Music-Download Royalty Rates Left Unchanged (original) (raw)

Fear not, iTunes fans. Rumors about the death of iTunes were a tad premature.

The Copyright Royalty Board (CRB) ruled Thursday that the royalty rate for permanent downloads, like those found via Apple's iTunes, will remain at 9.1 cents per download, according to an organization of music publishers.

The CRB also ruled that rates for physical CDs will be 9.1 cents while sellers of ringtones will be charged 24 cents per selection.

For each 99-cent song sold on iTunes, Apple hands over about 70 cents to the record companies. Those companies must give 9.1 cents, or a mechanical royalty rate, to songwriters, composers, and publishers.

"We're pleased with the CRB's decision to keep royalty rates stable," Apple said in a Thursday statement.

The National Music Publishers' Association (NMPA) was pushing for a rate closer to 15 cents per song "because the costs involved [with digital downloads] are much less than for physical products," NMPA president and CEO David Israelite wrote on the group's Web site.

NMPA said the Recording Industry Association of America (RIAA) wanted something closer to 5 cents. An RIAA spokeswoman said Friday, however, that her organization in fact requested "a rate of 9 percent of wholesale revenues." It was the Digital Media Association (DiMA), which represents iTunes, Amazon.com, Best Buy and other online music stores, that wanted a rate of 4.8 cents, she said.

The RIAA is "pleased" with the decision, RIAA chairman and CEO Mitch Bainwol said in a statement.

"No party got everything it wanted, yet at the end of the day, the certainty provided by this ruling is beneficial," Bainwol said. "It remains essential that we work together to ensure a vibrant music marketplace for both music fans and music creators."

DiMA also praised the ruling.

"Keeping rates where they are will help digital services and retailers continue to innovate and grow for the next several years, which will benefit songwriters, artists, labels and publishers," Jonathan Potter, executive director of DiMA, said in a statement.

Apple was fiercely opposed to proposed rate hikes, and threatened to shut down its iTunes store if the CRB approved a royalty rate the company deemed financially ruinous.

"An excessive royalty rate would stifle any effective competition with piracy or the physical retailers, as we would either be forced to raise prices, limit further investment in present and future services or even simply drop out of the market," Eddy Cue, vice president of iTunes, said in written testimony submitted last year to the CRB. "Any increase in the royalty rates we pay for musical works would have a significant adverse impact on the commercial viability of iTunes."

If anything, the CRB should lower the rates, Cue said. "To the contrary, to make the tremendous investments necessary to create and grow this market more reasonable, the costs associated with our business need to be reduced," he said.

Despite pushing for an increased rate, the NMPA said it was pleased by the decision.

"These events will bring clarity and order to an environment that for the past decade has been hampered by litigation and uncertainty on all sides," Israelite said in a statement.

The Nashville Songwriters Association International and Songwriters Guild of America also issued their support for the ruling.

The CRB opened a formal inquiry into the matter in January.

Also on Thursday, the CRB approved a deal between songwriters, the recording industry, and the digital media industry that sets the mechanical royalty rate for interactive streaming and limited downloads at 10.5 percent of annual revenue.

That deal was announced last week and submitted to the CRB for its consideration.

Interactive streaming Web sites are music sites that let users select the songs to which they want to listen, like imeem.com. Limited download sites let users download a song and listen to it for a set amount of time, or as long as they continue to pay a monthly fee, like Rhapsody or Napster's subscription services.

Still up in the air is the royalty rate for Internet radio stations like Pandora. In March 2007, the CRB announced a rate that Web stations said would make it impossible for them to stay in business.

Under a bill approved by Congress this week and now en route to the White House, Internet radio stations and copyright holders have until February 15 to come up with an agreement over rates. Normally, the two sides would be subject to government oversight care of the CRB, but this bill guarantees that the government will not intervene if the opposing parties can agree on a settlement.

Editor's Note: This story was updated Friday at 11am Eastern with comments from the RIAA and DiMA.