Mechanicals Staying Steady on Paid Downloads…

The music industry has been eagerly waiting for the Copyright Royalty Board (CRB) to approve a group of mechanical rates related to on-demand streams, conditional downloads, permanent downloads, and master ringtones. The wait is now over, as the CRB has finally given the green light to these rates.

The most heavily-debated rate on permanent downloads has been held steady at 9.1 cents per download for tracks that are under five minutes in length. For every additional minute, the rate is 1.75 cents, rounded upward on the total song length. This rate is also applicable for physical recordings as well. It is important to note that this rate is only for the mechanical license, which is the license that is required to reproduce and distribute a song. The performance license, which is required for playing the song in public, is a separate license that is usually obtained by the venue or the broadcaster.

On the less permanent side, mechanical rates have also been disclosed. The rates actually vary by service type, though generally, the rate is 10.5 percent of top-line revenues, minus applicable performance royalties. This means that the mechanical license fee is calculated as a percentage of the revenue that the music service generates from the sale or streaming of the song. The performance royalties, which are paid to the songwriter and the publisher, are deducted from this revenue before the mechanical license fee is calculated. This is to ensure that the songwriter and the publisher receive their fair share of the revenue.

The mechanical rate on master ringtones, which excludes polyphonic and monophonic tones, is 24 cents per delivery. This means that every time a master ringtone is delivered to a mobile phone, a fee of 24 cents is payable to the rights holder. This rate is applicable for the mechanical license only, and the performance license for playing the ringtone in public is a separate license.

Immediately following the rates announcement on Thursday, leading mechanical royalty collections group Harry Fox Agency noted that labels, online music services, and other licensors will include the updates in their quarterly reports starting 180 days after the rates take effect. This means that the new rates will be applicable for all new licenses that are issued after the effective date, and the licensees will have to pay the new rates for the use of the songs.

The approval of these rates has been long-awaited by the music industry, as it provides clarity and predictability for the licensing fees. The rates are set for the next five years, which gives the industry a degree of stability and certainty. However, it is important to note that these rates are only for the mechanical license, and the performance license fees are set separately by the performing rights organizations (PROs) such as ASCAP, BMI, and SESAC.

In conclusion, the approval of the mechanical rates for on-demand streams, conditional downloads, permanent downloads, and master ringtones is a significant development for the music industry. The rates provide clarity and predictability for the licensing fees, and they are set for the next five years, which gives the industry stability and certainty. However, it is important to note that the performance license fees are set separately by the PROs, and they are an important part of the revenue stream for the songwriters and the publishers.