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Copyright Royalty Board Proceedings - Feb, 2008

From: Cathy Merenda
Dated: Friday, February 15 2:29 PM

The Copyright Royalty Board (CRB) began hearings in Washington on January 28th to determine mechanical rates for songwriters and music publishers.   Along with setting rates for physical products, the CRB will set rates for digital downloads, interactive streaming, limited downloads and ringtones - each of which require a separate license and generate separate payments

The RIAA (Recording Industry Association of America) and DiMA (Digital Music Association) are arguing to reduce royalty rates while the NMPA (National Music Publishers Association) is fighting to preserve existing rate structure and increase royalties. Current mechanical rate for Physical Phonorecords is 9.1 cents per song.   There are no rates currently set for digital downloads, interactive streaming, limited downloads and ringtones

David Israelite, President and CEO of the NMPA is currently fighting for the rights of songwriters and publishers to be fairly compensated for their work. The NMPA, RIAA and DiMA each have opposing viewpoints as to what fair compensation is. The RIAA and DiMA are proposing disturbing reductions in mechanical royalty rates. The AIMP strongly supports the NMPA’s position on their proposed rates outlined as follows:

Physical Phonorecords
NMPA:    12.5 cents per song and adjustments for inflation
RIAA:     
7.8 % of licensee’s wholesale revenues [approximately 6 cents per song]
DiMA:    No rate proposed for physical phonorecords.
 
Permanent Downloads:
NMPA:   15 cents per track and adjustments for inflation
RIAA:      7.8 % of licensee’s wholesale revenues [approx 5.0 to 5.5 cents per 99 cent track]
DiMA:     4.1% of a licensee’s applicable receipts, no minimum [approx 4 cents per 99 cent track]

Limited Downloads
NMPA: greatest of: (i) 15 % of revenue; (ii) 33.3 % of content costs; or (iii) the greater of $0.0033 per use or $0.00064 per minute, subject to adjustments for inflation
RIAA:      7.8% of wholesale revenue [approx 40 cents per $9.99 subscriber and 60 cents per $14.99 subscriber per month]
DiMA: 4 % of a licensee’s applicable receipts, no minimum [approx 38 cents per $9.99 subscriber per month and 58 cents per $14.99 subscriber per month]

Interactive Streaming
NMPA: greatest of: (i) 12.5 % of revenue; (ii) 27.5 % of content costs; or (iii) the greater of $0.00275 per use or $0.00053 per minute, subject to adjustments for inflation
RIAA: 9.6% of performance royalty payable by means of the same mode of transmission [approx 0.58 %]
DiMA: No rate proposed for interactive streaming.

DiMA made a motion made on January 7, 2008 to the CRB arguing that an interactive stream of music through internet based media services is not a digital phonorecord delivery (DPD) and, according to DiMA, should therefore not require a mechanical license or payment of mechanical royalties to songwriters and music publishers. The rejection by the CRB is just one small victory for music publishers.

Songwriters and music publishers receive mechanical royalties for the sale of CDs and other recordings that contain their musical works.  Interactive streaming services provide a means by which consumers can obtain the exact same music, anytime they desire, and can use these interactive services as a replacement for buying CDs and other recordings. As a result, DiMA's position would have had a far - reaching negative economic impact on songwriters and music publishers. Millions of compositions have been licensed to interactive streaming services on this basis since 2001.

The initial hearing will last four weeks, with the three permanent Copyright Royalty Judges hearing arguments Mondays through Thursdays from 9:30 a.m. - 4:30 p.m. each day. At the conclusion of the initial hearing, there will be more discovery, followed by a rebuttal hearing in May, and a final decision expected on October 2.

Cathy Merenda
President, AIMP

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