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US publishers hit out as streaming services appeal new mechanical royalty rate

By Chris Cooke | Published on Friday 8 March 2019

Having gone to war with Warner/Chappell in India, why not go to war with all the music publishers in America? Seems like a super fine plan to me. And so it is that Spotify has allied with some of its tech sector rivals to appeal the recent Copyright Royalty Board decision on the mechanical royalties that should be paid by streaming services Stateside.

The mechanical copying of songs is covered by one of those pesky compulsory licences in the US, with the Copyright Royalty Board setting what rates anyone doing any mechanical copying must pay to songwriters and music publishers. After the CRB’s most recent review of those rates, it was decided that the top line revenue share figure to be paid by streaming services should rise, over a number of years, from 10.5% to 15.1%. Which is an ultimate increase of 44%.

That rate change was first announced last year and then finalised last month. But interested parties still have one more chance to appeal the decision, and Spotify, Google, Pandora and Amazon have now confirmed that they intend to do so.

The first three of those organisations issued a joint statement as follows: “The Copyright Royalty Board, in a split decision, recently issued the US mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB’s decision harms both music licensees and copyright owners. Accordingly, we are asking the US Court Of Appeals for the DC Circuit to review the decision”.

Although all four tech firms have confirmed their intention to appeal, they are yet to file their actual complaints, so we don’t know what the “serious procedural and substantive concerns” are. However, any move to block or significantly alter the CRB’s ruling will, needless to say, anger the songwriting and music publishing community which had widely welcomed that 44% increase.

The boss of the US National Music Publishers Association, David Israelite, made it clear last month, when the CRB’s decision was confirmed, that if any tech company did appeal it would “in effect declare war against songwriters”. He went on: “Apple has announced it will not appeal. The others won’t say. We will know soon whether some digital companies want to be partners or want to attack the songwriters who make their businesses possible. Stay tuned”.

So, unsurprisingly, as it was confirmed Spotify et al were appealing the ruling yesterday, Israelite was blunt in his response. Noting how music publishers and streaming firms had last year collaborated on the Music Modernization Act in the US, to sort out the process for paying mechanical royalties, he said that hopes that that kind of collaboration would become the norm “was snuffed out today when Spotify and Amazon decided to sue songwriters in a shameful attempt to cut their payments by nearly one third”.

He went on: “The Copyright Royalty Board spent two years reading thousands of pages of briefs and hearing from dozens of witnesses while both sides spent tens of millions of dollars on attorneys arguing over the worth of songs to the giant technology companies who run streaming services. The CRB’s final determination gave songwriters only their second meaningful rate increase in 110 years. Instead of accepting the CRB’s decision which still values songs less than their fair market value, Spotify and Amazon have declared war on the songwriting community by appealing that decision”.

“No amount of insincere and hollow public relations gestures, such as throwing parties or buying billboards of congratulations or naming songwriters ‘geniuses’ can hide the fact that these big tech bullies do not respect or value the songwriters who make their businesses possible”, he continued.

Again acknowledging that Apple had decided not to appeal, Israelite added: “We thank Apple Music for accepting the CRB decision and continuing its practice of being a friend to songwriters. While Spotify and Amazon surely hope this will play out in a quiet appellate courtroom, every songwriter and every fan of music should stand up and take notice. We will fight with every available resource to protect the CRB’s decision”.

The battle over US mechanical royalty rates begins as Spotify’s spat with Warner/Chappell in India continues. That dispute is over whether or not a streaming service can rely on compulsory licences at all under Indian copyright law. Earlier this week the International Confederation Of Music Publishers said it supported the Warner publishing company in fighting Spotify’s claim that where direct deals are not possible it can utilise a compulsory licence when streaming songs in that part of the world.