One royalty done, one to go

Mechanical deal details announced; stickier performance pact tougher

The recording industry, music publishers and online music services have revealed the details of a landmark mechanical royalty deal for streaming and limited downloads of music.

The agreement proposes a mechanical royalty rate of 10.5% of revenue, less any amounts owed for songwriter performance royalties, for digital service providers that offer interactive streaming and limited downloads such as subscription and ad-supported services. When the settlement was first announced June 18, details were kept confidential until they were submitted to the Copyright Board in draft regulations.

The deal confirms that such audio-only streaming services as satellite radio and webcasting do not require mechanical licenses, and it allows for promotional interactive streaming to continue without royalty payments. So marketing devices like songs being available for streaming on artists' and label Web sites that promote the sale of music are not subject to royalty payments.

The mechanical royalty is the fee paid to the songwriters, composers and publishers of the actual music, not the artists who perform it or the record companies that produce the recording.

There remains no deal on the controversial performance royalty for Internet radio. SoundExchange, which collects the fees for artists and record companies, and such Web radio sites as Pandora and Live365 are at a stalemate.

The RIAA, Digital Media Assn., National Music Publishers' Assn., Nashville Songwriters Association International and the Songwriters Guild of America agreed to the new mechanical rate.

The deal doesn't address rates for physical product, permanent music downloads or ringtones, but all of those issues, as well as today's agreement, are expected to be ruled on by Oct. 2 by the U.S. Copyright Royalty Judges.

"The music publishers understand that as technology evolves they have to support new applications," American Association of Independent Music president Rich Bengloff said.

Ed Christman is a senior correspondent for Billboard. Cortney Harding contributed to this report.