[UPDATE 2] In a major win for songwriters and music publishers, the U.S. Copyright Royalty Board (CRB) has approved major graduated increases in mechanical rates for 2018-2022 totalling 43.8%. It is the biggest single increase in mechanical royalties in CRB history.
A U.S. Copyright Royalty Board decision handed down Friday includes a significant increase in the overall percentage of revenue paid to songwriters from 10.5% to 15.1% over the next five years. The CRB also removed the Total Content Cost (TCC) cap, giving publishers the benefit of a true percentage of what labels negotiate in the free market resulting in significantly higher royalties for songwriters.
The CRB also increased the TCC rate (money paid to labels vs. payments to publishers and songwriters) to 3.82 to 1, resulting in the more balance between record label and publishing rates. In the previous five year term publishers and songwriters received $1 for every $4.76 paid to labels.
In addition, the CRB granted a late fee which encourages the digital music services to pay more quickly.
The CRB decision resolves a trial that took place last year with National Music Publishers Association (NMPA) and the Nashville Songwriters Association (NSAI), representing the interests of music publishers and songwriters against Google, Amazon, Apple, Spotify and Pandora.
Win For Publishers & Songwriters
Both trade groups and most music publishers had hoped for a flat per-stream rate rather than the increase in percentages, but overall are pleased with the increase.
“As the leading music publisher, we believe that overall this is a very positive ruling by the CRB as it will deliver an unprecedented topline rate increase for songwriters and publishers over the next five years,” said Sony/ATV Music Publishing Chairman and CEO Martin Bandier in a statement. “While we are disappointed not to get the per-stream rate that we wanted, the planned rate increases go a long way to fairly compensate our songwriters for the essential contribution they make to streaming's success story.”
"the most favorable balance in the history of the industry"
“We are thrilled the CRB raised rates for songwriters by 43.8% – the biggest rate increase granted in CRB history. Crucially, the decision also allows songwriters to benefit from deals done by record labels in the free market," said NMPA President & CEO David Israelite. "The ratio of what labels are paid by the services versus what publishers are paid has significantly improved, resulting in the most favorable balance in the history of the industry. While an effective ratio of 3.82 to 1 is still not a fair split that we might achieve in a free market, it is the best songwriters have ever had under the compulsory license. The court also decided in our favor regarding a late free which will force digital music services to pay songwriters faster or be subject to a significant penalty.
"The bottom line is this is the best mechanical rate scenario for songwriters in U.S. history which is critically important as interactive streaming continues to dominate the market," Israelite concluded.
Songwriters desperately need and deserve the rate increases resulting from the Copyright Royalty Board (CRB) trial," said NSAI Executive Director Bart Herbison. "The CRB was a long and difficult process but songwriters and music publishers together presented a powerful case for higher streaming royalty rates."
“Today’s decision from the Copyright Royalty Board is a momentous milestone for long underpaid and underrepresented songwriters,” said Sound Royalties Founder and CEO Alex Heiche. “It is well past time that we adjust today’s royalty rates and policies to properly address streaming, which now dominates music consumption across the country. Between the significant rate increases, the removal of the Total Content Cost (TCC) cap and the new late fee, these much-needed and overdue changes will help ensure that songwriters are paid properly and on time for their valuable products,” Heiche added. “While likely still below what songwriters could rightly earn in a free market, this historic decision is the best news for these creatives in our lifetimes and protects the vitality of the songwriting profession in today’s evolving market.”