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SoundExchange rates won’t differ between majors and indies

By | Published on Thursday 26 November 2015


Could major labels earn more than indies from the US collective licensing system that is utilised by services like Pandora? That’s the question. The answer is “no”, by the way. For now at least.

As previously reported, America’s Copyright Royalty Board is currently reviewing the royalties paid by US online services that are licensed via SoundExchange.

Online radio set-ups, including personalised radio platforms like Pandora, are covered by a so called compulsory licence in the US, meaning labels are obliged to provide their content to such services through the SoundExchange system (which is why Adele can’t withhold her new record ’25’ from Pandora). The rates such services pay the labels via SoundExchange are then set by the CRB. Whenever rates are reviewed, Pandora pushes for them to be cut, while the labels argue for an increase.

In amongst the current CRB rate review, the judges considering the matter noted that when digital services are licensed through direct deals, rather than the collective licensing system, different rights owners might negotiate different royalty rates, with bigger rights owners usually getting paid more. “Could the collective licensing system accommodate such variation?” they then pondered. “Fuck no!” said the indies. “Hmmm, maybe”, thought the majors. The CRB turned to the US Copyright Office, and specifically Maria A Pallante, the Register Of Copyrights, for clarification.

She has now responded with a “no”, though only because she thinks the question was raised too late into the current rate review. Had one or more stakeholders proposed variable rates when making their initial submissions to the review she’d have given the question proper consideration, but now isn’t the time for such a debate. “I’ll leave the answer for another day”, Pallante wrote.

Which means that the CRB can’t opt for one royalty rate for the majors and one for the indies in the current review, which will set rates through to 2020. As previously noted, any such variation in royalty rates (the CRB didn’t specifically talk about a major/indie distinction, just whether some variation might be allowed), would throw up all sorts of tricky questions over how the collective licensing system classifies different groups of rights owners, and who calculates respective market share, which the CRB probably doesn’t want to have to get involved in answering anyway.