Online music publishers have been seeking a new agreement with record companies for years. However, publishers and music groups have finally reached an agreement.
The new agreement is designed to settle how the record industry calculates royalty fees. The rates apply for downloads and music that is streamed online. It calls for a mechanical royalty rate of 10.5 percent of revenue. This also includes revenues for subscription and advertisements. However, the agreement does not cover merchandise or permanent downloads.
The agreement also confirms that audio-only streaming services like satellite radio and Webcasting do not require mechanical licenses.
“This agreement provides a flexible structure to support innovative business models in the digital music marketplace that will benefit music fans, creators and online services,” said Mitch Bainwol, Chairman and CEO of the RIAA.
Also, the agreement allows for promotional interactive streaming to continue without royalty payments. Therefore, marketing devices like songs being available for streaming on artists and label website, which promote the sale of music are not subject to royalty payments.
Music groups describe the agreement as a breakthrough that will offer new ways to offer digital music online. The music groups include the Digital Media Association (DiMA), National Music Publishers’ Association, the Recording Industry Association of America, the Nashville Songwriters Association International and the Songwriters Guild of America.