Touve

If license directly-negotiated, no guarantee on artists' earnings from Apple iRadio play

Tuesday, May 14, 2013 - 11:50pm

We've heard recently that Apple's "iRadio" webcasting service has hit snags in licensing discussions with rights owners (most recently here).

It's important to note that any such deals that result from negotiation with labels mean Apple will not operate under the statutory webcast license (any service willing to operate within the statutory's requirements can pay that rate -- no negotiation needed). A direct license with labels could allow Apple to avoid the statutory's specific limitations on the use of music (its prohibition on "on-demand" and other measures known as the "sound performance complement"). It might even grant Apple a preferred royalty rate.

Such an arrangement would also free the labels from the statutory's required 50/50 split of the royalties with performers. As per the DMCA, the royalties SoundExchange collects from webcasters operating under the statutory license get split between copyright owners (record labels, who get 50%) and performers (the featured performer gets 45%, with 5% going to musicians unions for backup performers).

But the DMCA also allows for copyright owners to negotiate directly with webcasters, which is what appears to be happening with Apple. In such a case, the DMCA's requirements (like the "sound performance complement" and the "50/45/5" split) don't apply. Performers would still most likely earn something from webcast plays on a service with a direct license, under the terms of their particular contract with their record label. But if some artists are chafing at what they're paid by webcasters paying the statutory, they'll likely make far less from Apple iRadio plays.

"And so, it didn’t take a rocket scientist to anticipate that direct licenses for an iRadio service could get negotiated at rates below the webcaster rates formally established through the Copyright Royalty Board (CRB) or published Settlement agreement," writes Washington and Lee University assistant professor David Touve in Rockonomic here.

It's feasible to imagine that a record label, no longer required to share 50% of the webcasting royalties, could grant a major licensee like Apple a significant discount, and still earn more than it would under that statutory. Apple's savings, and the labels' bonus, would come from what performers would have earned under the statutory license.

Academic's math shows Pandora pays sound recording royalty at 10 times the rate of UK radio

Wednesday, December 12, 2012 - 12:10pm

We've heard (at the recent House Subcommittee hearing on the Internet Radio Fairness Act for one, but elsewhere too, and often) the recording industry:

  • doesn't like the amount of royalties streaming services pay to play copyright recordings, and wants more;
  • really doesn't like that U.S. broadcasters don't pay at all; but should, like the good folks of the non-U.S. broadcast world.

So, how much does, say, a UK radio broadcaster pay to play a copyright sound recording per listener, and how does that compare to other services, like Spotify or Pandora?

Enter David Touve (you may remember him as the Washington and Lee University Assistant Professor of Business Administration who estimated that U.S. broadcasters would owe the recording industry $2.5 billion a year if they were required to pay at the webcasting rate here).

Using data from PPL (which collects royalties from UK radio) and RAJAR (which measures listening), and estimating 12 songs per hour, Touve estimates "the value of a single radio play to a single listener in the UK for only that portion of the royalties that are paid to record labels, featured artists, and performing artists" is £0.000073, or $0.00012.

"For comparison, I believe the value estimated above is 1/36th the rate reported by Zoe Keating ($0.0042) [Touve's referring to this] for her receipts from streaming music services (e.g., Spotify), 1/10th the rate ($0.0011) paid by Pureplay Webcasters in the U.S. (e.g., Pandora), and 1/18th the CRB-established default Webcaster rate ($0.0021) in the U.S."

Put another way: Pandora currently -- under the settlement "discount" rate -- pays at a rate ten times what UK radio pays to perform sound recordings.

(The difference in audience size between Pandora and the broadcast industry of a country like the UK, much less the U.S., naturally means the recording industry's take from broadcasters will be much larger. But what Touve is putting in high relief is the discrepancy between the rates.)

Read Touve's latest Rockonomics blog entry here.

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