×

Copyright Royalty Board Boosts Songwriters’ Streaming Pay Nearly 50%

The Copyright Royalty Board has ruled to increase songwriter rates for interactive streaming by nearly 50% over the next five years, in a ruling issued early Saturday. Equally important, the CRB simplified and strengthened the manner in which songwriters are paid mechanical royalties, modifying terms in a way that offers a foothold in the free-market.

The ruling, in favor of the National Music Publishers’ Association and the Nashville Songwriters’ Association International, amounts to what NMPA president and CEO David Israelite calls “the biggest rate increase granted in CRB history,” with Amazon, Apple, Google, Pandora and Spotify compelled to pay more for the use of music.

Although the writers were looking for a per-stream rate, which they did not get, the digital services were fighting to reduce rates, so overall it’s a significant victory for writers. Streamlined rate terms replace byzantine calculations with a simplified formula based on the “greater of” concept. What under previous conditions may have involved dozens of computations involving different offerings has been reduced to two variables with a floor.

The new rate will be based on the greater of either 1) a percentage of revenue or 2) total content costs. Content costs are payments to labels, which are negotiated without legal constraints, so the deal effectively affords writers – who are largely shackled to statutory rules – some free-market frisson. Additionally, caps and limitations to which the writer rates had been subject are now eliminated. “It’s a very simple computation with the free-market label deals providing downside protection, or potential upside benefit,” said one observer.

“We are thrilled the CRB raised rates for songwriters by 43.8% – the biggest rate increase granted in CRB history,” Israelite said. “Crucially, the decision also allows songwriters to benefit from deals done by record labels in the free market. The ratio of what labels are paid by the services versus what publishers are paid has significantly improved, resulting in the most favorable balance in the history of the industry.” So for every $3.82 to the label, writer/publishers get $1.

While Israelite said an “effective ratio of 3.82 to 1 is still not a fair split that we might achieve in a free market,” he said these terms are the best songwriters have ever had under the compulsory license. The court also decided in our favor regarding a late free which will force digital music services to pay songwriters faster or be subject to a significant penalty. “The bottom line is this is the best mechanical rate scenario for songwriters in U.S. history, which is critically important as interactive streaming continues to dominate the market.”

Songwriters had asked the CRB to grant the greater of 15 cents per 100 streams or $1.06 per user per month, though they did gain ground. For the past 10 years – since the dawn of streaming – writer royalties had been strictly based on a percentage of each streaming service’s revenue, putting them at the mercy of subjective corporate decision-making.

The songwriters made the case that the existing system was crafted to help boost a then-nascent industry but had outlived its usefulness to the point of becoming a conflict of interest. What in effect had largely become big box streaming services were using music as a loss leader to boost market share and sell other products.

While the change will be insignificant to the bottom lines of behemoths Apple, Amazon and Google, the smaller Spotify and Pandora may feel the pinch. Interestingly, while Amazon, Google, Pandora and Spotify argued to maintain the status quo, Apple broke ranks, conceding that the current royalty rate structure was “too complex” and “economically unsound” and advocating for “a single per-play rate that is the same for all services.” That last did not come about, but the Cupertino tech firm signaled artistic sympathy that could play out in interesting ways going forward.

The ruling is the result of a March CRB rate hearing initiated by the NMPA and the NSAI after a breakdown in negotiations that began in November 2016. Such disputes are settled by a permanent panel of three royalty judges appointed by the Librarian of Congress to oversee terms and rates of writer royalty payments for sound recordings.

The ruling effects only the mechanical license, a term that literally references the rolls mechanically cranked through player pianos – arguably the first mass distribution media for recorded music. Albums, CDs and downloads also fall under the mechanical license (the thought being that like piano rolls, these are “physical copies,” although the idea that a digital stream is concrete by virtue of being stored at various points (on a server, in a buffer) is somewhat specious; analog broadcast signals also collect at various points, and digital radio and TV in practical terms is distributed in the manner of a stream.

But broadcasts – digital or analog – are considered a public performance, and garner what is currently a higher  “performance license” rate. Songwriter Rodney Jerkins illustrated the discrepancy in September at the Recording Academy’s District Advocacy Day in Los Angeles by sharing an accounting statement for “As Long As You Love Me,” a top 10 hit for Justin Bieber in 2012. By 2013, Jerkins’ stake in the song generated $146,000 in performance royalties, while streaming revenue from the same period garnered $278 for 38 million Pandora plays and $218 for 34 million YouTube streams. “If I owned 100 of the song I would have made $1,100 from YouTube,” Jerkins said, proclaiming, “Those numbers are criminal.”

