Copyright Royalty Board Finalizes Rule Adjusting Compulsory License Rates for Mechanical and Digital Phonorecords | Practical Law

Copyright Royalty Board Finalizes Rule Adjusting Compulsory License Rates for Mechanical and Digital Phonorecords | Practical Law

The Copyright Royalty Board has published final regulations setting compulsory license rates for mechanical and digital phonorecords.

Copyright Royalty Board Finalizes Rule Adjusting Compulsory License Rates for Mechanical and Digital Phonorecords

by Practical Law Intellectual Property & Technology
Published on 13 Nov 2013 • USA (National/Federal)
The Copyright Royalty Board has published final regulations setting compulsory license rates for mechanical and digital phonorecords.
On November 12, 2013, the US Copyright Royalty Board published a final rule adjusting the compulsory license rates and terms for mechanical and digital phonorecords. Effective January 1, 2014, the rule sets the licensing rates for use of musical works encompassed by Section 115 of the Copyright Act, including:
  • Physical phonorecord deliveries.
  • Permanent digital downloads.
  • Ringtones.
  • Interactive streaming.
  • Limited downloads.
  • Limited offerings.
  • Mixed service bundles.
  • Music bundles.
  • Paid locker services.
  • Purchased content locker services.
The Copyright Royalty Judges are required to conduct proceedings every five years to determine rates and terms for Section 115 licenses.
Notably, the rule sets out rates for these five new categories of music services:
  • For paid locker services (a subscription-based digital music service providing on-demand streaming and downloads, such as Apple's iTunes Match), the rate is the greater of 12% of service revenue, 20.65% of the service's payments for sound recording rights only and the aggregate amount of $0.17 per subscriber per month.
  • For purchased content lockers (cloud music storage provided with the purchase of digital downloads, such as Amazon's CloudPlayer), the rate is the greater of 12% service revenue and 22% of the service’s payments to record companies for sound recording rights only (over any applicable payments for the digital downloads themselves).
  • For mixed service bundles (a music service combined with a non-music product, such as a mobile phone), the rate is the greater of 11.35% of service revenue and 21% of service’s payments to record companies for sound recording rights only.
  • For “limited offerings” (including subscription service with limited genres of music or specialized playlists), the rate is the greater of 10.5% of service revenue, 21% of a service’s payments to record companies for sound recording rights only and the aggregate amount of $0.18 per subscriber per month.
  • For music bundles (a bundle of two or more music products), the rate is thegreater of 11.35% of service revenue and 21% of a service’s payments to record companies for sound recording rights only.
The other currently existing rates and terms have been extended as-is.
For more information on the proposed changes the Royalty Board considered, see Legal Update, Copyright Royalty Board Proposes Compulsory License Rates and Terms for Mechanical and Digital Phonorecords.