Digital Downloading has become an exciting distribution model that has made large amounts of music available to consumers for a fraction of the price of a compact disc. However, if the mechanical royalty rate paid to composers for the reproduction of their work remains pegged to a fixed number, fluxuations in the retail price of downloads will either reduce or increase the relative value of the payment. To avoid smaller margins, which could dissuade independent labels from making masters available online, or a disproportionately low mechanical rate, the statutory mechanical royalty should be set as a percentage of wholesale receipts, rather than as a static cent rate.
Will Mechanicals Break the Digital Machine: Determining a Fair Mechanical Royalty Rate for Permanent Digital Phonographic Downloads,
27 Hastings Comm. & Ent. L.J. 653
Available at: https://repository.uchastings.edu/hastings_comm_ent_law_journal/vol27/iss3/6