HITS Daily Double
"We are very hopeful of reaching agreement soon, and thereby creating long-term stability that will re-energize the Internet radio business."
——DiMA's Jonathan Potter


Pending Mechanical-Rate Rulings Will Have Sweeping Impact on Webcasters, Online Music Stores
Last week, the Digital Media Association, the National Music Publishers Association, the RIAA and other orgs submitted a draft proposal on mechanical rates for subscription and ad-supported services to the Copyright Royalty Board. The submission took place just before both houses of Congress passed the Webcaster Settlement Act, which allows webcasters to continue to negotiate new royalty agreements with copyright owners while legislators are busy trying to get reelected. The bill now goes to Dubya.

Said DiMA Executive Director Jonathan Potter: "This legislation will enable DiMA and our member companies, and all Internet radio services, to continue negotiating royalty rates with SoundExchange for the years 2006-2015. We are very hopeful of reaching agreement soon, and thereby creating long-term stability that will re-energize the Internet radio business."

Also chiming in was NAB EVP Dennis Wharton, who stated: "With this legislation now headed to the White House for President Bush's signature, NAB looks forward to sitting down quickly with SoundExchange to craft equitable streaming rates that enhance the online music experience and expose more artists to our listeners."

The NMPA and DiMA find themselves on opposite sides of another pending decision by the CRB. The NMPA hopes to raise mechanical royalties on paid music downloads (which are legally referred to as Digital Phonorecording Deliveries) from 9 cents to 15 cents, while DiMA and paid-download colossus Apple are looking for a reduced rate. With the vote expected by tomorrow, what appears to be 18-month-old paperwork detailing testimony from iTunes Store head Eddy Cue has surfaced online, Digital Music News reports.

"[I]if the iTunes Store were simply forced to absorb any increase in mechanical royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss—which is no alternative at all," Cue stated. "Apple has repeatedly made clear that it is in this business to make money, and would most likely not continue to operate the iTunes Store if it were no longer possible to do so profitably.”

Cue was also insistent on maintaining Steve Jobs’ beloved 99-cent price point. “Based on my experience at iTunes, helping facilitate millions of digital music sales transactions, I have no doubt that an increase in the $0.99 per track price point would lower total music purchases at the store, stall growth in consumer acquisitions, and therefore—in relatively short order—reduce overall license revenues paid to copyright holders."

The NMPA’s argument is predicated on the fact that Apple is in the hardware business, and that those millions of mini-transactions account for a tiny fraction of the company’s revenues.