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A group representing artists and record labels reached a royalty-fee agreement with music Web sites, ending a two-year battle and removing a cloud from over online radio.
"It's a substantial reduction in per-song streaming fees," says Tim Westergren, founder of Pandora Inc., an online music service that will stream about one billion hours of music this year. The royalties question threatened Pandora's viability and hung over all aspects of the business, he said, making it hard to negotiate with potential partners. Now, "we're out from under that," he said.
But as a result of the new royalty rates, Pandora plans to start charging its heaviest users a fee. Those listeners on the free version of Pandora who tune in for more than 40 hours a month will have to pay 99 cents to keep listening for the rest of the month.
The previous rate structure, set by a panel of federal judges known as the Copyright Royalty Board in March 2007, created near panic in the online radio business. Rates started at 0.08 cent per song, per listener, retroactively to 2006, and rose to 0.19 cent by 2010.
Many online music services said the old rate structure would cause them to go under. Two years ago, many of them organized a "Day of Silence" to protest the rates, halting their services for a day.
Under the new rate scheme, hashed out with Webcasters and SoundExchange, the royalty organization, larger services earning more than $1.25 million in revenue must pay the greater of 25% of gross revenue or 0.093 cent per listener, per song. The rates rise each year until they hit 0.14 cent per listener, per song, by 2015.
Webcasters taking in less than $1.25 million per year must pay the higher of 7% of expenses, or a percentage of revenue, starting this year at 12% for the first $250,000.
Subscription services, where people pay a monthly fee to hear music online, must pay rates starting at 0.15 cent per song per subscriber this year, rising to 0.25 cent by 2015.
Online music services are becoming increasingly popular as people choose to listen to radio via their computers. About 42 million Americans tune into online radio each week, up from 19 million in 2004, according to Arbitron Inc. and Edison Research Inc.
also: Access live stations, online radio, podcasts and more at www.radio.com
Webcasters including AccuRadio, Digitally Imported and RadioIO represented their industry in the talks. Webcasters have 30 days to decide whether they want to take part in the newly negotiated rates. The alternative is sticking with the Copyright Royalty Board rates, or negotiating rates separately with individual artists and labels.
The agreement affects only pure-play online music services, not those that are the online versions of stations heard over the FM and AM dial.
|Published July 07 2009|
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