D.C. Sets New Webcasting Rates: Free Streams Up, Paid Streams Down (With an Asterisk)

Pandora and other webcasters will have to pay more for free streams, while webcasters with a paid offering (including Pandora) will get some relief.
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The three-judge Copyright Royalty Board has announced webcasting rates that provide both good and bad news for webcasters, record labels and recording artists.

Rates for free streams, such as those supported by advertising, were set at 0.17 cents per stream for 2016, a 21.4 percent increase from the current rate of 0.14 cents. Pandora has roughly 76 million monthly free listeners who account for nearly 95 of active listeners and 78.5 percent of the company's revenue.

The rate for paid streams dropped to 0.22 cents per stream, a 13.6 percent decline from the current rate of 0.25 cents. Services such as Pandora and Slacker have a premium service that removes advertisements for a fee, and the streams from these paying customers just became more attractive.

The CRB document made available Wednesday is only a summary. The full decision will be released and will provide insight into the CRB's decisions.

The ruling included a twist that impacts the change in the annual rate. Rather than decide rates for each year from 2016 to 2020, the CRB will adjust, from 2017 to 2020, each rate according to the change in the Consumer Price Index. New rates will be adjusted each December — if necessary — based on the CPI before Dec. 1. So, the 2017 rate will be determined 25 days before the end of 2016.

Labels and artists can consider the new rates an overall raise for 2016. Free streams represent the majority of both streaming activity and revenue. But both new rates are still well below their desired rates. SoundExchange, on behalf of rights holders and recording artists, had proposed 0.25 cents per stream — the same rate the CRB set in the last rate proceeding.

Webcasters will have to pay a higher rate but were spared from the industry's requested increases. Pandora had proposed 0.11 cents per stream, iHeartRadio and the National Associate of Broadcasters proposed 0.05 cents. The current free-stream rate of 0.14 cents comes from a settlement with SoundExchange after the CRB set rates webcasters feared would kill their young businesses. The higher free rate, coupled with the more reasonable subscription rate, could provide an incentive to build those subscriber numbers.

This article first appeared on Billboard.com.

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