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BMG welcomes mechanical royalties increase in the US, regrets not speaking out sooner

By | Published on Monday 9 May 2022


BMG has put out a statement welcoming last week’s deal between the US record labels and music publishers regarding the mechanical royalty rate paid on discs and downloads, commending the songwriters and songwriter groups who campaigned for a better deal, and admitting that it regrets having not spoken out sooner in support of those writers and groups.

The royalty paid to songwriters and music publishers from the sale of discs and downloads in the US is set by the Copyright Royalty Board, which reviews what the royalty rate should be every few years. In the US, it’s usually record labels that secure the licences and pay the royalties for both discs and downloads, which means the record industry is actively involved in any CRB review of this particular royalty rate.

As the latest review got underway, the US National Music Publishers Association announced it had agreed a deal with the major labels which would see it and them propose keeping the royalty rate on discs and downloads unchanged at 9.1 cents per copy.

However, many songwriters hit out at that proposal, pointing out that the 9.1 cents rate was set in 2006 and, as a result of inflation, the value of that royalty had decreased over the subsequent fifteen years. And while discs and downloads might now be a relatively small revenue stream for the US record industry, for some artists and songwriters discs and downloads are still decent earners.

Some songwriter groups also argued that there were issues with the NMPA leading on any negotiations regarding this particular royalty rate, because its biggest members are the publishing wings of Sony, Universal and Warner, which are also the biggest customers of these mechanical rights licences via their record company divisions.

Based on growing opposition within the songwriter community, the CRB rejected the original NMPA/majors proposal. So last week they returned to the CRB with a new proposal that will see the song royalty rate on discs and downloads immediately increase to twelve cents and then increase on an annual basis in line with inflation.

Welcoming that development, BMG said in a statement on Friday: “The entire songwriter community owes a huge debt of thanks to those who fought for this increase in the face of the opposition of major record companies and indifference of music publishers. Thanks to them, songwriters will get an effective 32% rate increase on the current 9.1 cents a track mechanical rate for physical products and downloads in the US”.

“Without their belief and commitment, the RIAA (representing record companies) and the NMPA (representing music publishers) would not have been forced back to the negotiating table”, the statement went on. “Music companies have a duty to stand up for artists and songwriters. That is why BMG has put fairness at the heart of our agenda ever since we started business in 2008”.

“We regret on this occasion that we did not speak out earlier and more robustly against an industry consensus that turned a blind eye to what has been a fifteen year pay freeze for songwriters”, it added. “More broadly, this case again highlighted the dismissive approach of record companies toward songwriters who just a month ago entered a motion designed to exclude the vast majority of songwriters from benefiting from any rate increase”.

“Thankfully, they have backed down”, it concluded. “They could show further humility by following BMG’s example in abandoning unfair and anachronistic controlled composition deductions which are solely designed to depress songwriter earnings. This episode should be a wake-up call for all those in the industry who fail to match fine words about the value of music with a concern for the people who actually create it”.

BMG previously announced in 2020 that it was removing so called ‘controlled composition clauses’ from all the deals it has with artists on the recordings side of its business, including deals relating to the catalogues of recordings that BMG has acquired from other labels over the years. That clause allows labels to claim a discount on the statutory royalty rate on discs and downloads where the artist is also the songwriter.