On December 16 2015 the Copyright Royalty Board (CRB) ordered changes in the rates that digital streaming services must pay in royalties in 2016. Future rate changes will be based on changes in the consumer price index. As a result, subscribers to music streaming services can expect to see a slight increase in subscription costs, and non-subscribers will see an increase in streamed advertising.

The CRB sets the amount of royalties to be paid by digital streaming webcasters for music and directs the distribution of collected royalties to record labels and music providers for payments to copyright holders, musicians and composers for the use of their work.

The CRB's authority to set royalty rates is based on the Copyright Act. In late 2015 the CRB received arguments regarding royalty rates from online webcasters and music providers represented by SoundExchange, a company that collects the royalties for record labels and artists.

The effect of the CRB decision may be no increase or a slight increase in music streaming subscription costs and an increase in streamed advertising for non-subscribers. One of the players in the webstreaming industry, Pandora, estimates that less than 5% of users are subscribers.

The CRB ordered webcasters to pay a royalty of $0.17 per 100 songs webcast to (non-subscriber) users. This is a 21% increase on the previous $0.14 per 100 songs played. The royalty rate for subscription users will decrease from $0.23 per 100 songs to $0.22 per 100 songs (a reduction of 4%). Annual changes in these royalty rates until 2020 will be based on changes in the consumer price index.

Non-subscriber users of streaming services may see more frequent reminders to stop streaming if users are away from their computer devices, and more frequent advertising as streaming services adjust to the increased non-subscriber royalties.

Carl M Davis II

This article first appeared in IAM. For further information please visit www.iam-media.com.