There’s no denying that streaming royalties are now a primary source of revenue for many songwriters. This is a complex area to cover, so we’d like to clarify where things currently stand within the U.S. and how we got here in as much detail as possible.
First, some context. The state of the streaming industry has been hotly debated since 2018 — the year the U.S. Copyright Royalty Board (CRB) approved a 44% increase in streaming royalty rates.
The CRB is a three-judge panel that functions as an independent unit within the Library of Congress. It performs the duties specified in the Copyright Royalty and Distribution Reform Act, including the statutory licenses that let outside parties utilize copyrighted works by paying a set mechanical royalty instead of having to request a copyright license from each rightsholder.
The CRB meets every five years to set, and periodically adjust, the rates and terms of these statutory licenses amongst other duties. Here is a general timeline of how the world of streaming has shifted since the CRB’s initial ruling for a 44% increase in mechanical royalty rates….
After two years of testimony from dozens of witnesses on both sides, the CRB ruled to increase songwriter rates for interactive streaming from 10.5% to 15.1% over the next five years (2018-2022). The new rate would be based on the greater amount of either (1) a percentage of revenue, or (2) total content costs*.
* Content costs are payments to labels, which are negotiated in a free market by digital service providers
Though not directly related to the January ruling by the CRB, the Orrin G. Hatch Music Modernization Act is signed into law as of October 11 at 12:08 p.m. EST. The bill revamps Section 115 of the U.S. Copyright Act, combining three major pieces of legislation:
The Music Modernization Act, which streamlines the music licensing process to make it easier for rights holders to get paid when their music is streamed online.
- The Classics Act (Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society Act) for pre-1972 recordings.
The AMP Act (or Allocation for Music Producers Act), which improves royalty payouts for producers and engineers from SoundExchange when their recordings are used on satellite and online radio.
The rates set by the CRB in January 2018 are finalized after being reviewed by the Registrar of Copyrights. With its publication in the Federal Register, the parties that participated in the rate proceedings had 30 days to file an appeal. Apple Music indicated it would not appeal the decision.
In a joint statement Amazon, Google, Pandora, and Spotify wrote, "We are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision." Knowing how divisive its decision would be, Spotify published a blog post to explain its position. In response, NMPA President and CEO David Israelite issues a point-by-point counter.
On July 1 — about four-and-a-half years after its original Phonorecords III ruling — the CRB announced its final decision regarding a rate increase, which hadn’t changed one bit. In a statement praising the move, Israelite said, “Today the [CRB] reaffirmed the 15.1% headline rate increase we earned four long years [ago], confirming that songwriters need and deserve a significant raise from the digital streaming services who profit from their work.
He continued, “Now, songwriters and music publishers finally can be made whole and receive the rightful royalty rates from streaming services that they should’ve been paid years ago. We will work to ensure that the services quickly backpay copyright owners as they are required by law.”
“Today’s decision reflects a significant increase in the royalties that will be paid to publishers,” added Digital Media Association (DiMA) president Garrett Levin. “The work to give effect to these new rates will soon begin in earnest [as] the streaming services are committed to working with the MLC and music publishing companies to facilitate the accurate distribution of royalties.”
As a reminder, The MLC (a.k.a. The Mechanical Licensing Collective) is a nonprofit organization that was created to administer blanket mechanical licenses to eligible streaming services and pay any related mechanical royalties to songwriters, composers, lyricists, and publishers. The MLC’s first mechanical royalty payments went out to its members in early 2021. They totaled more than $24 million, not including $16.4 million that was still pending due to unmatched royalties. For more on how The MLC’s efforts may impact your mechanical earnings, check out a blog post here.
Now that the CRB has upheld its Phonorecords III position, it’s time to shift the discussion to another round of potential rate increases. Debate over Phonorecords IV is set to begin soon, and impact mechanical royalty payouts between 2023 and 2027.
“We will fight to increase the TCC, or percentage of label revenue,” explained Israelite, “which amounts to an insurance policy for songwriters, in the next CRB and will also fight for stronger terms regarding bundles…. As an industry, we move forward united as we press for even fairer rates in the next CRB starting this fall.”