This Week In Royalties: March 5 - 11 (Special Edition)

Mar 10, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.

US Copyright Royalty Board Holds Hearings for Mechanical Rates.  
(Music Week)
(Bloomberg)  
Benom’s Take: This is a big deal in the world of songwriting and music publishing, and comes around only every few years. The Copyright Royalty Board (CRB) hearings will determine music publisher and songwriter mechanical royalty rates for physical/download sales (currently at 9.1 cents) and interactive streaming royalties (fractions upon fractions of a penny per stream) for the next five years.

The CRB first added streaming rates in 2008, and didn’t change them in 2012, so honestly, I wouldn’t be a bit surprised if the royalty rates remain stagnant for another five years. It seems to be the pattern of the CRB. If the judges can make all parties “just a little bit unhappy,” then I guess they’ve done their job?

The two main bodies representing songwriters and publishers--the Nashville Songwriters Association International (NSAI) and National Music Publishers Association (NMPA)--seem content to let the rates for CD and ringtone mechanical royalties remain the same for 2018 - 2022, and instead are focused on adjusting the way mechanical royalties are paid for digital streaming services.

My beef with this whole thing is that the mechanical royalty is supposed to be tied with the rate of inflation. From 1909 through 1977 it remained at 2 cents. A lot of things happened between 1909 and 1977, not to mention a couple of World Wars and a lot of inflation! Nevertheless, the royalty remained stagnant at 2 cents until 1978, when they began rising periodically until their current state today. If this royalty had kept up with inflation, the rate SHOULD be around 50 cents in 2017. I’m not saying publishers and songwriters should fight for a new rate of $0.50, but could we at least TRY to keep up with inflation???

In regards to interactive streaming rates, the NMPA/NSAI are asking for:

  • A $0.0015 per stream minimum, or 15-cents for every 100 streams.

  • A $1.06 per subscriber per month fee, more than double the 50-cent per subscriber introduced for mechanical royalties in 2008

  • The greater of either a) 15% of service revenue, minus the songwriter performance royalty; or 33% of revenue paid to labels for licensing their masters, less the performance royalty pool.

These rates are tied to a small percentage of revenue from the streaming sites. The current rate is too low and, in my opinion, the publishing side and sound recording side of streaming royalties should be equal.

Because the record companies get free-market negotiations on interactive streaming, but the publishers/songwriters are heavily regulated by the government, the result is that the sound recording side earns exponentially more than the publishing/songwriter side from streaming.

And for some crazy reason, the CRB judges are barred from considering sound recording data when setting rates for publishers/songwriters. True story. I don’t get it. Ask a lawyer, but it smells fishy to me. The interactive streaming royalties should be valued equally (or close to it) in the marketplace. However, I imagine if CRB history repeats itself, the next five years will just be more of the same. Stay tuned...