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The agreement "reflects our mission to make it easier for digital music services to launch cutting-edge business models and streamline the licensing process."
——RIAA chief Cary Sherman

RIAA, NMPA, DiMA AGREE ON EXPANDED ROYALTY RATES

The Five-Pronged Proposal Would Create Guidelines for New Online Services
The RIAA, National Music Publishers Association and Digital Media Association said yesterday that they’d reached an agreement on proposed royalty rates for a range of online services.

The proposal, which would completely resolve the Copyright Royalty Board Rate Proceeding under Section 115 of the Copyright Act, would create guidelines for five new categories:

1) Mixed-service bundles (for example, a locker service, limited interactive service, downloads or ringtones combined with a non-music product such as a mobile phone, consumer electronics device or Internet service)

2) Paid locker services (subscription-based locker providing on-demand streaming and downloads)

3) Purchased content lockers (a free locker functionally provided to a purchaser of a permanent digital download, ringtone or CD where the music provider and locker have an agreement) 

4) "Limited offerings" (subscription-based service offering limited genres of music or specialized playlists)

5) Music bundles (bundling music products such as CDs, ringtones, permanent digital downloads and vinyl albums sold with download codes)

The agreement "reflects our mission to make it easier for digital music services to launch cutting-edge business models and streamline the licensing process," RIAA chief Cary Sherman said in a statement.

Under federal law, mechanical royalty rates are set every five years. Until now, those rates have been established for physical sales, downloads and on-demand services. To go into effect, the new royalties require the approval of the CRB.

Typically, the label that distributed a given recording collects the royalty as part of the sale price and passes it along to the publisher, the Wall Street Journal’s Ethan Smith points out. But the proposed terms don't set licensing fees payable to record companies.

Without a blanket agreement, a new online service would need to negotiate separately with hundreds of publishers to secure licenses for the same music that could be addressed in negotiations with just the Big Four. If it's approved, the new rate structure would make it much quicker and easier for any new online entity to get up and running.
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