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News |  08 Jul 2009 12:38 |  By RnMTeam

Webcasters to pay royalties for online music streaming

MUMBAI: After years of tweaking and rewording agreements, commercial webcasters have agreed to royalty rates for music they stream online. Record labels and internet radio stations in the US on Tuesday declared an end to a two-year battle over royalties that the online services had said threatened their existence.

The deal establishes a two-tier royalty payment system for companies such as the popular service offered by Pandora Media Inc which broadcasts music over the Internet.

The agreement calls for large webcasters to pay artists and copyright owners a percentage of all U.S. revenue up to 25 percent or on a per-song basis, which ever is greater. Smaller webcasters will have the option of paying the greater of a percentage of revenue or a percentage of expenses and in certain circumstances have less stringent play list reporting requirements in return for payment of an additional "proxy fee. The agreement covers royalty rates from 2006-2015 and 2014 for small webcasters.

The agreement was announced by SoundExchange, a nonprofit group designated by the U.S. Copyright Office to collect and distribute digital music royalties. The group's members include large record companies such as Sony BMG and Warner Music Group, as well as more than 2,500 independent labels.

Pandora Internet radio founder Tim Westergren wrote on the Pandora's blog, For this we are truly thankful and want to express our deepest gratitude to everyone involved.... Pandora which was founded in 2002 is one of the largest Internet radio sites with about 30 million registered listeners, according to Westergren. It generates more than 90 percent of its revenue through advertising, has cultivated a devoted fan base by offering a music discovery service.

Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. This ensures that Pandora will continue streaming music for many years to come,... says Westergren.

Due to the agreement, Pandora said it will now charge 99 cents to users of its free service who listen more than 40 hours per month. The change will affect about 10 percent of its users, the company said.

In 2007, the U.S. Copyright Royalty Board elected to sharply increase royalties paid by Internet radio operators. Many webcasters protested that the rates were too high, which led to the negotiations to establish a new rate structure.

SoundExchange executive director John Simson called the rates set in 2007 appropriate and fair.... However, he said the new royalty agreement incorporates an experimental approach... that addresses concerns on both sides.

It gives certain pureplay webcasters the opportunity to flesh out various business models and the creators of music the opportunity to share in the success their recordings generate....