Posted: Thu., Oct. 22, 2009, 6:31pm PT

$265 million music royalty deal reached

Publishers, labels make arrangements for payments

By Christopher Morris

U.S. music publishers and major labels have finalized an agreement for the distribution of some $265 million in unpaid mechanical royalties.

Pact, which also codifies future procedures, was hammered out in negotiations between the National Music Publishers Assn., the trade org representing more than 800 pubs, and the Recording Industry Assn. of America, representing the four major labels.

NMPA prexy-CEO David Israelite said the org's board voted unanimously on Tuesday to approve the deal. A definitive memorandum of understanding will be signed, pending final resolution of outstanding issues.

RIAA chairman Mitch Bainwol said he expected the agreement to be completed "in short order."

Agreement will see labels paying out monies from so-called pending and unmatched accounts. The accounts exist in cases where a publisher has not been located by a record label, or when there's a dispute over ownership shares in a song.

Sources said a deal was hastened after a late 2008 decision by the three-judge Copyright Royalty Board. The federal regulatory unit mandated interest of 1.5% per month, or 18% per year, on unpaid royalties. Ruling became law in March.

First phase of payment, to take place over the next several months, involves some $160 million from pending and unmatched accounts prior to 2007.

Second group of payments covers 2007-08 and involves roughly $105 million. These accounts will be disbursed about a year after newly agreed-upon procedures for publishers and labels are instituted.

Those procedures, which lay out specifics of licensing and payments for publishers, songwriters and record companies, will apply to future distributions of mechanical royalties.

"It's historic, because in addition to solving a decades-old problem of money owed to publishers and songwriters, it sets up a blueprint for the future that is revolutionary," the NMPA's Israelite said.

"This is good news for the industry, because relations between publishers and labels have long been dysfunctional," said the RIAA's Bainwol. "This is a fair deal, and we've established a capacity to work together."

While Bainwol acknowledged that the institution of "late fees" on royalty payments played into the present accord, he added that "both sides of the equation were benefited incredibly by finding a way to fix it."