First Royalty Rates Set for Digital Music, iTunes Won't Shut Down


A collective sigh of relief was let out Thursday, as a panel of federal judges who determine royalty rates for recordings ruled to renew the current royalty rate until 2012.  The ruling by the Copyright Royalty Board, a panel of three judges appointed by the Librarian of Congress, applied directly to mechanical royalties (which as we mentioned before , are the fees paid directly to songwriters and publishers of music, not the performers).

The currently royalty rate of 9.1 cents was lobbied to receive a 66 percent increase by music publishers, concerned about losing income as music sales decline. Labels and retailers pushed to judges to adopt a new model that would determine royalty payments as a percentage of wholesale revenue, however neither of these suggestions made the ruling.

One document in the hearing, submitted by an Apple executive, had threatened that a significant inflation in royalty rates could potentially force them to shut down the massively popular iTunes music store, which has sold over 5 billion songs to date. While Apple sees substantial sales, they operate with very thin margins.

There are still some in the music industry that have claimed that new rulings such as these might not be enough to satisfy the insatiable rise of illegal file sharing. “Whether these developments will be sufficient to return the music industry to health is not clear,” said Jonathan Feinstien, a music lawyer at the Krasilovsky & Gross firm in New York.

Image Credit: Apple, Inc.

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