Songwriters have something to celebrate this holiday season. While it looked as though the royalty rate decisions for the 2018-2022 (Phonorecords III) and 2023-2027 (Phonorecords IV) periods would not receive a final ruling from the Royal Copyright Board in time for Christmas, there is finally clarity of at least one kind. from the royalty. On Friday (December 16), the council adopted a proposed regulation to increase royalties for US mechanical devices on physical products (such as vinyl records, CDs, cassettes), permanent downloads, ringtones and music packages.
As part of Phonorecords IV, coming into force in 2023. Beginning Jan. 1, songwriters will earn 12 cents per song or 2.31 cents per minute of playtime or fraction thereof, whichever is greater for larger physical products and permanent downloads. This will also include inflation-based adjustments for later years of the rate period, a big change for compositors who have historically been locked into stagnant penny rates for sales despite rising costs of living. Ringtones will remain at the same rate as before, and the amount earned for each element of the music package will be determined by the rates for that element.
The new decision today confirms what is known as “Settlement 2,” which was formed by the National Music Publishers Association (NMPA), the Nashville Songwriters Association International (NSAI), and major music companies Universal Music Group. by Sony Music. Entertainment and Warner Music Group earlier this year.
As the name of the settlement suggests, it was preceded by one. In 2021, the same parties proposed “Regulation 1,” which would have maintained the long-term 9.1 cent penny rate for physical products and permanent downloads. That proposed settlement was sent to judges at the Royal Copyright Board for approval last year, but it sparked backlash among some in the freelance writing community.
The 9.1 cent rate has been in place since 2006 and has not risen with inflation. George Johnson, an independent songwriter who often pushes back against the Royalty Board’s calculations in favor of higher rates, and other stakeholders opposed continuing the 9.1 cent rate for another five years. They also noted other issues with Count 1, such as the lack of adjustments for inflation, and questioned the memorandum of understanding (MOU) between the major labels and the NMPA that could have waived late fees, allowing the U.S. Copyright law when payment deadlines. are omitted.
In response to the concerns, the CRB adjudicators concluded that the proposed regulation does not provide a reasonable basis for setting statutory rates and deadlines as set out in proposed solution 1.
For many years, the CRB’s rate proceedings have focused primarily on achieving fair compensation for feed-in rates. In 2021, digital audio services paid an estimated $1.3 billion to publishers and songwriters, according to data from the Mechanical Licensing Collective.
Although sales formats account for approximately 15% of the recorded music market, NMPA estimates that these formats generate only 5% of US publishing royalties. If streaming continues to grow at its current rate, some say that within three years these sales formats covered by Subpart B configurations could account for as little as 1% of publishing royalties.
The NMPA has also previously cited rate litigation as being expensive, often in the tens of millions of dollars, as a reason why they have focused on fighting high-flow rates rather than the formats covered in Subpart B, noting that Litigation costs may eventually equal or exceed the additional amount that would be achieved with a higher Subpart B increase.
However, in Friday’s ruling, the court noted that royalties generated by vinyl, CDs, downloads and other formats covered by Subpart B “should not be treated as a minimum or as a ‘throwaway’ bargaining chip to encourage better terms for streaming.” . configurations”. They also noted the improvements to Settlement 2 as “distinct” from the first proposed settlement.
The event marks the highest rate of physical merchandise and permanent downloads for songwriters in nearly two decades.
Now there is only one final step. the registrar of copyright will have to check and make sure it complies with the copyright statute, and if approved, which is typical, this will come into effect at the beginning of the year. However, participating parties also have 30 days to appeal the CRB’s decision.