The U.S. Copyright Royalty Board (CRB) released its ruling on mechanical rates for songwriters for 2018 - 2022 and decided to increase the royalty payments music streaming companies must make to songwriters and music publishers.
Streaming services must pay a fee, known as a "mechanical license," every time a user listens to a song.
These licensing fees are typically paid to music publishing companies like Sony/ATV Music Publishing, which collect the fees on behalf of recording artists in exchange for a commission.
This decision is the result of a trial that took place between March and June of 2017 with National Music Publishers' Association (NMPA) NMPA and the Nashville Songwriters Association (NSAI), representing the interests of music publishers and songwriters against Google, Amazon, Apple, Spotify and Pandora.
The court's decision includes a significant increase in the overall percentage of revenue paid to songwriters from 10.5% to 15.1% over the next five years - the largest rate increase in CRB history. Additionally, the CRB removed the Total Content Cost (TCC) cap, giving publishers the benefit of a true percentage of what labels are able to negotiate in the free market resulting in significantly higher royalties for songwriters.
The CRB also increased the TCC rate resulting in the most balance between record label and publishing rates in the history of mechanical licensing. In addition, the CRB granted a late fee which will dramatically alter the licensing practices of digital music companies.
NMPA President & CEO David Israelite: "We are thrilled the CRB raised rates for songwriters by 43.8% - the biggest rate increase granted in CRB history. 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. While an effective ratio of 3.82 to 1 is still not a fair split that we might achieve in a free market, it is 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.
"The decision represents two years of advocacy regarding how unfairly songwriters are treated under current law and how crucial their contributions are to streaming services. We thank the songwriters who shared their stories with the court and helped illustrate how badly these rate increases are needed. While the court did not grant songwriters a per-stream rate, the increases in overall rates and favorable terms are a huge win for music creators."