The New Digital Music Mechanical Royalties

Don't look now but the a new mechanical royalty rate for digital media is coming. The Recording Industry Association of America (RIAA), National Music Publishers Association (NMPA), and the Digital Media Association (DiMA) have all settled on an agreement that will cover how digital media creators and their representatives will be compensated from 2013 through 2017. The agreement still has to be approved by the US Copyright Royalty Board, but at this point that seems to be just a formality.

The agreement generally keeps the music publishing royalty status quo of 9.1 cents per song download, per song on a CD or other physical formats, 24 cents per ringtone, and the complex formula for subscription and streaming formats, but also adds 5 new categories:

• Paid Digital Music Locker Services providing on-demand streaming and downloads like those supplied by iTunes and Amazon, where music publishers will now get a mechanical royalty rate of 12% of revenue or 20.65% of total content cost, or 17 cents per subscriber, whichever is greater.

• Free Digital Music Locker Services that include a download purchase, music publishers will receive a mechanical royalty rate of 12% of revenue or 22% of total content cost, whichever is greater.

• A new term for a category called "Mixed Bundle" which could include a locker service, limited interactive service, download or ringtones combined with non-music product like a cell phone, consumer electronics device or Internet service would provide music publishers a royalty of 11.35% of revenue or 21% of total content cost, whichever is greater.

• Another new category called "Limited Interactive Service," which is when a subscription service offers a limited amount of music to a single genre or playlists that the user can access at a lower price, will pay publishers 10.5% of revenue, 21% of total cost, or 18 cents per subscriber, whichever is greater. 

• And yet another new termed category called "Mixed Bundles," which is when a CD comes with a download, publishers see 11.35% of revenue or 21% of total content cost.

How publishers get paid for these scenarios has been a very contentious issue over the last few years, but the new categories seem to insure that the writer and publisher will get paid in those circumstances where they didn't before. That said, the above figures come mainly from the industry association's own press release, so there are a lot of details that are yet unknown. I'm sure we'll revisit the topic many times as more info becomes available.

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