Bargaining theory and the copyright royalty board’s rate setting decisions for interactive streaming of music

Abstract

In the USA, the remuneration for songwriters whose copyrighted material is broadcast using online interactive music services is subject to a compulsory license with a rate that is regulated by the Copyright Royalty Board. On the other hand, an essentially equally necessary input to the interactive music services, namely the sound recording copyright, is freely negotiated between the parties. This sets up an interesting bargaining problem that is of interest to the regulator. The present paper sets out this problem formally, and resolves the equilibrium outcomes. The model is calibrated with the actual rates that have been set recently.