On December 16, 2015, the Copyright Royalty Board released its much-anticipated ruling, increasing the royalty amount that Pandora and other digital streaming services must pay to stream music in 2016.
The CRB’s ruling, which will be released in full after the parties redact confidential information, distinguishes between nonsubscription and subscription services. The CRB cracked down on nonsubscription services, raising the royalty rate for every 100 songs to 17 cents (up three cents from the current 14 cents per 100 songs). It lowered the royalty rate for subscription services by one cent, down to 22 cents. This is significant for companies like Pandora, where 95 percent of listeners are nonsubscribers.
The ruling is considered a win for SoundExchange, a royalty collection company, who asked the CRB to raise nonsubscription royalty rates to 25 cents for every 100 songs played in 2016, rising to 29 cents by 2020. Pandora asked for nonsubscription rates to be lowered to 11 cents in 2016, rising to 18 cents by 2020. The CRB limited its ruling to 2016.
The music industry has been watching the case closely. According to a study done by Nielsen’s Music 360, Americans’ preference for streaming music increased more than 50 percent from 2013 to 2014. The Recording Industry Association of America reported that digital streaming services, including Pandora, accounted for more than one-third of music revenues in the first half of 2015. This number increased 7 percent from 2014.
It appears that the royalty rate increases will not apply to companies like Apple and Spotify, who have separate agreements for their music streaming services.