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Songwriter groups urge US Copyright Royalty Board to open submissions on proposed new mechanical royalty rate on discs and downloads

By | Published on Tuesday 25 May 2021


An alliance of groups representing artists and songwriters have welcomed a commitment by the US Copyright Royalty Board to publish and accept comments about a proposed settlement regarding the mechanical royalties due on CDs, vinyl records and downloads sold in the US. However, they have also expressed concern that the organisations that agreed that proposed settlement might now be employing sneaky tactics to make it harder for artists and songwriters to comment on it.

In the US, 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.

Spotify, which has received the most criticism for its involvement in that appeal, insists that it doesn’t oppose the price rise in principle (although it did specifically do that earlier in the CRB proceedings), but rather it has issues with other elements of the compulsory licence, and the process the CRB went through when deciding the new rates.

Either way, that appeal is ongoing, with the streaming services on one side of the dispute, and the music publishers and songwriters – and their respective trade organisations – very much allied on the other side.

But what about the mechanical royalties due on CDs, vinyl records and downloads? In that domain, the record companies, rather than digital firms, are the customers of the mechanical rights and therefore pay the royalties.

The rates for discs and downloads are currently being reviewed, and earlier this year the National Music Publishers Association and Nashville Songwriters Association International filed a ‘notice of settlement in principle’ with the CRB that stated that the two organisations had agreed a provisional settlement with the major record companies to keep the current rates in place – which is basically 9.1 cents per copy.

However, while the publishers and songwriters are generally of one mind when it comes to the streaming mechanical rates, plenty of organisations representing songwriters in the US and beyond are not happy with what the NMPA and NSAI are proposing regarding the rate for discs and downloads.

They argue that, in this domain, where the Sony, Universal and Warner record companies are the biggest customers of mechanical rights, the NMPA is not best positioned to represent songwriters, given key members of that organisation are the Sony, Universal and Warner music publishing businesses.

In a letter to the CRB earlier this month, those other organisations – led by Music Creators Of North America – pointed out that the 9.1 cents rate was set in 2006. Since then inflation has basically decreased the value of the rate by approximately one third. The current CRB review will set the rate from 2023 to 2027. “By 2027, 9.1 cents may be worth less than half of what it was in 2006”, MCNA stated in its correspondence.

“How can the US music publishing industry’s trade association, and a single music creator organisation (which represents at most only a tiny sliver of the music creator community), have agreed to such a proposal?”, the letter then asked.

“The answer to that question is an easy one to surmise”, it added. “The three major record companies who negotiated the deal on one side of the table have the same corporate parents as the most powerful members of the music publishing community ostensibly sitting on the other side of the table”.

“Songwriter, composer and independent music publisher interests in these ‘negotiations’ were given little if any consideration, and the proposed settlement was clearly framed without any meaningful consultation with the wider independent music creator and music publishing communities, both domestically and internationally”.

“How on earth can these parties be relied upon to present a carefully reasoned, arms-length ‘settlement in principle’ proposal to the CRB under such circumstances”, it then asked, “fraught as they are with conflicts of interest, without at least an opportunity for public comment?”.

The letter requested that the CRB ensure that comments from the wider songwriter and music publishing community be invited and considered before any decision on the new mechanical rates be set in stone.

In a speedy response, the CRB then agreed to ensure that happened. It stated: “After the parties to the partial settlement file a motion to adopt [the] settlement, the judges will publish the settlement in the Federal Register for comments by the participants in the proceeding and others who would be bound by the terms of the settlement”.

In a new letter sent yesterday, Music Creators Of North America et al welcome that commitment by the CRB, but also express an extra concern.

In its letter on 18 May, the CRB noted “we haven’t received that motion yet, but it is due today”. MCNA’s new letter observes: “As the CRB is now aware, the parties did in fact file notice with the CRB later that day indicating that the terms of the settlement they had now reached was identical to the terms set forth in their prior ‘notice of settlement in principle’ … the parties did not, however, file a motion asking the CRB to adopt the settlement as expected”.

“We believe that this procedural omission … may well be calculated to delay and/or compromise the ability of the independent music creator and music publishing communities to file comments in a timely manner”, the MCNA then states, “and could result in irreparable harm to our ability to present our views and pose our questions”.

“Simply put”, it adds, “we believe the settling parties are seeking to stifle timely discussion and dissent through delay, a strategy which should be rejected as antithetical to due process”.

With that in mind, MCNA requests that, based on the 18 May filing from the NMPA and NSAI, “those who would be bound by the terms of the settlement now be permitted to timely file comments approving of, objecting to, or seeking more precise detail concerning the terms”.

We await the CRB’s response.