

Songwriters, record labels, and webcasters have reached an agreement on mechanical royalties for songs played on web radio services. However, the "disastrous" performance royalty that threatens to drivePandora and other webcasters out of business remains in effect.

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Interactive webcasters and companies that offer music subscription services will pay 10.5 percent of their revenue to songwriters and publishers minus any performance royalties already being paid to labels. The move comes as part of music publishers’ drive to start collecting mechanical royalties for compositions played online after giving online radio a free pass while business models developed.

"This historic agreement is the foundation for a new generation of music distribution," stated president and CEO of the National Music Publishers’ Association David Israelite. "This agreement will ensure that songwriters and music publishers continue to thrive in the digital age." RIAA chairman and CEO Mitch Bainwol also waxed enthusiastic in the announcement, as did representatives of every other organization involved — the Digital Media Association (webcasters), the Nashville Songwriters Association International, the label EMI and the Songwriters Guild of America.

For once, it appears, these various parties have agreed onsomething. All that remains is for the Copyright Royalty Board to stampits approval on the agreement.

This marks the first time a mechanical royalty rate has been set formusic webcasters. As opposed to performance royalties, which coverspecific recordings, these mechanical royalties deal with compositionscreated by songwriters.

The agreement covers "limited downloads" (as offered by subscriptionservices such as Rhapsody) and songs streamed as part of interactivestreaming services such as MySpace’s new playlist feature.

In certain promotional scenarios, no royalty need be paid tosongwriters and publishers as part of the agreement, which all sidestout as offering sufficient flexibility to allow new business models tosurvive and thrive. In addition, parties to the agreement determinedthat webcasters will not owe distribution or reproduction royalties tosongwriters and publishers for copies of songs cached on servers aspart of the streaming process.

In cases where webcasters and subscription services owe 10.5 percentor more of their revenue to labels and performers as part of theperformance royalty determined

by the Copyright Royalty Board last year, it appears webcasters willowe nothing to songwriters and publishers. In cases where thoseroyalties aren’t quite so steep, they’ll pay the difference tosongwriters and publishers. This should allow enough flexibility forstreaming and subscription services to keep doing what they do whilestill compensating songwriters and publishers.

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