Copyright Royalty Board Abandons 9.1 Cent Mechanical Royalty Rate

The Copyright Royalty agreed to unfreeze the 9.1 cent mechanical royalty rate it pays to songwriters and publishers on Tuesday, setting the stage for the next battle over the rate in the 2023-2027 period.

The rate, which is set every five years, is traditionally a hard-fought and contentious battle between music publishers and streaming services (and other digital providers), is likely to become even more heated with the change in the rate. The 9.1-cent rate, which was agreed upon in 2008 at the beginning of what is called the Phono IV process, involves royalties for both physical (CD, vinyl and cassettes) and digital (streaming and downloads) formats.

However, songwriter advocates argued that physical revenue is far less significant than streaming, which is overwhelmingly the dominant format and will be so for the foreseeable future, and worked to mobilize their efforts toward a higher streaming rate. The CRB judges last year proposed continuing that rate for the 2023-2027 period, but songwriter groups and others argued for a higher rate, and the CRB has agreed. Now the parties involved will either settle on a new rate or the process will into legal proceedings.

The decision ties into an ongoing CRB rate battle between songwriters and publishers on one side and streaming services on the other. In January 2018, the CRB decreed a 44% increase in streaming rates for 2018-2022 — from 10.5% to 15.11% of total revenue — a major victory for songwriters and the publishers. However, Spotify, Apple, Amazon, Pandora and Google (YouTube) disputed the ruling when it was ratified the following year, which songwriter and publisher groups equated to “suing songwriters.”  That legal deadlock continues, even as the battle for the next period approaches.

The National Music Publishers Association, the Nashville Songwriters Assn. International and the major labels — Sony, Universal and Warner Music — had argued in favor of maintaining the 9.1 cent rate; according to Billboard, the NMPA took that stance because it would have been inordinately expensive to litigate for a higher rate. However, the stance of the three majors — Sony, Universal and Warner — is complicated by the fact that they also own the three biggest labels, which would have to pay the higher rate on music sales. However, the move has been widely applauded by publishers along with songwriter groups. Some have called out the NMPA for that stance.

Sony Music Publishing CEO Jon Platt called the rate-setting process “currently the most critical issue facing songwrtiters and music publishers in the United States.

“Yesterday, after hearing the objections of songwriters, the CRB rejected that settlement. The CRB judges listened to the voices of songwriter advocates,” he wrote. “While it is still too early to predict the outcome, we are pleased that the CRB is receptive to higher rates, and we steand by these songwriter advocates and applaud their grassroots efforts and achievements.”