A two-year-old court case ended this week that will most likely set a precedent in the mobile industry for how much streaming music and video services will have to pay artists in royalties.
The case was being heard between MobiTV and the American Society of Composers, Authors and Publishers (ASCAP) in New York’s U.S. District Court, but it could impact many companies in the space, including carriers, handset makers and other service providers. At the heart of the disagreement was whether mobile should generate more revenue than other traditional media, like radio or TV.
This week, the judge ruled in favor of MobiTV, and found that mobile is like any other delivery technology from cable TV to satellite. In turn, the fees requested by ASCAP will be drastically scaled back. Under the more onerous terms it was proposing, MobiTV would have owed a whopping $41 million in royalties during an 8-year period. But under the rules adopted by the judge, MobiTV will only owe $300,000 between 2003 through 2009 (which represents a six-year period).
Bill Losch MobiTV’s CFO told mocoNews: “I think from our perspective we definitely feel we should pay a fair price, but what ASCAP was proposing was not only out of realm of possibility, it was also a completely different model than the accepted model. We are a leader in the space as far as content aggregation, and we felt it was important for them to establish a precedent.”
Royalty rate structures are very complicated, but MobiTV’s lawyer Kenneth Steinthal explained that ASCAP was asking for a higher royalty rate and off of a different revenue base that was much larger. For instance, a traditional cable operator normally pays different rates for different content — it’s typically a fraction of a percent. But ASCAP was proposing that mobile streaming services would pay a much higher 2.5 percent across the board. It was also proposing that it would be charged based on what the end-user was paying in subscriber feeds, not what MobiTV was paying for the content. That was a much larger revenue base. Based on those two factors alone, the fees were drastically different.
Steinthal: “We presented a very simple model. We are a mobile version of what you get when you turn on your cable television….The experts said there’s no reason to discriminate against mobile distribution or charge a different rate base. No reason to change the rate structure between cable, satellite or telecom.”