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From Wired:

Want Better Music? Don’t Stiff the Songwriters

Eliot Van Buskirk 02.04.08 | 12:00 AM

As Hollywood writers strike for a piece of digital profits, a similar battle is brewing over royalties paid to songwriters and music publishers. The Copyright Royalty Board began hearings last Monday to determine publishing royalties for CDs, downloads and — for the first time — subscription music services, ringtones and interactive webcasts.

The hearings will consist of a fair amount of policy wonkery that only an insider could possibly appreciate, but music fans have a horse in this race, too. The seemingly arcane mechanical royalty rate, to be set by early October, could affect everything from the price of music to its overall quality.

“If you’re a music fan, the worst thing in the world that could happen is if great songwriters stop writing music because they can’t make a living,” said David Israelite, president and CEO of the National Music Publishers’ Association, which is pushing for a higher royalty rate.

On the other side of the argument, record labels and webcasters — who squared off during last year’s battle over performance royalties — have teamed up this time around, saying songwriters and publishers are making too much money and stunting the music industry’s growth.

“We are seeking to have royalties be in line with what the record industry historically has paid,” said Jon Potter, executive director of the Digital Media Association, or DiMA. “Royalties today are disproportionately high for publishers in the context of overall sound recording pricing…. They’ve gone from 7 cents, to 8 cents, to 9 cents (per song), while record prices have dropped dramatically.”

While songwriters want an increase from 9.1 cents to 12.5 cents per song sold — saying distribution costs are dropping during the transition to digital — the Recording Industry Association of America, or RIAA, wants songwriting royalties to be set at 8 percent of the wholesale price. DiMA proposes 4.1 percent of the retail price, and has asked the Copyright Royalty Board to decide whether webcasters need to pay mechanical royalties at all, since streaming isn’t designed to leave the consumer with a copy of the song.

http://www.wired.com/entertainment/music/commentary/listeningpost/2008/02/listeningpost_0204