A final verdict on streaming royalty rates will result in a net increase of approximately $400 million in royalties for songwriters and music publishers in 2021-2022.
This comes after a years-long struggle between creators and streaming platforms over adequate remuneration.
The windfall is the result of the Copyright Royalty Board’s Phonorecord III determination in August 2023, which established increased royalty payments for music streams between 2021 and 2022.
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This means that streaming companies such as Spotify, Amazon Music, YouTube, and Pandora underpaid songwriters and publishers by $419.2 million, according to Mechanical Licensing Collective (MLC) data, with underpayments occurring from 2021 to 2022.
The total comprises $281 million in mechanical royalties and $137.8 million in performance royalties. The difference arose from final royalty rates being higher than interim rates utilized during a four-year dispute between publishers and streamers.
The MLC was founded by the Music Modernization Act in 2018. It is the single entity authorized to collect and disburse mechanical royalties resulting from the reproduction and dissemination of musical works. The MLC expects the total payout to increase by another $10-$15 million as more streaming service reports come in.
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“WE ARE EXTREMELY PLEASED THAT SONGWRITERS AND MUSIC PUBLISHERS FINALLY WILL RECEIVE THE OVER $400 MILLION THEY ARE OWED IN MECHANICAL AND PERFORMANCE ROYALTIES FROM THE 2021-2022 PERIOD.” -David Israelite, NMPA.
David Israelite, president and CEO of the Music Publishers Association, “We are extremely pleased that songwriters and music publishers finally will receive the over $400 million they are owed in mechanical and performance royalties from the 2021-2022 period.”
“Our appellate decision upholding the rate hike we won in 2018 will finally provide music producers and copyright owners with the windfall they should have earned years ago. The fact that the MLC will distribute the majority of this adjustment in a completely transparent and expedited manner is another significant advantage of the Music Modernization Act (MMA), and while we would have wanted it to be paid sooner, this is a welcome and important boost now.”
However, while underpayments dominated the news, streaming services were shown to have overpaid publishers for mechanical royalties by around $28.8 million for the previous “historical unmatched period” (2018-20). This reduces the total bonus owing to inventors to around $390.4 million.
As of Friday (February 23), the MLC said it had received reports of adjustment from 14 of the 21 streaming companies that provided cumulative statements of account to the MLC for unmatched usage from the portion of the Phono III rate period prior to the blanket license’s implementation (i.e., before 2021).
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“OUR APPELLATE WIN UPHOLDING THE RATE INCREASE WE ACHIEVED IN 2018 WILL FINALLY NET MUSIC CREATORS AND COPYRIGHT OWNERS THE WINDFALL THEY SHOULD HAVE RECEIVED YEARS AGO.” -David Israelite, NMPA.
According to the breakdown, Amazon Music overpaid publishers $7.4 million in mechanical royalties, Apple Music overpaid $17.4 million, YouTube Music overpaid $2.8 million, and Spotify overpaid $3.7 million.
The MLC indicated that, while some of the final prices are identical to the initial rates, others differ.
“Due to those differences some DSPs reported adjustments that reduced the amount of historical unmatched royalties previously transferred to The MLC,” according to the statement.
The announcement comes amid big developments at the MLC. The organization is currently undergoing its first re-designation process, in which the US Copyright Office reviews its and the Digital Licensee Coordinator’s (DLC) operations over a five-year period.
The MLC also recently announced intentions to examine streaming services to ensure that royalties are accurately reported and paid. In January, it issued notifications of intent to audit streaming services that began operating under the MLC’s compulsory blanket license beginning in 2021.
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