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“With sales falling and prices declining, our core costs have to go down, not up."
—-Mitch Bainwol, RIAA
COPYRIGHT ROYALTY BOARD: THE RIAA PERSPECTIVE ON DIGITAL ROYALTIES
Trade Org Points to Declining Sales for Lowering Mechanical Rate on Digital Downloads

The National Music Publishers’ Association has had their say and now the RIAA is back with theirs.

With the Copyright Royalty Board ready to hear testimony on mechanical royalty payments for digital downloads and streams (see hitsdailydouble, 1/28), the RIAA has countered with its arguments for a reduced rate.


Unable to strike a deal between labels and publishers, the RIAA insists it is seeking ways to counter the money lost from online piracy.


Pointing to how labels have lowered prices, bundling additional content to enhance consumer value and creating a range of new business models and content offerings, the RIAA is asking publishers “to join us to meet these challenges facing our industry.”

The RIAA's Mitch Bainwol points out “with sales falling and prices declining, our core costs have to go down, not up…  Current mechanical royalty rates in the U.S. are already well above historical and international norms. We also think that the rate structure should be changed to a percentage royalty system, a system that has served publishers and songwriters around the world very well for many decades. A percentage royalty rate would be self-adjusting and flexible, making it easier and quicker to explore new business models in the years ahead.”

Unfortunately, the two sides are pretty far apart. The current mechanical rate for physical phonorecords is 9.1 cents. The NMPA is proposing an increase to 12.5 cents per song.  The RIAA, on the other hand, has proposed slashing the rate to approximately 6 cents a song.

For permanent digital downloads, NMPA is proposing a rate of 15 cents per track, with the RIAA countering with 5-5.5 cents per track.  

The real difference comes in the area of interactive streaming services, where the NMPA proposed a rate of the greater amount between 12.5% of revenue, 27.5% of content costs, or a micro-penny calculation based on usage. The RIAA have countered that songwriters and music publishers should get the equivalent of .58% of revenue, which is less than 1%.  

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