WASHINGTON — The Internet cued up a happy song Monday as music publishers and record companies officially signed a breakthrough licensing deal that helps clear the way for forthcoming label-backed digital music services.
Capping months of tough negotiations, the pact was hammered out by the National Music Publishers Assn. and the Recording Industry Assn. of America. Deal clears away a critical stumbling block for the rollout of Pressplay, a digital music subscription venture between Sony, Vivendi Universal and MusicNet, backed by EMI, Bertelsmann, AOL Time Warner and RealNetworks.
It also sets an important precedent in the digital music arena by requiring the services to pay a mechanical publishing royalty. In the offline world, a mechanical is paid to publishers for the physical reproduction of music they imprint on a CD or tape, but there has been heated disagreement as to whether it applies in cyberspace.
“We are pleased to have reached a consensus with the record industry on this key issue, enabling us to move forward on the matter of determining what the royalty rates for such streaming will be,” NMPA prexy-CEO Edward Murphy said.
Once the rate is set, online subscription services will have access to all music authorized to be licensed by the Harry Fox Agency — the NMPA’s royalty clearinghouse. Royalties will be payable on a retroactive basis. Until the rate is known, the RIAA will give the agency a $1 million advance.
If the two sides can’t settle on a rate, the RIAA will pay monthly advances of $750,000.
Music publishers repped by HFA can opt out of the licensing agreement. Similarly, an Internet subscription service or label can deal directly with HFA.
Pact follows a similar deal announced last month between the NMPA and music biz pariah Napster. The beleaguered Netco agreed to shell out $10 million per year against royalties, plus a flat $26 million to compensate for past copyright infringements.