We reported yesterday on the ruling by the D.C. Circuit Court of Appeals on the appeal by Amazon, Google, Pandora and Spotify against new songwriter royalty rates set by the US Copyright Royalty Board. The decision was seen as backing the streaming services in ruling against the procedure used to set the new rates.
Now the ruling has been unsealed – you can read it here in full – and the National Music Publishers Association has been offering its opinion on why it’s not a clearcut victory for the DSPs.
In a statement, CEO David Israelite claimed that the ruling “supported the rate increase granted by the CRB to music publishers and songwriters, agreeing that writers have been underpaid and that the rate increase start date is January 1, 2018”.
He added: “To be clear, the decision did not reject the top line rate increase for songwriters; rather, the D.C. Circuit Court of Appeals asked the CRB for further explanation as to why it had rejected one particular supposed benchmark. It also asked the CRB to explain its authority for modifying ‘service revenue’ in regards to music bundles. We believe these things are easily done by the CRB.”
Israelite promised to “continue to fight back against Spotify and Amazon’s brazen attempts to cut songwriters’ royalties” – if you’re wondering why Google and Pandora weren’t mentioned, see his previous explanation here – but there are clearly some thorny issues to resolve before the CRB can resolve the issues cited by the ruling.
One, for example, is related to the “uncapped Total Content Cost” [TCC] which ties one element of publishing royalties to the amounts paid out for recordings – the latter of which are ‘free market rates’ negotiated by labels – without a cap on how high that publishing element can go.
“The end result was a rate structure that could significantly increase costs for the Streaming Services, and that eliminated the prior structural protection that braced the streaming services against unregulated increases in sound recording royalties,” ruled the appeals court.
To be clear though: the ruling isn’t saying this was wrong, necessarily, but rather that the streaming services weren’t given fair notice of this methodology to register any objections. “If the Board wanted to implement such an extreme change in the rate structure, it was duty bound to give a heads up to the parties.”
Anyway, those parties are heading back to the rate-setting process now, to re-address these and other issues. Will it be “easily done” as David Israelite hopes? The history of rate-setting processes in the US, and recent tensions between the publishers and DSPs, suggests that there’ll be more arguments to come.