indies

Apple to reportedly pay indie labels 0.13 cents per-performance, share of 15% of ad revenue

Thursday, June 27, 2013 - 1:00pm

As Apple prepared to unveil its upcoming webcast service iTunes Radio, it negotiated "direct deals" with the major labels to license the copyright sound recordings they own. Apple has reportedly now circulated "similar though not identical" licensing terms to independent record labels.

The Wall Street Journal reports that Apple is offering to pay sound recording copyright owners a combination of a "per-performance" royalty and a share of advertising revenue (a "performance" means a single listeners hearing a single song). For the first year of iTunes Radio, Apple will reportedly pay indie labels 0.13 cents (or $0.0013) per-performance, plus 15% of its net advertising revenue (proportionate to the music's play on the service). For the second year, those numbers increase to 0.14 cents and 19%.

There's some special conditions involved here too, to which other webcasters that pay through SoundExchange are not afforded. The Journal reports, "Apple won’t have to pay royalties for some performances of songs that are already in listeners' iTunes libraries," which makes sense -- or, interestingly (though perhaps confusingly too) "songs that might be on an album that a listener owns just part of." Further, Apple will get to select what it calls "Heat Seeker" songs to promote, which are also exempt from royalties, as will be songs listeners skip after 20 seconds or less. However, in either case, Apple only gets to avoid paying for two songs per hour per listener. [The publication Hypebot has more explanation and analysis on this here.]

As mentioned, the major labels' terms are similar to those Apple is offering indies, though the majors reportedly get cash advances on royalties.

The offer of terms document, the paper reports, also refers to the possible use of music as background or "bumpers" for talk, weather, sports, and news programming. Apple won't pay for such use of indies' music.

For reference, Pandora pays the "Pureplay" rate, offered by SoundExchange to firms whose primary business is webcasting. For 2013, Pandora pays 0.12 cents per-performance, which will increase to 0.13 cents next year, and 0.14 cents in 2015. Rates for 2016 and beyond have not yet been determined.

"'Pureplay' webcasters, like Pandora, pay significantly lower per performance royalties than either broadcasters or those paying under the statutory rate," points out industry expert David Oxenford, "but are required to pay a minimum fee of 25% of the gross revenue of their entire business." (In other words, Pandora pays the greater of the per-performance rate or 25% of gross revenue. Details of the pureplay agreement are here.)

The statutory rate Oxenford refers to is what was determined by the Copyright Royalty Board to be a "fair market rate" for webcast royalties. Those not party to one of SoundExchange's alternative licenses (under the Webcaster Settlement Act) would pay the statutory, which amounts to 0.21 cents per-performance this year, rising to 0.23 cents for 2014-2015. Read more from Oxenford here.

One further, and important note, especially in light of the criticism directed at Pandora from the recording artist community: The law requires royalties paid by webcasters like Pandora to be divied by SoundExchange, with 50% going to the actual owner of the sound recording copyright (in the majority of cases, this is a record label), 45% to the "featured" performing artist, and the remaining 5% to unions that represent background vocalists and musicians. When sound recording copyright owners make direct deals with operators, as they have with Apple, they are under no obligation to share the royalty revenue with performers. (The paper's reporting of Apple's deals is very general, and we're not suggesting we know performers won't get directly paid in them. We're just pointing out that the law does not mandate a share for performers in direct deals.)

Though no specific terms were reported by the paper in regards to music composition licensing, the Journal writes "Apple is also offering music publishers more than twice as much in royalties than Pandora does."

The Wall Street Journal article is here. You can also read more in Crain's New York here.

Indie labels may find streaming works better for them than digital retail in the long run

Tuesday, June 25, 2013 - 12:50pm

There's a fascinationg quote in Evolver.fm today. Eliot Van Buskirk is quoting Charles Caldas, who is CEO of Merlin, an organization that represents independent music labels.

Caldas revealed to Van Buskirk that, according to Merlin survey data, the indie labels' share of listening on "streaming platforms" is 12% to 20% better than indies' share of the download market.

That is, indie label music seems to garner a larger share of the listeners on services like Spotify, Pandora, Rdio, and Slacker than their share of sales in the iTunes Store, Amazon, etc.

"Freedom of choice created by limitless 'shelf' space and a proliferation of social media tastemaker filters is leading fans, no longer herded by the expensive, tightly-controlled media channels and store fronts of physical retail, to discover and enjoy more music than ever before," Caldas said.

There's undoubtedly various ways to interpret Merlin's finding. But this newsletter has long suggested that streaming services (Internet radio in particular), with the ability to target niche audiences, would eventually be a boon to independent artists and labels who create art outside the "lowest common denominator" interest. Since many feel the music industry's future is not in sales (e.g. downloads), but in "access" (streaming licensing), this could be a glimpse of greater success for indies down the road. It's just a start and just a small piece of evidence, but likely positive.

Van Buskirk has his own thoughts on this matter hereVan Buskirk's piece in Evolver.fm is here.

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