Now shipping....

this has been brewing for quite sometime. all along i’ve thought that royalty rates would either decrease or move from a statutory penny rate to a percentage of the retail price. there just doesn’t seem to be any way that the market, operating on the penny-rate model, would stand for an increase in royalty rates while the price of the product was dropping. and i thought the labels would lead the charge.

in this wired article from last february, we’re told:

”While songwriters want an increase from 9.1 cents to 12.5 cents per song sold -- saying distribution costs are dropping during the transition to digital -- the Recording Industry Association of America, or RIAA, wants songwriting royalties to be set at 8 percent of the wholesale price. DiMA proposes 4.1 percent of the retail price, and has asked the Copyright Royalty Board to decide whether webcasters need to pay mechanical royalties at all, since streaming isn't designed to leave the consumer with a copy of the song.”

and now, this just in, as the royalty board will vote this thursday on whether or not to raise the rate - to fifteen cents per song.

apple’s response is that ”if the rate hike goes through and the labels refuse to absorb the entire resulting increase, the iTunes music store will become unprofitable.”

the result?

”...Steve Jobs is unlikely to raise the standard track price on iTunes to $1.05, although that would probably be just fine with the labels, which have been pressuring Apple to budge on its 99 cents per track policy for years by allowing Amazon to sell DRM-free albums that they insist be wrapped in DRM when iTunes sells them, among other things. Despite this pressure, Jobs has refused to relent, continuing to insist on the 99 cent flat pricing structure. It's hard to believe that Apple would close iTunes rather than raise prices, but that's exactly what iTunes vice president Cue threatened to do.”



looks like the rate is now 9.1 percent. basically, the board did nothing. so itunes is saved to fight another day.

however (and i'll editorialize here) the board did nothing to help the digital music industry. and so, ladies and gentlemen, we'll find ourselves in the same place five years from now. at which point i'm predicting they'll really be backed into a corner.

Tags: drm, future, money, royalties

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My quick thoughts...

If itunes store goes away... my life won't change much. I don't like buying songs from their store and generally don't. I hope they stay open and they allow the artists to get a bigger cut, but if they don't... no biggie for me.

With Myspace's music store coming soon (or already open, not sure); will continue to grow and become the more prominent place to purchase mp3s. Sounds good to me...

(again, this is just my quick response, and I admittedly don't know the details of the deal. )
Why on Earth should songwriters be subsidizing Apple, a corporation that earns more than all of the major labels combined? If they close the i-tunes store, they'll simply license the technology so that folks can run their own stores.

What's missing from your post is the fact that the Digital Media Association and the RIAA were demanding that songwriters take a statutory royalty cut to 6 cents. What's also missing is the fact that labels and digital media distributors are perfectly free to negotiate lower royalties with songwriters. The statutory rate is a government imposed cap on royalties.

Don't believe everything you read in Wired!
i don't think wired had the facts wrong, but true enough, they didn't give the whole back story. i never take any one source at its word.

of course, i didn't relate all the back story either. i wanted to leave things a bit more open ended for comment.

you're right: the dma and riaa were pushing for the rate cut back in february. later in the game, when it appeared that there was a chance to back apple into a corner, the labels seemed all too happy to consider the increase.

with most of this stuff, i'm more interested in the process than the event: how cultural and technological perspectives. and as always, appreciate the voice you had to the discussions.
I always thought the statutory rate was a cap on the "low" end and writers and publishers were free to negotiate "higher" rates if their value supported it. Why else would it be called a "statutory" rate? Kind of like minimum wage.
I wish! A songwriter is required by law to issue a license at the statutory rate. It only exists because of the lobbying efforts of large corporations. The Digital Media Association has been pushing for a statutory replication rate that would also cap royalties to artists. This is why they issue endless negative press releases about the RIAA in the hopes that the public will support their lobbyists.

They point their fingers at the RIAA but their shotgun is aimed directly at artists and producers.
I have always been under the assumption that the statutory rate applied to what publishers "at minimum" were required to pay a creator for a use of their work in a mechanical form.

Does that mean creators of copyrighted worksy can't earn "more" than that? Are you saying that publishers can't pay more than the statutory rate? Or that they aren't "allowed" to pay more than the rate. But they can choose to pay less? I thought, all these years now, that the law was to protect the creator, not insure the exploiter would always have their expenses "capped." That seems a little more protective of those that exploit creative works rather than those who create them.

Thanks for the clarification. And they say you can't teach an old dog new tricks.
There is no reason for them to pay more because the copyright owner is required by law to settle for the statutory licensing rate.

All copyright laws take rights away from creators. Without copyright laws, creators would own and control everything they create forever.

The endless PR spin from media distributors have most people believing the opposite.


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