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Songwriter groups make final submission to review of US royalty rates on discs and downloads

By | Published on Thursday 25 November 2021

Copyright

An assortment of organisations representing songwriters in America and beyond – led by the Songwriters Guild Of America, the Society Of Composers & Lyricists and Music Creators North America – have submitted some final comments to the US Copyright Royalty Board in relation to its review of the mechanical royalty rate charged on discs and downloads sold within the American market.

When labels release physical discs they usually own or control the copyright in the sound recording on those discs, however they need to secure a licence covering the accompanying song rights, which will be owned or controlled by one or more music publishers or songwriters. The label specifically needs a mechanical rights licence, and in most countries this is available via the collective licensing system, with industry standard rates applying.

However, in the US, it works slightly different. There is a compulsory licence covering the mechanical copying of songs, which means the rate the label pays is set by the CRB. The label can rely on that licence and that rate providing it goes through a set administrative process.

Every so often the CRB reviews those rates, and one such review is currently underway. Earlier this year the National Music Publishers Association and the Nashville Songwriters Association International told the CRB that they’d reached a deal with the record labels which would see the mechanical royalty rate on physical releases (and, actually, downloads too) remain unchanged. So that would mean a rate of 9.1 cents per copy.

However, groups like SGA, SCL and MCNA hit out at those proposals, arguing that the 9.1 cents rate was set in 2006 and inflation alone meant that an increase was now justified. They also argued that because the NMPA’s biggest members – ie the major publishers – are also the biggest customers of this licence through their label divisions, the trade body basically has a conflict of interest.

On the back of that, those other songwriter groups wrote to the CRB in May pointing out that they – as interested parties – had a right to comment on this review and the NMPA/NSAI proposals. After the NMPA and NSAI subsequently filed a motion requesting that the CRB formally adopt their deal with the labels, the copyright board formally announced it would accept input from other organisations, with the deadline for making such submissions set for 26 Jul.

SGA, SCL and MCNA et al took that opportunity to make a submission, criticising the NMPA/NSAI deal with the labels and setting out arguments for why the mechanical royalty rate should, in fact, be increased.

They also pointed out that, while physical sales in the record industry may now be dwarfed by streaming income, discs and downloads together still accounted for 16% of US record industry revenues last year. Plus the ongoing vinyl revival and recent interest in NFTs – which are often linked to a download – means there remains plenty of interest in the music formats covered by this compulsory licence.

After the 26 Jul deadline passed, the CRB then said it would actually allow submissions up to 10 Aug. Some have speculated that extension was requested by the majors who wanted an opportunity to respond to the arguments made by SGA, SCL and MCNA. Certainly the majors took advantage of the extension and sent in another submission on 10 Aug.

Subsequent to that, in October, SGA, SCL and MCNA asked if they could submit new information they had gathered that was relevant to the royalty review. And so the CRB opened up submissions once again, this time with a 22 Nov deadline. Which is why SGA, SCL and MCNA made another final submission this week, primarily responding to comments made by the majors in their August submission.

That final submission makes four key points.

First, it states: “We strenuously object to the position of the major publishers and record labels that submissions by interested, non-participant commenters need not be considered by the CRB in evaluating the adoption of privately negotiated settlements”. That claim, they say, is “contrary to the spirit and letter of the US Copyright Act”.

Secondly, they reiterate their argument that the CRB should take inflation into account when reviewing the mechanical royalty rates, so that a new rate is set that takes into account inflation since 2006, and which them updates annually based on future inflation.

Such a move, they say, would “recognise both the severe financial dangers posed to songwriters and composers by the inflationary times in which we now live, and the demonstrably resurging importance to independent music creators and music publishers of royalty income realised from the distribution of physical product, downloads and other … configurations [covered by this particular compulsory licence]”.

Thirdly, they stress that the NMPA/NSAI proposal is opposed by “an overwhelming percentage of US and global songwriters and composers”, while also noting that freezing the mechanical royalties on discs and downloads could actually have an even wider impact. That’s because the streaming services are using that proposed royalty freeze to justify their argument that the mechanical royalty rate they pay (which is likewise governed by a compulsory licence in the US) should also be frozen (or even reduced), despite the fact that in that royalty review the NMPA is pushing for an increase.

And finally the submission says: “We enthusiastically support continued calls for comments by the CRB from interested parties in appropriate circumstances during all future stages of the [this and other royalty rate reviews]. This will help to ensure that more music creator voices are heard by the CRB, other than the extremely narrow constituency of opinions provided by only those whose participation the major music conglomerates are willing to finance”.

With that final submission made, it remains to be seen how the CRB rules on all this.



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