Royalty Board Grants Rehearing on Music Streaming

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By Anandashankar Mazumdar

Feb. 12 — The Copyright Royalty Board has granted in part a motion for rehearing in its proceeding on royalty rates for online music streaming services, according to a statement issued Feb. 12 by the board.

This comes almost two months after the board issued its ruling for streaming rates for the years 2016-2020. That set a rate of 22 cents for 100 streams for subscription-based services and 17 cents for 100 streams for nonsubscription services.

After the mid-December ruling, music royalty collection entity SoundExchange Inc. filed a motion for rehearing under seal.

The board's statement said that it would “issue a post-hearing determination in the near future.”

Under the prior royalty regime, Pandora Media Inc.—the world's largest music streaming service—was paying 14 cents for 100 streams for its ad-supported service. Pandora wanted the rate lowered to 11 cents, and the music industry argued for raising it to 25-29 cents.

When the rates were released in December, SoundExchange issued a statement advocating for the negotiation of market-based royalty rates between streaming services and copyright holders.

“It’s only fair that artists and record labels receive a market price when their music is used,” SoundExchange said then. “We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy.”

A SoundExchange spokeswoman told Bloomberg BNA on Feb. 12 that “Rehearings are part of the rate setting proceedings and it is very standard practice to ask the judges to take another look at their decisions on some items.”

The CRB has not stated publicly what issues it will address on rehearing, “but we do know the judges agreed with us on some issues and disagreed on others,” the spokeswoman said in an e-mail message.

Kristelia A. García, a law professor at the University of Colorado, Boulder, Colo., said that SoundExchange's position had some merit because, so long as music is subject to compulsory licenses, there is an “effective rate ceiling,” and existing rates do not reflect a true, free market negotiation process.

Furthermore, she said that the streaming services' argument that rates should be on the lower side, because artists benefit from exposure through their services, doesn't hold together.

“If the claim is true, then the Services should have no trouble negotiating downward from the statutory rate with copyright owners who recognize that value,” García said in an e-mail message to Bloomberg BNA. “I think this consideration should be market-tested.”

As to the streaming services' assertion that they would not be able to afford the kinds of higher rates sought by SoundExchange, García said, “It is most likely true, but I'm not sure we should be sympathetic to it.”

“It would be accurate for me to declare that I cannot afford a Porsche at this time, but it would not necessarily follow that I should be allowed to purchase one for a lower cost so as to allow me transportation until I can build up my savings,” she said. “If the Services have a future-value proposition (and I think that they do), their focus should be on convincing the content owners of it.”

In some cases, such persuasion might come in the form of granting equity in future value, she said.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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