1709 Blog: for all the copyright community

Saturday, 19 December 2015

Pandora shares soar after Copyright Royalty Board set new rate

Pandora, the world's largest Internet radio service, will pay record companies more money to stream its music following a long-awaited decision on Wednesday by the three-judge panel of the U.S. Copyright Royalty Board.  The Board, a panel of three federal judges, decides how much Internet radio stations such as Pandora must pay record companies. Under a 1995 law and its successors, disputes over this rate are settled by the Copyright Royalty Board.

But the new fee represents a comparatively small increase - the record companies were seeking much higher rates. The new statutory per-stream rate os paid to recorded music rightsholders by non-interactive digital 'radio' platforms such as Pandora and iHeartRadio.  the non-subscription per-stream rate set by the CRB will be $0.0017, which $0.0003 more per stream than recorded music rightsholders currently receive from Pandora. According to MBW calculations, that will mean Pandora paying out $94.1m more to recorded music rightholders next year compared to 2015 for the same amount of consumption. However this rate will only apply for definite in 2016 - the following four years (2017-2020) will be determined by fluctuations in the US Consumer Price Index, which could bring the rate back down - or push it further upwards. In the wake of the CRB's decision, Pandora shares, which had plummeted 27% in 2015 before closing Wednesday at $13.44, were surging 20% in after-hours trading.  SoundExchange has been arguing wants to almost double it to $0.0025. In 2014, Pandora paid out $446.4m to all music business rightsholders, according to its SEC filings. (From a total cost of sales of $508m). A rate court ruled that ASCAP is entitled to 1.85 percent of Pandora’s revenue, and this year, a court ruled that Pandora must pay 2.5 percent of its revenue to BMI for the use if songs - so by far the biggest share of revenues were paid to labels and artists in 2014: $407.8m. But SoundExchange said "We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy" and one commentator noted "Whatever the case, a competitive marketplace - not federal judges - ought to be setting prices" adding "The radio business is changing quickly. The sooner government gets out of it, the better off artists and consumers will be."

http://www.bloombergview.com/articles/2015-12-16/deregulate-the-music-industry and http://www.thestreet.com/story/13398099/1/pandora-hit-with-higher-costs-as-royalty-board-hikes-streaming-rates.html

And Billboard explains more here

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