Business News Labels & Publishers Legal

Songwriter groups formally call on US Copyright Royalty Board to reject NMPA’s mechanical royalty rate proposals

By | Published on Tuesday 27 July 2021

National Music Publishers Association

An assortment of organisations representing songwriters in America and beyond – led by the Songwriters Guild Of America, the Society Of Composers & Lyricists and Music Creators North America – have called on the US Copyright Royalty Board to reject a proposal endorsed by the major music publishers to keep in place the current mechanical royalty rates for discs and downloads within the US.

Under American copyright law, the so called mechanical copying of songs is covered by a compulsory licence, meaning that – although music publishers and songwriters are due payment whenever their songs are copied – the rates they are due are set by a panel of judges, aka the Copyright Royalty Board. Those rates are then reviewed from time to time.

In recent years most attention has fallen on the mechanical royalty rates that apply when music is streamed – a stream involving some copying, as well some communicating and making available, of a song. The last time the CRB reviewed the streaming rates it approved an increase, so that the rate would go up – over a number of years – from 10.5% to 15.1% of any monies allocated to a song by a service based on consumption share.

Although that brought the US statutory rate more or less in line with the rate enjoyed by music publishers which negotiate direct deals on the free market in other countries, most of the streaming services have appealed the CRB’s decision. That appeal is ongoing with publishers large and small united with songwriters in fighting to ensure the recent rate increases are not revoked.

However, when it comes to the mechanical royalties due on discs and downloads, there is a big divide between the songwriter community and the publishers, certainly the major publishers.

The main customer of mechanical rights when it comes to discs and downloads are the record labels. And earlier this year the National Music Publishers Association and Nashville Songwriters Association International told the CRB that they’d agreed a new deal with the major labels to keep the current mechanical rate for discs and downloads in force. That rate hasn’t increased since 2006 and is currently 9.1 cents per copy.

Plenty of songwriter groups have hit out at that proposal, arguing that the wider songwriting community has not been consulted and is not happy with the plan that the CRB retain a rate that has fallen by a third in real terms since 2006 when inflation is taken into account.

They also point out that the NMPA’s biggest members – the publishing wings of Sony, Universal and Warner – have a vested interest in the status quo, because their sister record companies are the biggest customers of these rights.

SGA, SCL, MCNA and others formally raised concerns about the NMPA/NSAI proposal back in May, and urged the CRB to allow the wider creative community to input on what had been proposed. The NMPA and NSAI then formally filed a motion asking the CRB to endorse its agreement with the majors and to confirm that the mechanical royalty rate on discs and downloads would remain at 9.1 cents.

In a subsequent statement, the CRB said that the judges on the board were now welcoming “comments on whether they should adopt the proposed regulations as statutory rates and terms relating to the making and distribution of physical or digital phonorecords of nondramatic musical works. Comments and objections regarding the rates and terms and the minor revisions must be submitted no later than 26 Jul 2021”.

It was in response to that call for comments that SGA, SCL and MCNA yesterday made a submission to the CRB asking for the NMPA/NSAI settlement to be disregarded and for, at minimum, the current rates to be amended to take into account inflation since 2006.

In a lengthy document, the three organisations provide a brief history of the mechanical rights compulsory licence and subsequent royalty rate setting, and how – in their opinion – it has repeatedly disadvantaged US songwriters over the decades, and especially since 2006. They also set out their objections to the NMPA leading on the negotiations for a new rate, given that its three biggest members have a conflict of interest.

And while the NSAI was also involved, yesterday’s submission states that, “in regard to NSAI, its demonstrably uniform alignment with NMPA on a broad array of music industry issues over recent years has in our view appeared so unwavering as to approach potential inseparability. As a result, we believe we are correct to be concerned that the organisation cannot be said in this instance to represent music creator rights and interests in an independent, unbiased manner”.

The submission also notes remarks made by NSAI to the effect that – with discs and downloads now representing a minority of recorded music revenues – it’s not worth pursuing a battle to get the mechanical royalties on those products increased, and instead songwriters and publishers should focus their efforts on ensuring the increases on the streaming side are kept in force.

However, the SGA/SCL/MCNA stress that, while obviously discs and downloads are a much smaller deal today than in the past, they are still bringing in decent money for the record industry, even in the US. Because, while it is true that the shift to streams has occurred faster in the US than the other big mature recorded music markets, discs and downloads still accounted for more than 16% of US record industry revenues last year.

And, the submission notes, not only is the vinyl revival still underway, but those pesky NFTs that everyone has been chattering about all year are, when sold by the music industry, usually linked to a disc or a download or both.

With all that in mind, the submission concludes: “We urge the CRB to decline to adopt the settlement agreement as a basis for statutory rates and terms. Adoption of the settlement and the rules as proposed would represent a miscarriage of justice, placing the imprimatur of the CRB on a negotiation and settlement process that was unfair, non-transparent, and may have been conducted under circumstances that were anything but reasonable pursuant to (and setting crucial precedent for) the required ‘willing buyer-willing seller’ standard”.

In addition to calling for new royalty rates to be set that – at the very least – take inflation into account, the submission also asks that provisions be made for future increases inline with inflation. It also says that the US Copyright Office should look into how it could make it easier for independent creators to input on future royalty rate decisions.

“We urge that the CRB recommend the undertaking of a study by the US Copyright Office to improve the ability of independent music creators and music publishers to more fully participate in CRB proceedings at reasonable cost”, the submission adds. “The current inability of all but the major music publishers and their affiliated music publisher and music creator groups to effectively participate in CRB proceedings due to the costs of such participation must be effectively addressed”.