Photo credit: Jin Yun
The Copyright Royalty Board finally confirms its decision on mechanical songwriter royalties for 2018-2022.
The Copyright Royalty Board has issued one determination on Tuesday (May 23) on Phonorecords III – mechanical royalties for US songwriters and publishers for 2018 through 2022. The decision increases royalties annually during those five years from 11.4 percent to 15.1 percent of service revenue through the end of 2022.
Additionally, the decision upheld key claims made by streaming services during their appeal to cap royalties based on total content cost (TCC) and reintroduce a tariff cap into the formula. The full document is not available to the public, but a Attachment The judgment, which contains the regulations discussed in the document, was released to the public on Wednesday (May 24).
Streaming services use a complex and multifaceted formula to calculate how much is owed to songwriters and publishers, depending on numerous considerations. Many of these items were revealed prior to the release of the Addendum, so the finding further corroborates this information. Overall, insiders have described it as a mixed bag; Some regulations favor the interests of musicians, others favor streaming services.
“We are pleased that the court has finally upheld the outcome of Phono 3, a case decided in 2018. This first detention order validates the 15.1 percent increase in overall fees that we fought for,” said President and President of the National Music Publishers’ Association (NMPA) CEO David Israelite.
“However, the long time we have waited for this decision proves that the Copyright Royalty Board’s system is grossly flawed. Now songwriters have some certainty about their plans, and we will make sure they receive the hundreds of millions of dollars that digital streaming companies owe them during this period of adjustment.”
Lawsuits began over five years ago to clarify how publishers and songwriters would be paid for US mechanical music royalties for the 2018-2022 period. A 2018 CRB decision determined that the headline rate would increase from 10.5 percent of a streamer’s revenue in 2018 to 15.1 percent in 2022, while increasing subscriber count calculations for discounted family plans (1.5x) and student plans (0.5 times) are increased.
These provisions also removed the release price cap mechanism that prevented publishers from automatically receiving higher payments when their labelmates negotiate higher prices for their master recordings. This problem was one of many sticking points for streaming services; Spotify, Google, Amazon and Pandora all pointed out at the time that they felt the board had “acted haphazardly and capriciously by simultaneously combining a TCC prong with a revenue share (headline rate) increase.”
Digital services then appealed, hoping to regain some of the more DSP-friendly provisions from the previous period (Phonorecords II). In particular, Apple did not participate.
Since this appeal was successful, pre-trial detention proceedings were initiated, which are dragging on to this day. A 15-day window will now begin to rehear the applications before the US Copyright Office must also conduct a legal review for errors, with up to 60 days allowed for completion. A decision will then be published, giving DSPs a maximum of six months to make retrospective adjustments and backlogs.