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Changes to UK music royalties unlikely to impress YouTube, Pandora

26 May 2009 | 20.37 Europe/London
The UK press has been getting excited at the prospect of YouTube bringing back premium music content - and American song streaming service Pandora coming back to Blighty - with the news that British music royalty collector the PRS is cutting its rates. By all accounts, it looks like they've got the wrong end of the stick.

As widely reported, the PRS is "slashing" - presumably with some sort of giant metaphorical knife - the price it charges websites each time a song is streamed over the Internet: down from 0.22p to 0.085p. But whereas the mainstream press is telling us this is good news for the likes of YouTube and Pandora, it looks like the PRS could actually be turning its back on them and banking on the little guy instead; for larger, well-established streaming sites the PRS is effectively increasing its rates: up from 8.5% to 10.5% of the revenue generated by the songs under its control. "For a typical site that launches, they will pay the per-stream rate," a PRS spokesman said. "As more money comes in, the share of revenue [fee] will kick in."

It was back in March that YouTube decided to block UK access to thousands of its popular music videos after it failed to cut a deal with PRS. While there have been workarounds for more advanced users, that's meant most people looking for songs by everyone from Rihanna to U2 just get a little notice instead: "This video is not available in your country." Back then the PRS was demanding more money from the Google-owned site.

While the PRS is a not-for-profit organisation, its job is to make money for its music industry clients - and it collected a record-breaking £117 million in the first three months of this year on their behalf. With YouTube parting ways with it well before the end of that quarter - and Pandora having left the UK music market in January 2008 - it looks like the PRS has found it can do without them. "We believe these new streaming rates will stimulate growth in the digital music market and will benefit our licensees and our members," said Andrew Shaw, managing director of the PRS.

Meanwhile, Pandora is also doing pretty well without the PRS. According to an interview with VatorNews, profits at the online radio service are up by 80% when you compare the first three months of 2009 to the same period last year. "The first couple of months this year were a little bumpy," says its CEO, Joe Kennedy. "Advertisers were figuring out what their budgets were. But we've been having a fantastic year in terms of generating ad revenue... I think we have a decent shot of doubling to $40 million this year." He claims Pandora has almost ten million users in total.

Sites like We7, which lays claim to a comparatively mere half a million users in the UK, have welcomed the change. "It's brilliant. Not so much the rates but the realisation by the PRS that things have to change in the digital world," says its head of music, Steve Purdham. "Till now it's felt like they were not listening," he told BBC News.

YouTube hasn't made its own stance clear - yet. It issued the following statement: "We welcome any efforts to make licensing costs more realistic, but as we're still in discussions with the PRS to agree license terms for YouTube we're unable to comment further." It has plenty of time to make up its mind: the PRS will implement the charging changes in July and plans to maintain the new rates for the next three years.

[ PC Pro | The Times ]