×

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.

Popular on Variety

More Music

  • Music fans listen to the band

    Woodstock Gets a Low-Key 50th Party With Ringo, Santana and That Album Cover Couple

    After efforts to stage a massive event celebrating Woodstock’s 50th anniversary failed to materialize, the Bethel Woods Center for the Arts in New York’s Catskills region became the only game in town. For months, organizers quietly promoted a weekend of concerts that would put the focus on the 1969 event and its musical and cultural [...]

  • Carrie Underwood, left, and Reba McEntire

    CMAs Make Hosting Change: Brad Paisley Exits, Dolly Parton and Reba McEntire Are In

    The CMA Awards have had the most consistent hosting situation of any music awards show in television, but 11 years after installing Brad Paisley and Carrie Underwood as the reliable faces of the telecast, even ABC and the Country Music Association have decided it’s time for a switch. Come Nov. 13, Underwood will return for [...]

  • Ava Max iHeartRadio Wango Tango, Portraits,

    Megan Thee Stallion, CNCO, Ava Max to Perform at VMAs Pre-show

    CNCO, Megan Thee Stallion and “Sweet but Psycho” singer Ava Max (pictured) have been added to the performer lineup at this year’s MTV Video Music Awards. The three will take the stage during the VMAs’ red carpet pre-show, hosted by Terrence J and Nessa. Zara Larsson will join the two hosts as a special correspondent. [...]

  • Bruce Springsteen FYSEE Opening Night with

    Bruce Springsteen Drops Introspective Trailer for 'Western Stars' Film

    While initial reports about Bruce Springsteen’s forthcoming documentary around his recent “Western Stars” album said that it would essentially be a concert film, the first trailer for it, which dropped today, suggests it’s going to be a more introspective outing, more in line with his autobiographical performances at “Springsteen on Broadway” in 2017 and 2018, [...]

  • Spotify Announces Upgrades to Family Plan,

    Spotify Announces Upgrades to Family Plan, at No Charge in U.S. and U.K.

    Just days after reports emerged that Spotify is aiming to increase the price of its family plan in its home market of Scandinavia, the streaming giant announced an upgrade to the plan — with no price increase in the U.S. and U.K., where it remains at $14.99 and £15, respectively. A rep for the company [...]

  • Mike Vaughan

    Former Venmo COO Mike Vaughan Joins Stem's Board

    Los Angeles-based music distribution and payments startup Stem has appointed former Venmo executive Mike Vaughan to its board of directors. Vaughan was chief operating officer of Venmo from 2011 until earlier this year, and is now executive in residence at Oak HC/FT. “The music industry can benefit tremendously from innovation in the way money flows [...]

  • James Corden Variety Cover Story

    James Corden Signs Deal to Host 'Late Late Show' Through 2022

    James Corden has signed a new deal with CBS which will see him stay on as host of “The Late Late Show” through 2022. The multi-talented Brit had been in advanced negotiations with the studio since May, and the new deal is sure to see him score a substantial bump in pay. The previous deal [...]

More From Our Brands

Access exclusive content