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New inflation matching settlement on US disc and download song royalty rate welcomed

By | Published on Friday 6 May 2022

National Music Publishers Association

A plethora of organisations from across the US music industry have welcomed a new proposed settlement regarding the mechanical royalty rate paid on discs and downloads Stateside, after an initial proposal from the National Music Publishers Association and the major labels was widely criticised by songwriter groups.

In the US, the mechanical copying of songs is covered by a compulsory licence, which means that when songs are copied the royalties paid to music publishers and songwriters are set by a panel of judges called the Copyright Royalty Board.

Those rates come up for review every few years, with the owners and customers of mechanical rights either proposing a pre-agreed settlement to the board, or having a big argument in front of said board and then allowing the judges to decide what a fair rate might be.

With discs and downloads, the customers of the mechanical rights are mainly record labels, with whatever rate is set coming out of what monies the label makes from selling a CD, vinyl record or MP3.

Which is why it was the majors that sought to negotiate a pre-agreed settlement with the National Music Publishers Association. The originally agreed settlement – also endorsed by Nashville Songwriters Association International – was to keep everyone the same as it currently stands.

But, that proposal was widely criticised by other songwriter groups who pointed out that the statutory rate on discs and downloads is a set price per copy – not a percentage of revenue – meaning that each year the rate actually decreases in real terms because of inflation. The last increase was in 2006 when the royalty became 9.1 cents per copy. But 9.1 cents in 2006 was worth more than 9.1 cents in 2022.

One songwriter in particular – George Johnson – felt that proposal was unfair and filed a formal objection. He was then backed up by an assortment of other songwriter groups.

Some of those groups also pointed out that the three biggest members of the National Music Publishers Association are the publishing wings of Sony, Universal and Warner, ie the biggest customers of mechanical rights on the recordings side, which possibly made it problematic for the publishing trade body to be negotiating settlements of this kind on behalf of songwriters.

There were defenders of the NMPA who said that the publishers were already embroiled in a complex legal battle over the mechanical royalty rate that applies to streams, where the digital platforms are the customers, most of which are trying to persuade the CRB to reduce that rate.

With that in mind, was it wise to instigate another legal battle with the labels over the discs and downloads rate, when discs and downloads are now a relatively small revenue stream for the music industry?

But many songwriters argued that – while streaming is by far the biggest recorded music revenue stream today – the physical market is actually pretty stable at the moment with the vinyl revival and even an increase in CD revenues last year.

Plus, while iTunes style downloads may now be a tiny part of the business at large, for some artists and genres downloads are still a decent revenue stream, plus all that NFT nonsense often includes some downloaded music along the way. Therefore – at the very least – the mechanical royalty rate on discs and downloads should be set to keep up with inflation.

On the back of all that opposition from songwriters, in March the CRB confirmed it was rejecting the initial proposal from the NMPA and the labels. But could an alternative voluntary agreement be reached to prevent having to go to the “let’s all argue in front of some judges” phase? Well, turns out yes, an alternative voluntary agreement could be reached, pretty much embracing the songwriters’ demand of increases in line with inflation.

In a filing with the CRB yesterday, the NMPA and the labels said that they had agreed a new proposal that would result in “an immediate 32% increase to twelve cents per track for physical phonorecords and permanent downloads for 2023 and inflation-based adjustments for subsequent years of the rate period”.

The filing added: “The parties respectfully request that the judges expeditiously publish the royalty rates and terms described herein … and adopt the settlement industry-wide as the statutory royalty rates … the parties further request that the judges stay and not move forward with litigation of statutory royalty rates … while the settlement is under consideration”.

Commenting on the new proposal, NMPA boss David Israelite said: “This new settlement gives songwriters a 32% raise on sales of vinyl, CDs and downloads – raising the rate from 9.1 cents to twelve cents – and critically also includes a yearly cost of living adjustment to address inflation. This extremely positive result is due in large part to the creators who made their voices heard in the CRB process”.

Meanwhile, speaking for the label side, Recording Industry Association Of America chief Mitch Glazer said: “After wide consultation with songwriters, publishers, and labels, we are glad to have reached a solution we believe addresses the core concerns of the CRB judges and the individuals and organisations who shared their views during this proceeding. As a music community, we are strongest when we come together to forge lasting and sustainable win-win deals”.

But what do songwriters, artists, producers and independent publishers think of this new proposal? Well, they all think it’s great. And if you want proof of that, boy do we have a lot of quotes for you saying so. You can read all of them in full here if you’re interested. Or maybe just use this handy concise summary where we’ve ever so slightly edited down the quotes for you.

The Songwriters Of North America “enthusiastically support” the settlement.

The Nashville Songwriters Association International “welcomes” the settlement.

The Association Of Independent Music Publishers “fully endorses” the settlement.

The Recording Academy “applauds” the settlement.

The UK’s Ivors Academy “welcomes” the settlement.

The Music Publishers Association Of The United States “appreciates” the settlement.

The Music Artists Coalition “applauds” and “endorses” the settlement.

The Black Music Action Coalition “supports” and “applauds” the settlement.

The Church Music Publishers Association is “very pleased” with the settlement.

The Production Music Association says the settlement is “a massive step forward”.

The 100 Percenters hopes the settlement shows that the industry recognises songwriters “deserve better rates”.

And the Artist Rights Alliance reckons the settlement is “a meaningful win”.

Can you believe we’ve got all those quotes and not one person was THRILLED about this? Tell you what, CMU is “THRILLED” that this settlement has been reached. Well done one and all!