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Internet, satellite and cable music royalty payments up 17% in 2011

This is certainly an indicator of strong growth for internet radio and streaming services. Music royalties agency SoundExchange announced Tuesday that it ended the year collecting $292 million in royalty payments, up 17% from 2010. These royalties are paid by internet, satellite and cable TV music-only services for the right to play sound recordings, and are distributed to the owners of the sound recording rights. The payments are based upon listener hours, which means a service pays more royalties when more listeners are tuned in. Terrestrial radio is excepted from these royalties by statute, though all broadcasters are obligated to pay songwriting royalties via agencies like ASCAP and BMI.

SoundExchange also reports that 15,300 new artists, labels and rights holders were registered last year, and therefore became eligible to receive royalty payments.

I am definitely of two minds with regard to these payments, often known as “mechanical” royalties. On the one hand, I think it is only fair for musicians to be paid when services base their income on playing recorded music. But on the other hand, there are many non-commercial services that do not turn a profit, and for whom these payments can be burden. Furthermore, it is reasonable to question how much money individual artists see from these collections, since the major record companies arguably own the majority of mechanicals rights.

Even the for-profit services like SiriusXM satellite radio and Pandora have been protesting. They say that the SoundExchange fees are too high and that the terrestrial radio exemption is unfair. Last fall SiriusXM made waves by reaching out to the major labels to negotiate individual contracts that would bypass SoundExchange, in the hope of reducing its rates. Such a move is legal because SoundExchange is the default statutory collection agency for those who don’t have other agreements with rights holders. The catch with bypassing SoundExchange is that you end up with a lot of individual contracts to hammer out. The risk for artists with such arrangements is that those who own the rights to their recordings might have difficulty collecting their due royalties.

In any event, this rise in royalty payments are a strong sign that more listeners are turning to online radio and music streaming services, in addition to the more established satellite and cable providers.

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5 Responses to Internet, satellite and cable music royalty payments up 17% in 2011

  1. J January 19, 2012 at 9:50 am #

    Paul, I’m surprised you don’t have your facts straight. “Terrestrial radio is excepted from these royalties by statute, though all broadcasters are obligated to pay songwriting royalties via agencies like ASCAP and BMI.”

    Terrestrial radio MUST pay Sound Exchange royalties as well, by statute. This is clearly stated on the SE website. You should know this. This is the main reason many terrestrial stations still are holding off on streaming their station online; they are scared of the “more listeners = more royalties” mantra.

  2. Kery Brewer January 19, 2012 at 9:51 am #

    I like the growth I’m seeing reflected in your article, and enjoy your posts.

    However, your first paragraph contains a gross misstatement of fact. Terrestrial stations DO IN FACT have to pay SoundExchange as well. It may be covered in their terrestrial licensing, or they pay SoundExchange directly via a variety of licensing models.

    As a provider of streaming services to radio stations, we deal with the licensing issue daily and are always assisting terrestrials in getting the SoundExchange licensing in place.

  3. Paul Riismandel January 19, 2012 at 9:55 am #

    J and Kery,

    It wasn’t a misstatement of fact, so much as I failed to be more specific and state that terrestrial broadcasters do not have to pay SoundExchange for their terrestrial broadcast signal. Yes, they do have to pay for their internet stream just like everyone else. And as the advisor to a terrestrial college station with an internet stream, I just authorized this year’s payment to SoundExchange myself.

    However, believe it or not, not every terrestrial broadcaster has an internet stream, and those broadcasters would not have to pay SoundExchange anything. They are, in fact, excepted from paying mechanical royalties by statute.


  4. Sydney Chilton February 27, 2012 at 10:43 pm #

    Thank you ever so for you blog post.Much thanks again. Cool.

  5. Lydia Crew February 27, 2012 at 11:40 pm #

    This is one awesome blog article. Great.

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