Do you recall the heated dispute over mechanical royalty rates in the US between music publishers and services like Spotify and Amazon Music?
When the National Music Publishers’ Association (NMPA) in the United States obtained a crucial decision from the Copyright Royalty Board (CRB), the war for the future of the music industry officially began in 2018.
According to the judgement, for the five years between 2018 and 2022, on-demand streamers in the region must pay composers and publishers a higher headline percentage of US revenue (from 10.5% to 15.1%).
Following an appeal by Spotify and a few other competing music streaming services, animosity between the two sides persisted for a while, but last month, the CRB finally decided to stick with the 15.1% rate.
The legal battle (also known as “Phonorecords III”) for the years 2018 to 2022 is over. However, a new legal battle that would be just as ferocious was beginning.
Later this year, “Phonorecords IV,” which establishes the on-demand streaming mechanical rates in the US for the five years from 2023 to 2027, was scheduled to begin.
The NMPA presented its case to the publishers at the “pre-battle” phase of “Phonorecords IV” last year, advising the CRB that the top US streaming mechanical rate for 2023–2027 should be as high as 20%.
Unsurprisingly, major streamers underwhelmed in comparison: Spotify, Amazon, and Pandora all recommended that the cost be reduced to 10.5%.
The stage was set for yet another pricey legal brawl! But we won’t be receiving one.
Because the Nashville Songwriters Association International (NSAI), the DiMA, the trade organization for digital music services in the US, and the NMPA have all released an unexpected combined announcement today (August 31): They have reached a peaceful and respectful understanding rather than using legal representation to metaphorically pull each other’s heads off over the coming months.
The new on-demand streaming mechanical rate in the US for the years 2023–2027 should be set at 15.35%, according to a joint proposal from the three companies that is being submitted to the CRB.
That is a little bit more than it is at the moment (15.1%), but it is still lower than the initial demand of 20% from those in the publishing industry.
“[This 15.35%] agreement will provide higher royalty rates for songwriters and music publishers, promote sustainability, innovation, and continued investment for the entire industry, and usher in a new era of collaboration between all parties,” the music publishers and digital services stated in a joint statement released today.
If there is significant disagreement to the proposal’s recommendations, the CRB may still reject it.
But with the music publishing and digital music industries finally coming to an upfront agreement, the proposal’s participants are optimistic that the CRB would approve it.
In a press release today, the NMPA/DiMA/NSAI noted that the proposed 15.35% rate would be “phased in over the five-year term” and added: “The deal also includes a number of changes to other components of the rate, including increases to the per-subscriber minimums and the ‘Total Content Costs (TCC)’ calculations which reflect the rates that services pay to record labels.
The agreement “modernizes the treatment of ‘bundles’ of products or services that include music streaming and updates how services can offer incentives to attract new subscribers into the music ecosystem, as streaming services continue to innovate to deliver songwriters’ works to growing numbers of paying fans.”
“This agreement reflects the dedication of the streaming services to offering the best musical experiences to fans and expanding the streaming ecosystem to the advantage of all stakeholders, including the creative foundation of songwriting,” stated Garrett Levin, President and CEO of DiMA.
In the context of economic stability that will encourage ongoing innovation, streaming services now have the chance to develop new partnerships with publishers and songwriters. This deal, maybe more than anything else, shows the potential for industry advancement when stakeholders sit down for conversations in good faith.
According to David Israelite, President & CEO of the NMPA, “This historic settlement is the consequence of songwriters raising their voices. We move forward in collaboration with the greatest rates ever, guaranteed, rather than proceeding to trial and prolonging years of strife. We appreciate the digital services’ participation and their treatment of creators as partners in business. Critically, since this is a percentage rate, we are aware that song value will reach new heights as streaming continues to rise rapidly.
“This collaborative procedure will result in enhanced composer pay from digital streaming businesses and locks in our historic 43.8% increase from the previous CRB proceeding,” NSAI Executive Director Bart Herbison said.
In addition to the increased rate momentum, additional structures have been put in place to support minimum payments. Music Industry Globally