The Copyright Royalty Board recently released recommendations for compulsory mechanical license rates for the period 2008 through 2012. The recommendations were the result of a proceeding that has been ongoing all year.
What Is the Compulsory Mechanical License?
Once a recording of a non-dramatic song has been commercially released with the authorization of the copyright owner, anyone may make another recording of the song and sell copies of their recorded version. You do not need the permission of the copyright owner in order to obtain a compulsory mechanical license. Your only obligations to the copyright holder of the song are providing notice and periodic accountings and paying the mechanical license fee set forth in the statute. The compulsory mechanical license rate is periodically adjusted.
Webcasters, record labels, and music publishers participated in the CRB proceeding to determine the new statutory mechanical license rates. The proceeding resulted in several categories of mechanical license rates. For the first time, the compulsory mechanical license includes rates for internet streaming and ringtones.
Rates for Internet Streaming and Limited Downloads
The webcasters, record labels, and music publishers reached an agreement on the rates for limited downloads and internet streaming. Their proposal, which has been accepted by the CRB and has been released for public comment, is a royalty equal to 10.5% of streaming or subscription revenue less any amounts owed for performance royalties.
Rates for Physical Products, Permanent Downloads, and Ringtones
The music industry parties did not reach an agreement for rates for permanent downloads, physical products (such as CDs, cassettes, etc.), and ringtones. Hence, the CRB set those rates after holding a full hearing.
For the making and distribution of physical products (CDs, cassettes, etc.) and permanent downloads, the compulsory mechanical license remains at the greater of 9.1 ¢ per copy or 1.75¢ per minute of playing time.
For ringtones, the compulsory mechanical license rate is 24¢ for every copy of a ringtone distributed. This is significant because until very recently, it was hotly contested within the music industry whether ringtones were subject to the compulsory mechanical license or whether making a ringtone required permission directly from the music publisher.
