Streaming services and music publishers reach deal on US song royalty rates

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By Chris Cooke | Posted on Thursday, September 1, 2022

US streaming services and music publishers have reached a first-to-second royalty rate agreement, meaning neither party will have to go through the time and expense of a messy audience and controversial before the US Copyright Royalty Board. This is good news for services, publishers and songwriters. Less for those of us who enjoy writing about the messy and controversial CRB hearings!

But what is the problem? Well, first the quickest of the recaps. To promise. In the United States, the mechanical copying of songs is covered by compulsory licensing, which means that publishers are obliged to allow streaming services to reproduce their songs at rates set by a panel of judges, i.e. ie the CRB. These tariffs are reviewed every five years, with CRB judges confirming how much of the revenue the services should allocate to song rights (as opposed to recording rights).

The streams also exploit the song’s so-called performing rights and associated services license through US collecting societies such as BMI and ASCAP. However, what is paid to companies for the performing right is essentially deducted from the mechanical rate – so the CRB decides what share of total streaming revenue to allocate to songs. And in the mid-2010s, it was 10.5%.

But elsewhere in the world, where rates are negotiated on the open market, some publishers and companies had pushed the share of revenue allocated to songs closer to 15%. So when the CRB started thinking about what the US rate should be for 2018-2022, publishers also pushed for an increase, and they got it, with judges announcing annual increases over that period. five years until the rate reaches 15.1%.

However, some of the streaming services have appealed this increase. And then when the CRB started thinking about what the rate should be for 2023-2027, some of the services pushed for something more like the 2017 rate.

The call and proposals for 2023-2027 have indeed been highly controversial within the US music publishing industry and songwriting community, with the services generating much public outrage – Spotify in particular, in partly because its main rival in the United States, Apple Music, did not participate in the call.

This grand call was mostly unsuccessful, with the CRB holding the increase at 15.1%. While some of the technical aspects of the compulsory license that Spotify and others objected to were also changed in a way that the services liked, for example the “total cost of content” rules, which guarantee publishers a percentage minimum of the total amount a service pays to the music industry and “bundling”, which impacts things like family plans and mobile plans.

With the rates for 2018-2022 finally confirmed – you know, in July 2022 – the focus turned to the audience to decide the rates for 2023-2027, with publishers pushing for another big increase towards something like 20%, while some of the services – as noted – offered something closer to 10%. Although you sensed that the opening proposals from both sides were ultimately intended to have the CRB judges end up opting for something around the current 15%.

Which brings us to the deal that has just been concluded between the services and the publishers. It’s something around the current 15%. There will be a slight increase over the next five years, from 15.1% to 15.35%, although this is obviously a much more modest increase than what occurred between 2018 and 2022 Although in this agreement, some of the aforementioned technical characteristics are also modified for the benefit of editors and writers.

A statement from the services and publishers last night explained: “The agreement also includes a number of changes to other components of the tariff, including increases to per-subscriber minimums and ‘total cost of content’ calculations that reflect the rates that the services pay. to record labels.

“As streaming services continue to innovate to deliver songwriters’ works to growing numbers of paying fans,” he added, “the agreement also modernizes the treatment of product ‘bundles’ or services that include music streaming and updates how services can offer incentives to bring new subscribers into the music ecosystem”.

On the services side, the deal was announced by the Digital Media Association and is backed by its members, including Amazon, Apple, Google, Pandora and Spotify. On the publishing side, the deal is endorsed by the National Music Publishers Association and the Nashville Songwriters Association International.

These rates only apply in the United States, of course. However, if there had been a bold increase to 20% – as the publishers had originally proposed – it would probably have motivated some publishers and in particular songwriters elsewhere in the world to push for a greater share of the digital cake.

It could still happen – given that the US was originally behind Europe – but a higher rate in the US would have emboldened editors and writers who feel the songs are currently undervalued on streaming .

That said, the US deal could still motivate publishers and companies that aren’t yet reaching 15% elsewhere in the world to push up to and then slightly beyond that rate.

And it’s also worth noting that in the US services pay for the operation of the collecting society that manages the mechanical royalties – the MLC – whereas in Europe most of the administrative costs fall on publishers and companies. So once that’s factored in as well, American publishers and songwriters are already slightly ahead.

I mean there are still administrative costs on the performing rights side in the United States that are administered separately for history and stupidity, but nonetheless the songs business is now slightly better off in the States United than in Europe – and, thanks to this agreement, without any messy and contentious CRBs fighting to make it happen.

Confirming the deal, Digital Media Association CEO Garrett Levin said, “This deal represents the streaming services’ commitment to delivering the best music experiences to fans and growing the streaming ecosystem for the benefit of all. stakeholders, including the creative basis of songwriting”.

“For streaming services,” he continued, “this moment represents an opportunity to pursue new collaborations with publishers and songwriters amid economic certainty that will support continued innovation. Perhaps more than anything, this agreement demonstrates the potential for industry progress when parties come to the table for good faith discussions.”

NMPA boss David Israelite added, “This historic colony is the result of songwriters making their voices heard. Instead of going to trial and continuing years of conflict, we’re instead moving forward together with the highest rates ever, guaranteed. We thank Digital Services for coming to the table and treating creators as business partners. Importantly, since this is a percentage, we know that as streaming continues to grow exponentially, we will see unprecedented song value.”

And NSAI Executive Director Bart Herbison added: “This collaborative process will result in increased songwriter compensation from digital streaming companies and lock in our historic 43.8% increase over the previous CRB procedure. Along with the rate-raising momentum, there are also new structures to help secure minimum payments.”



LEARN MORE AT: Amazon | Amazon Music | Apple Music | Copyright Board | Digital Media Association | Google | Nashville International Songwriters Association | National Music Publishers Association (NMPA) | pandora


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