UK Legislation
The United Kingdom adopted the European Copyright Directive (EUCD) in 2003 and the meaning of broadcast performance was broadened to cover "communicating to the public". This then included music distribution through the internet and the transmission of ringtones to mobiles. Thus a music download was a "copy" of proprietary music and hence required to be licensed.
After a prolonged battle on royalties between online music companies such as AOL, Napster and the recording companies (but not all of them), represented by the British Phonographic Industry (BPI), and organizations representing the interests of songwriters (MCPS and PRS) a compromise was reached, leading to a subsequent 3-year interim legislation (2007) adopted by the UK Copyright Tribunal under the Copyright, Designs and Patents Act 1988. The legislation, referring to a new JOL (Joint Online License), applies only to music purchased within UK.
The applicable royalties are given in the Table below which, interestingly, also includes music downloads and music services through mobile devices. This path-breaking legislation is expected to become the model for EU (which is yet to develop comprehensive legislation), and perhaps even extend to the US.
Note that the new legislation includes the distinction between downloads of musical tracks from iTunes and other stores, which were considered "sales" and the webcasts considered "performances".
In brief, the compromise reached is that songwriters will receive 8% of gross revenues (definition follows), less VAT, as royalty for each track downloaded bridging the demand of the artists demanding a 12% royalty rate (what was, otherwise, the norm for a CD) and music companies holding out for 6.5%, slightly higher than the 5.7% paid for a 79p track sold by iTunes. A minimum of four pence will be paid, in the new legislation, if tracks are discounted.
The terms used in the legislated Table are explained following it.
| Service | Royalty Rate | Minimum |
|---|---|---|
| Permanent Download | 8% | £0.04 per download - reducing by degrees for larger bundles of tracks, or certain older tracks, to £0.02 (in respect of a bundle 0f 30 tracks+) |
| Limited Download or On Demand Service | 8% | Mobile subscription: £0.60/subscriber/month
PC subscription: £0.40/subscriber/month Limited Subscription: £0.20/subscriber/month All others: £0.0022 per musical work communicated to the public |
| Special Webcasting
(premium or interactive service where 50%+ of content is by single band/artist) |
8% | Subscription: £0.0022 per musical work (if not subscription);
if the service is subscription, minimum to be negotiated |
| Premium or interactive webcasting | 6.5% | Subscription: £0.22/subscriber/month;otherwise, £0.00085 per musical work communicated to the public |
| Pure webcasting | 6.5% | Subscription £0.22/subscriber/month; otherwise 0.0006/musical work communicated to the public |
| Service | Royalty Rate and Minimum |
|---|---|
| Mobile or Permanent downloads and other mobile services | Rates and minima as per services above, except that: For mobile Permanent Downloads, revenue is reduced by 15%
For all other Mobile services revenue is reduced by 7.5% The above reductions to apply until prices converge with non-mobile services. |
Not all music providers in the UK were part of the compromise that led to the legislation. For those not participating - principally, AOL, Yahoo! and RealNetworks - the Tribunal set the royalty rate for pure webcasting at 5.75%.
UK legislation recognizes the term online as referring to downloading digital files from the internet and mobile network operators. Offline is the term used for the delivery of music through physical media such as a CD or a DVD.
A stream is a file of continuous music listened to through a consumer’s receiving device with no playable copy of the music remaining.
Permanent Downloads are transfers (sale) of music from a website to a computer or mobile telephone for permanent retention and use whenever the purchaser wishes, analogous to the purchase of a CD.
A Limited Download is similar to a permanent download but differs from it in that the consumer’s use of the copy is in some way restricted by associated technology; for instance, becomes unusable when the subscription ends (say, through an encoding, such as DRM, of the downloaded music).
On-demand streaming is music streamed to the listener on the computer or mobile to enable her to listen to the music once, twice or a number of times during the period of subscription to the service.
Pure Webcasting is where the user receives a stream of pre-programmed music chosen "by the music service provider". It is non-interactive to the extent that even pausing or skipping of tracks is not possible.
Premium and Interactive Webcasting are personalized subscription services intermediate between pure webcasting and downloading.
Special webcasting is a service where the user can choose a stream of music, the majority of which comprises works from one source – an artist, group or particular concert.
Simulcasting, although not in the Table above, is the simultaneous re-transmission by a licensed transmission of the program of a radio or TV station over the internet of an otherwise traditional broadcast. The person receiving the simulcast normally makes no permanent copy of it. It is defined in the legislation as an offline service.
’Gross Revenue’, which is comprehensively defined in the legislation, summarized here, means, all revenue received (or receivable) by the licensee from Users, all revenue received through advertisements associated with the music service, sponsorship fees, commissions from third parties and revenue arising from barter or contra deals. No deductions are permitted except for refunds of unused music due to technical faults.
The advertising revenue which is shared between the artist and music provider is defined as:
- when the advertising is in-stream;
- when the music offered forms the only content of a page featuring advertising (excluding the advertisement itself); and
- when the music offered forms more than 75% of a page featuring advertising (excluding the advertisement itself).
Read more about this topic: Royalty Points, Music Royalties, Royalties in Digital Distribution
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“The conservative assumes sickness as a necessity, and his social frame is a hospital, his total legislation is for the present distress, a universe in slippers and flannels, with bib and papspoon, swallowing pills and herb-tea.”
—Ralph Waldo Emerson (1803–1882)