Business News Labels & Digital Publishers Legal Top Stories

By Chris Cooke | Posted on Monday, July 4, 2022

The American Copyright Royalty Board upheld its previous decision regarding the highest streaming royalty rate for songs, which increased the percentage of the streaming service’s revenue allocated to song rights in the United States by 10.5% at 15.1%. Most streaming services – with the notable exception of Apple Music – had previously appealed the decision.

In the United States, there is a compulsory license covering the mechanical copying of songs, which means that the rate paid by streaming services to music publishers and songwriters is set by the panel of judges known as the CRB.

Every five years, representatives of the publishing and songwriting community on one side, and the streaming services on the other, present their arguments about what should be paid, then the judges set a tax.

For the period 2018 to 2022, the CRB decided that the rate should increase each year to reach 15.1%, which some publishers and collecting societies had already negotiated in other parts of the world where there is no is no compulsory license and thus each licensing entity negotiates its own agreement.

Despite the move essentially bringing the United States into line with other markets, most streaming services have appealed the rate increase. Unsurprisingly, the move proved controversial within the songwriting and publishing community, with Spotify in particular facing a lot of criticism.

At various points, Spotify argued that it did not oppose the rate increase in principle, but said it had trouble with some of the technical aspects of the compulsory license. However, many editors and writers countered that Spotify outright opposed the price increase earlier in the proceedings. And, when the CRB began reviewing rates for 2023-2028, Spotify again proposed a base rate of 10.5%.

The services’ appeal was initially successful, as in 2020 a Washington appeals court told the CRB it had to reconsider its decision regarding the 2018-2022 period. But, after conducting a reconsideration, the board essentially left the rate increases in place.

Welcoming the decision, the head of the National Music Publishers Association of the United States, David Israelite, said on Friday: “Today the court reaffirmed the increase in the overall rate that we obtained four long years ago. years, confirming that songwriters need and deserve a significant increase in digital streaming services that profit from their work.”

“This process has been long and costly,” he added, “and while we are relieved at the outcome, years of litigation to maintain a rate increase that we have spent years fighting for is a system Now songwriters and music publishers can finally be cured and receive the legitimate royalty rates from streaming services that they should have received years ago.”

Although the old steep increase in tariffs has been reconfirmed by the CRB, some changes have been made regarding some of the technical aspects of the compulsory license that Spotify et al had objected to.

In particular, this affects rules around “total cost of content”, which guarantees publishers a minimum percentage of the total amount a service pays the music industry, and “bundling”, which impacts things like family plans and mobile plans. Both of these rules have been changed in a way that is more favorable to services.

With that in mind, Israelite said these rules will become a priority for the NMPA as the CRB considers rates for 2023 through 2028. songwriters, in the next CRB,” he added, “and will also fight for stricter conditions regarding bundles.”

The NMPA is also pushing for a further increase in the base rate for the next term, hoping to raise it to 20%. We felt that it was in this spirit that certain services – Amazon like Spotify – were offering a rate of 10.5% for the next five years, that is to say hoping that if they started the procedure with a proposal of around 10% and the publishers at 20%, the CRB would end up opting for something around 15%.

However, with 15.1% now confirmed as the closing rate for this period, the NMPA hopes to persuade the CRB judges to increase it further in the next period.

For streaming services, the primary goal is to keep their financial commitment to the music industry as a whole at less than 70% of their revenue, which means that while more is allocated to song rights, less can go to Recording rights.

In most markets, while publishers and collecting societies have slowly increased their share of revenue as agreements have been renewed, services have been able to negotiate somewhat the rate paid to record labels and music distributors. .

So much so, outside of the United States, when dividing the digital pie is debated, the focus is often primarily on whether or not there should be a reallocation of some of the money that currently goes from recordings to songs.

However, when it comes to CRB proceedings in the US, the labels aren’t involved, so it all becomes a battle between the songwriting and publishing community and the streaming services. This was noted on Friday by the Digital Media Association, which believes that all different stakeholders – artists, labels, songwriters, publishers and services – should be involved in any debate about the digital pie.

The boss of the streaming industry trade body, Garrett Levin, said: “The streaming services thank the judges for their efforts. Today’s decision reflects a significant increase in royalties that will be paid to publishers. Work to give effect to these new tariffs will soon begin in earnest. Streaming services commit to working with [collecting society] MLC and music publishing companies to facilitate the accurate distribution of royalties”.

“This procedure is also a reminder that rate setting does not – and cannot – happen in a vacuum,” he added. “Today’s decision comes as the three major label groups – which operate the world’s three largest music publishers – continue to carve out the lion’s share of industry profits while recording steady growth. double-digit revenue from streaming.”

“Looking ahead,” he concluded, “streaming services believe it’s time for all stakeholders – labels, publishers, writers, artists and services – to engage in in-depth discussions to determine the right balance of royalty sharing in the future”.