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

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Issue Date: 
Dec 12 2012 - 12:10pm

From Issue:

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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Which ever they used for the

Which ever they used for the pandora pay and sounds all for the royalty. - Richard E. Dover

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The UK radio and online music royalties

Interesting to see UK copyrights costs cited in the US. These are the facts ....

UK broadcast radio paid £2.25 per 1000 hours listened for music copyright in 2011. A 'small webcaster' in the UK paid £15 to £23 per 1000 hours listened (the exact amount depends upon the number of songs played per hour). It should be noted that UK commercial radio earned revenues of £22 per 1000 hours listened in 2011. That yield was achieved after 40 years of the sector's existence and huge expenditure on marketing campaigns. How is a nascent industry like online radio expected to afford, in music copyright fees alone, as much money as the commercial radio sector earns in revenues?

There is no level playing field between terrestrial radio and online radio in the UK. Indeed, the Copyright Tribunal that set the PRS online music royalty rates understood that the rates were "approximately six times those under the commercial radio agreement" because "commercial radio offered quite a different service to 'music, music, music.'" [Declaration of interest: I worked for a year preparing evidence for that Tribunal and these quotes are from the Tribunal Decision.]

The detailed numbers and the Tribunal's reasonings are in a presentation 'Online radio: the UK business model' I made at a Music 4.5 conference in London this September. View it at http://www.scribd.com/doc/107099932

If anyone has questions about UK music copyright costs, contact me. The precise figures are different between the US and UK, but the inequalities between broadcast radio and online radio are just as serious.

Grant Goddard
radio analyst
London

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