Music streaming royalty rate change panned by artists' collective

A panel of copyright judges on Wednesday raised the amount free Internet music streaming services must pay to record labels next year and beyond, from 14 cents per 100 plays to 17 cents.

Rate for free streaming services up 3 cents per 100 plays, paid subscription rate is reduced

Services like Pandora and IHeartRadio will pay beginning in 2016 a rate of 17 cents per 100 song plays by non-subscribers. (Jason Kempin/Getty Images)

A panel of copyright judges on Wednesday raised the amount Internet music streaming services like Pandora must pay to record labels next year and beyond.

The Internet radio giant hailed the ruling as "balanced" and its shares jumped, but artist and label group SoundExchange decried the decision, saying it "will erode the value of music." SoundExchange, which distributes payments to artists and labels, said it will closely review the decision and consider its options.

The Copyright Royalty Board's decision sets rates for non-interactive services like Pandora, iHeart Radio and Sirius XM for the next five years. The rates set by the board act as a minimum for services that use them as an alternative to direct deals with labels.

The board raised the rate for free streaming services to 17 cents per 100 plays, up from 14 cents. For paid subscription services, the rate fell to 22 cents from 25 cents. Both rates will rise with inflation through 2020.

Pandora CEO Brian McAndrews said in a statement the increase was one his company "can work with and grow from." Pandora, which is based in Oakland, says its blended rate will rise 15 percent.

Pandora Media Inc. shares jumped 20 per cent in after-hours trading following the decision to $16.10 US. Sirius XM Holdings Inc. shares dropped a penny after-hours to $4.08. IHeartMedia Inc. shares were unchanged at $1.10.

Regardless of the rate ruling, Pandora is seeking to expand its platform globally and to include more interactive features that go beyond its popular Internet radio service, which doesn't allow listeners to select specific tracks or albums. It has about 80 million listeners.

Though it announced last month that it would be buying key technology from soon-to-be-shuttered on-demand streaming service Rdio, it needs to negotiate directly with music labels in order to launch such an interactive service. It also needs direct deals to expand beyond its current operations in the U.S., Australia and New Zealand.

On-demand services like Apple Radio and Spotify have negotiated rates with musiclabels.

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