PROFESSIONAL SONGWRITERS CURRENTLY LOCKED IN A LEGAL BATTLE
There is an all-out war between streaming services and professional songwriters. Spotify and Amazon are complaining about how much they get paid in the United States.
This current battle is taking place because streaming services have appealed against a rise in mechanical streaming royalties for songwriters. These services used to pay songwriters and publishers a headline royalty rate of 10.5% of their annual US streaming revenues. The “all-in” number covered both mechanical and performance royalties. In November 2018, the government-mandated Copyright Royalty Board (CRB) said that, for five years from 2018 onwards, this “all in” rate would rise by around 1% annually, up to 15.1% in 2022.
The CRB (U.S. Copyright Royalty Board) further ruled that streaming services would have to pay songwriters either this headline rate or instead, if it resulted in a higher figure, up to 26.2% of their “Total-Content Costs” across records and publishing. National Music Publishers Association hailed as “the biggest rate increase granted in CRB history.”
David Israelite, CEO, and president of the National Music Publishers’ Association is fighting for publishers and songwriters against Spotify and Amazon et al’s appeal. Following the delivery of oral arguments from all parties to the appellate court in D.C three months ago, Israelite says he would ordinarily expect a final decision this summer, but that the pandemic has “slowed everything down.”
Israelite and the NMPA (National Music Publishers’ Association), have a larger concern. The royalty rates currently being contested were the result of the third CRB hearing on this matter. The fourth, given the acronym “CRB IV” by the publishers, is due to begin on January 5th, 2021. Israelite calls CRB IV “the most important CRB trial we’ve ever had.” He is expecting another fiery clash with the streaming services — with momentous consequences for what songwriters are paid long into the future.
The reason “CRB IV” carries such weight for songwriters lies in the passing of the Music Modernization Act (MMA), the landmark piece of US legislation signed into law in October 2018. The MMA decreed that the next time the CRB convenes to set songwriter streaming royalties (for 2023-2027), it should use a “willing seller, willing buyer” rate standard. In a nutshell, this means that the CRB’s three judges should strive to create a situation where they are not dictating a rate themselves, but rather mirroring what would happen if they didn’t exist at all — i.e. if the music publishers and the streaming services were left to thrash out a rate between themselves.
The music publishers’ plan is to go high. Israelite states that in the world of synchronization, licensing fees in the US are broadly split 50/50 between publishers (and songwriters) and record labels (and artists). Yet when it comes to streaming, a very different equation shakes out: publishers/songwriters are paid that 10%-15% headline share of Spotify’s revenues (divided up by their market share), while the major record labels are understood to be paid a 52% share (divided up by their market share).
“When I say it should be 50/50, there’s no way that happens overnight,” he says. “It’s too radical of a change for anyone to swallow, including the record labels. But at least it gives us leverage to start to balance out the proposition. If the labels are getting 52%, there’s a lot of room from 15% [upwards] before you get to a 50/50 split. I don’t know where that settles out, but we hope it will be closer to 52% than it will 15%,” states Israelite.
Israelite: “My biggest objection to how streaming works today is that the record label’s copyrights are negotiated in a totally free market. There are no restrictions, no government price controls. The record labels can say no if they don’t want Spotify to play a sound recording; publishers cannot say no.” He adds that the streaming services “get a performance license, whether we like it or not, through ASCAP and BMI. They also get our mechanical license, whether we like it or not, [via] the CRB. And we just have to live with that.”
Israelite and the NMPA urge songwriters to focus on the most pressing matter at hand — the appeal by Spotify, Amazon, Google, and Pandora (but, not Apple) against their pay rise from ‘CRB III’. Yet he also recommends, whatever the outcome of the current legal skirmish, that both writers and publishers maintain long memories after ‘CRB IV’ begins next year.