News January 30, 2018

Songwriters will earn more from streaming after U.S. Congress decision

Lars Brandle

Songwriters in the U.S. should see a lift in their measly royalty cheques after the National Music Publishers’ Association claimed victory in its push for a better cut on mechanicals from streaming companies.

Over the weekend, the Copyright Royalty Board of the U.S. Library of Congress announced it had the simplified the multi-tiered process by which royalty payments are calculated for subscription services. Granular details of the ruling remain under lock and key, though the CRA did reveal that streaming companies will be compelled to raises their payouts from 10.5 percent to 15.1 percent of revenue to songwriters and music publishers — a gain of nearly 50% — over the five years from 2018.

That new, higher chunk of cash will be split between the mechanical and performance royalties to publishers and songwriters and will scale-up each year until the end of 2022. It’s the biggest single increase in mechanical royalty rates in CRA history.

The CRB board, which comprises three judges, issued a brief memo on the week to illustrate the changes, which can be seen here.

Songwriters were eyeing a per-stream rate, which they did not get, but the NMPA is nevertheless claiming a “huge win for music creators,” one which projects increases in overall rates and favourable terms.

Also, the CRB also removed the Total Content Cost (TCC) cap which, the NMPA says, will give 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.” And in another move, CRB stepped up the TCC rate (money paid to labels against sums to songwriters and publishers) to a ratio of 3.82 to 1, resulting in the most balance between record label and publishing rates in U.S. mechanical licensing. In addition, the CRB granted a “late fee” which the NMPA says will “dramatically alter the licensing practices” of digital businesses by encouraging them to pay faster.

“We are thrilled the CRA raised rates for songwriters by 43.8 percent — the biggest rate increase granted in CRB history,” NMPA president/CEO David Israelite said in a statement. “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 favourable balance in the history of the industry.” The effective ratio of 3.81 to 1 means for every $3.82 to the label, the creator and publishers receives $1. That ratio is “still not a fair split,” claims Israelite, but it’s “the best songwriters have ever had under the compulsory license.”

The digital services, which include Amazon, Apple, Google, Pandora and Spotify, had opposed NMPA’s proposed rate increase in a trial that took place last year. None have commented on the latest development.

Songwriter lobby bodies are also happy with the CRB rate determination. “Songwriters desperately need and deserve the rate increases resulting from the Copyright Royalty Board trial,” the Nashville-based NSAI said in a statement. “The CRB was a long and difficult process but songwriters and music publishers together presented a powerful case for higher streaming royalty rates.”