major labels

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.

Billboard says Spotify not-even-close to being labels' #2 source of revenue

Monday, July 2, 2012 - 11:35am

Last week we covered (here) Business Insider's report that on-demand music Spotify had become major music labels' second-largest source of revenue, behind the iTunes Music Store. Following up, Billboard.biz says (paraphrasing here): "Nuh-uh."

While "Spotify may be the second-largest digital account for major labels," (not paraphrasing), "Walmart can generate more music sales in one country than Spotify can generate around the world." Billboard.biz estimates Walmart had about $525 million in 2011 music revenue. Spotify total revenue was reportedly about $250 million, and probably less than $175 million went back to record companies.

Looking solely at the U.S. market, Spotify (or all on-demand streaming, for that matter) isn't even close to second-place. For instance, SoundExchange paid labels $292 million from the performance royalties it collected from satellite and Internet radio. "Subscription services as a whole returned only $132.7 million in 2011. Subscription services were also less valuable to labels than synchronization royalties ($196.5 million) and mobile platforms ($277.4 million)," the news source wrote.

Read Billboard.biz for more here.

Canadian rights agency AVLA strikes deal with CBC for on-demand service, and with webcaster Mediazoic

Thursday, January 26, 2012 - 8:00am

Canada's CBC and the international Audio-Video Licensing Agency have announced an agreement that will enable the launch of a new CBC digital music service. The broadcaster plans to increase the online availability of its radio programming, including via on-demand services

Meanwhile, AVLA has also forged a deal with Canadian webcaster and digital music company Mediazoic for "reproduction" rights. (For its webcasting operation, Mediazoic has an agreement with Re:Sound to cover performance rights. Re:Sound is Canada's non-profit that licenses recorded music for public performance, broadcast, and digital.) In addition to their own webcasting operation and record- and radio-production facility, Mediazoic creates software tools for third-party organizations who wish to offer their own customized Internet radio stations. Renowned personality Alan Cross is currently a Mediazoic host.

AVLA represents the copyrights of more than 1,000 record companies and copyright owners, including majors Warner Bros., Sony, and EMI. Mediacaster Magazine reports AVLA members "own or control the copyright to most of the sound recordings and music produced, distributed and heard in Canada. It can license both the broadcasting and reproduction of members' audio and video recordings in Canada...

"Both AVLA deals are seen as clever and imaginative business propositions, and among the first such negotiated collective licenses in Canada for on-line streaming and podcasting of radio and online digital music programming," Mediacaster writes.

Read Mediacasters' full coverage here.

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