performance royalties already being paid to labels.
If a songwriter has a publishing deal with a publisher who’s a member of Harry Fox, the royalties should go from the music service to the publisher through HFA, then be passed along to the songwriter/composer as per their deal. For self-published musicians the royalties should go from the music service to a digital aggregator, which then would pass them on to either the musicians’ indie label, or directly to the musician.
The agreement primarily affects Rhapsody and Napster, for both their on-demand streaming services and their “to-go” services that allow subscribers to put music on portable players. But it will also affect other major services like MySpace, imeem, iLike and others for their interactive streaming options they want to provide.

However, this agreement is not the answer to the ongoing digital performance royalty fight between SoundExchange and webcasters like Pandora and soma.fm. That’s another issue, related to a different copyright. As i’ve mentioned many times, the music industry is unequaled when it comes to beauracracy… According to the press release, the parties agreed that non-interactive, audio-only streaming services like Pandora and soma.fm do not require a mechanical license. This means webcasters no longer have to worry about paying the publishers both for a performance and again for the cache and buffer copies made to enable that performance.
However, this agreement does not solve the debate between webcasters and sound recording rightsholders, which has to do with the non-interactive public performance of a recording on a digital platform. To keep it simple, I’ll just say that the disagreement about this digital performance royalty rate is ongoing. Hopefully a settlement will be reached soon, before it kills internet radio and brilliant musical innovations like Pandora.com

There are many parts of this agreement, like the acceptance of a percentage of revenue calculation that make a lot of sense. Hopefully it will influence and allow new business models to continue and flourish and allow musicians to benefit from increased access, exposure and revenue, and let music fans discover more music.

The problem with digitally distributing cover songs

Sunday, July 13th, 2008

I’ve just finished producing a fantastic new cover song for Heather Doré’s Pop music debut. I’ll tell you more about it soon when she launches it. She is a 21st century artist, so she is releasing her music, as it is completed, from her website, and you don’t have to wait, you can get it right away!
But releasing a cover song for digital distribution only from her own website has proven to be complicated as many simple things are in the music industry as it is overrun with paranoid obsession and unbelievable bureaucracy…

If you want to release on CD, or on iTunes within the country it was produced, then it is much more simple, but on your own website, where anyone in the world can buy it? Problems.
This is because the music industry works on a per country basis, that’s why it took forever to get iTunes in most countries because of all the deals and paperwork they had to do for practically every song.

That’s right, the corporate music industry complains, bitches, moans, publicizes and sues about losing money, but they make you jump through hoops and practically give up your first born child to help them make money with their music! Just give us what we want! How simple is that? It’s what, the first rule of business or something? Give the customer what they want. How could scores of billion dollar corporations worldwide forget that rule? It seems intense greed and lust for power blinds one quite severely, and this is why they’re losing money, NOT because of downloading. They would rather destroy their entire business before making it easy for you to give them money.
Good, change is good, and this is all causing music business to move back in the hands of the artist, making the importance of good music key. And that is a very good thing! Ok, rant over.

Basically I am still on the phone with the Canadian Music Rights Reproduction Agency and the song publisher regarding the song, so I don’t have any definitive answers for you. (The CMRRA doesn’t even have anything about digital distribution on their website, but at least we have such an agency to make some things a bit easier than they would be with payment of mechanical royalties in Canada)
What I can tell you is iTunes has done a deal where they pay out royalties as required for sales in each country for cover songs sold, so that simplifies things when releasing cover songs digitally this way.
But if you want to sell the songs on your own website to the world, which is my recommended method of selling music (NOT on myspace or facebook, but on www.yourname.com personal website), you have to obtain special rights for the world to sell the song, AND pay monthly royalties to the publisher yourself with detailed financial statements. And you may have to negotiate with different publishers for different parts of the world. Imagine having to negotiate with 3 or 4 publishers for each country in the world just to sell a song digitally from your website! Within 5 years, most music will be sold electronically!

So you think, ok how hard can that be, you just pay online at the publishers website with a credit card, right? Sorry, you must be taking about an industry that is efficient, progressive and meets the needs of it’s customers, and that’s not how the music industry works, and that is one of the many reasons why they are losing money.

Needless to say we aren’t going to work on many cover songs any more, as fun as it may be.