“The CRB was a long and difficult process but songwriters and music publishers together presented a powerful case for higher streaming royalty rates,” Nashville Songwriters Association International (NSAI) Executive Director Bart Herbison said. “Songwriters desperately need and deserve [these] rate increases.”

Sony/ATV chairman/CEO Martin Bandier said: “As the leading music publisher, we believe that overall this is a very positive ruling by the CRB as it will deliver an unprecedented topline rate increase for songwriters and publishers over the next five years. While we are disappointed not to get the per-stream rate that we wanted, the planned rate increases go a long way to fairly compensate our songwriters for the essential contribution they make to streaming’s success story.”

Representatives for Amazon, Apple, Google, Pandora and Spotify did not respond to requests for comment. CRB decisions can be challenged at U.S. Court of Appeals for the D.C. Circuit, although this ruling seems an unlikely candidate.

More Music

  • Phylicia Fant Shawn Holiday

    Shawn Holiday, Phylicia Fant Named Columbia Records' Co-Heads of Urban (EXCLUSIVE)

    Columbia Records has named Shawn Holiday and Phylicia Fant Co-heads of Urban Music, it was announced today by the label’s chairman and CEO, Ron Perry. The two will each hold the title of Co-head of Urban Music. Previously, Holiday was Senior Vice President of Urban A&R for Columbia, while Fant joins Columbia from Warner Bros. Records, [...]

  • BTS puma collaboration basket sneakers shop

    BTS Escape Injury After Tour Bus Accident in Taiwan

    Korean boyband BTS have escaped injury after a collision that involved three of their tour buses, according to news reports. The superstar pop band were on board the buses after having performed a gig at the Taoyuan Baseball Stadium in Taiwan. At least seven vehicles were involved, according to local reports, but no one was [...]

  • Bruce Springsteen on Broadway

    Film Review: 'Springsteen on Broadway'

    Hope you like the 69-year-old version of Bruce Springsteen’s face, because it’s virtually all you’re going to see for the two hours and 40 minutes of the filmed “Springsteen on Broadway” — other than the bare brick wall of the theater casting a dim glow in the background beyond those gray sideburns, and two songs’ [...]

  • Clueless review

    Off Broadway Review: 'Clueless' the Musical

    How does a musical stage adaptation of Amy Heckerling’s 1995 film comedy of oblivious privileged teens, “Clueless,” play in the era of female empowerment and millennial engagement? True, the principal skills of lead teen Cher Horowitz are the superficial ones of mall shopping and makeovers. But her sweet spirit and independence, plus some added P.C. relevance, [...]

  • john legend christmas collaboration 1-800-flowers

    John Legend Sets Holiday Partnership With 1-800-Flowers

    Just call it a legendary Christmas collaboration. John Legend is teaming up with 1800flowers.com this season to deliver free copies of his new album, “A Legendary Christmas.” From now until Dec. 22, any bouquet ordered from the site’s exclusive “Legendary Christmas Collection” will include a free digital download of the album. Think of it as [...]

  • A Female Perspective on Music Production

    A Female Perspective on Music Production: 'Change Takes Time,' Says Ex-Matrix Member

    With Linda Perry’s Grammy nomination for Producer of the Year, it’s the first time in 14 years that a woman has been represented in the category. Perry is preceded by Lauren Christy, formerly of the production trio The Matrix, who has written for Avril Lavigne (“Complicated,” “Sk8er Boi”), and Enrique Iglesias (Tonight I’m Loving You”), [...]

  • Justin Timberlake Super Bowl

    Justin Timberlake Reveals Rescheduled 'Man of the Woods' Tour Dates

    After postponing six December concerts due to bruised vocal cords, Justin Timberlake has announced the rescheduled dates for his “Man of the Woods Tour,” all of which will now take place in 2019. Timberlake had been pushing back dates since late October due to bruised vocal cords, and the singer’s rebooted tour begins Jan. 4 [...]

More From Our Brands

Access exclusive content