Copyright Board Lets Music Royalties Ride

The Copyright Royalty Board has decided to leave royalty rates for permanent music downloads remain unchanged - so Apple would have to make good on its threat to close iTunes.

The Copyright Royalty Board—which establishes statutory royalty rates paid to content authors and publishers in many media—has decided to leave royalty rates unchanged for physical media and so-called “permanent” digital music downloads. Every time a consumer buys a song on CD or downloads a version from an online music service, authors and publishers earn 9.1 cents.

The fee applies to CDs and downloaded music tracks, but doesn’t apply to “non-permanent” subscription services. The CRB also voted to establish the first royalty rate for ringtone purchases: 24 cents per tone.

The CRB’s decision had been the source of some consternation in the digital music industry, since the board was considering raising the per-song royalty rate to as high at 15 centers per track. The higher rates would have significantly impinged on—or even eliminated—any earnings online music sellers receive from tracks…which would tend to discourage those services from remaining in business. Earlier this week, Apple even threatened to pull the plug on its market-leading iTunes store if the royalty rate increased, saying that a royalty rate increase would turn iTunes into a money-losing proposition. In fact, Apple—along with the Digital Media Association industry group—actually wanted the CRB to lower the per-song royalty rate to either 4.8 cents per track or a flat 6 percent of “applicable revenues.”

Streaming services, like Rhapsody To Go, will pay 10.5 percent of their revenue, minus performance royalties paid to music publishers, under a new royalty system announced by the CRB last week.

Royalty fees, in theory, are paid back to songwriters and music publishers via SoundExchange, an non-profit performance rights organization.