Labels and publishers reach agreement on US physical / download mechanicals


In recent years, the process of setting mechanical royalty rates for streaming in the US has led to rancorous fallouts between songwriters, publishers and their representative bodies on one hand, and streaming services on the other.

However, there is more to mechanicals than streaming, and yesterday brought some potentially good news for songwriters and publishers on that front.

A settlement brokered by the NMPA, NSAI and RIAA led to a joint motion to adopt new royalty rates for “physical phonorecords, permanent downloads, ringtones and music bundles” [PDF] that will see an 32% increase of payments from 9.1 cents per track to 12 cents in 2023, with inflation-based adjustments after that point.

You’ll notice we used the qualifier ‘potentially’ in our first paragraph. That’s because for now, this is just a proposal: the US Copyright Royalty Board still needs to approve it.

While that can’t be taken for granted, the fact that labels and publishers have reached agreement is a positive sign – and a big win for the songwriters and activists who had campaigned hard to avoid these mechanicals being ‘frozen’ at 9.1 cents per track.

If the proposal is accepted, there may also be knock-on effects for streaming mechanical rates, which remain unsettled for the 2018-2022 period in the wake of an appeal by streaming services, with the rate-setting process for 2023-2027 already underway – and shaping up to be just as divisive.

What do the physical and download rates have to do with the streaming ones? The Music Tech Policy blog has a take on that which is worth reading.

“It should take away a major argument that the digital retailers are using against songwriters in the streaming part of the Phonorecords IV proceeding [the 2023-27 one],” wrote MTP’s Chris Castle.

“The services are essentially saying that if the rates should be frozen when the labels are paying the mechanical (which they are on physical and downloads), then the rates should be frozen when the services are paying the mechanical (which the services are on streaming). And no inflation adjustment.”

“In one power move, the labels did something fair for songwriters and incidentally also helped publishers in spite of themselves by taking away a major argument from the digital retailers.”

We’ll see how this plays out in the coming months, but in his statement on yesterday’s motion, NMPA boss David Israelite made no bones about the tone of the coming fight.

“With this settlement filed, we clear the way to focus solely and tirelessly on raising streaming rates,” he said. “As we battle the biggest companies in the world, who are pushing for the lowest royalty rates in history, songwriters and their advocates stand more united than ever.”

A variety of industry bodies have issued their own statements on yesterday’s settlement: you can read them in full below:

NMPA: “This new settlement gives songwriters a 32% raise on sales of vinyl, CDs and downloads – raising the rate from 9.1 cents to 12 cents – and critically also includes a yearly cost of living adjustment to address inflation. This extremely positive result is due in large part to the creators who made their voices heard in the CRB process. With this settlement filed, we clear the way to focus solely and tirelessly on raising streaming rates. As we battle the biggest companies in the world, who are pushing for the lowest royalty rates in history, songwriters and their advocates stand more united than ever.” – NMPA President & CEO David Israelite

NSAI: “We want to thank the CRB for signaling an opportunity for an increase on physical rates. The 32% increase on CDs, Vinyl and downloads is welcome and the fact that the cost of living adjustment is built in helps us maintain increases in the future.” – Bart Herbison, Executive Director, Nashville Songwriters Association International (NSAI)

SONA: “SONA enthusiastically supports the proposed phonorecords IV Subpart B settlement, which controls how much songwriters and publishers are paid for Digital Permanent Downloads, Vinyl & CD sales. Big or small, all songwriters should always have a voice in the decisions that govern and affect our livelihood. We are grateful that our collective voice has been heard. This is a long overdue step in correcting the low rates historically paid to songwriters and it’s about time a song’s inherent value is properly recognized.” – Michelle Lewis – Executive Director, Songwriters of North America

AIMP: “The AIMP fully endorses the proposed CRB Subpart B settlement, which would increase the mechanical rate for physical sales and digital downloads from 9.1 cents to 12 cents. This is a step in the right direction and will be a significant boon for the independent music publishing community. Moving forward, nearly all independent publishers will tell you that the future of the music business is in streaming, and we applaud the continued efforts of the NMPA to fight for better streaming rates for all independent music publishers and songwriters.” – Association of Independent Music Publishers

GRAMMYS: “I want to applaud the NMPA and RIAA for working together to act in the best interest of songwriters. This settlement demonstrates that when the music community acts collaboratively, we can achieve meaningful progress for music creators.” -Harvey Mason jr., CEO of the Recording Academy.

Recording Academy’s Songwriters & Composers Wing: “This settlement provides a necessary and long overdue raise for songwriters that will make a real difference in their lives and livelihoods. Importantly, it will also ensure that songwriters continue to be paid fairly over the next five years as this increase is indexed for inflation.” – Evan Bogart, Chair of the Recording Academy’s Songwriters & Composers Wing

IVORS: “The Ivors Academy of UK songwriters and composers welcomes the news that the value of songwriting and publishing rights are beginning to be better recognised. This is an important settlement and indicates the necessary direction of travel.” – Graham Davies, Chief Executive, Ivors Academy

MPA: “This unprecedented rate increase for vinyl, CDs and downloads will have a significant impact on our industry and hopefully points to potentially higher rates for streaming from the CRB. We appreciate the efforts to come to this agreement and thank NMPA for working on behalf of songwriters and publishers.” Brittain Ashford, Executive Director, Music Publishers Association of the United States

BMAC: “BMAC supports the proposed phonorecords IV Subpart B settlement. Our organization applauds the negotiators for proposing to increase payment for artists by 33%, and we are particularly happy to see the acknowledgments of cost of living adjustments for songwriters. As we recognize there’s still much more to be done, we must acknowledge each step made in the right direction towards equality for the songwriter.” – Prophet, Co-Founder/Co-Chair Black Music Action Coalition

PMA: “This new settlement is a massive step forward for all composers and songwriters and will be of great benefit to many thousands of production music creators whose also works are offered for sale to the public through CDs, vinyl and digital platforms. We thank the NMPA for negotiating a 32% raise and continuing to fight for higher, fairer streaming rates in the CRB this fall.” – Adam Taylor, Chairman, Production Music Association (PMA)

The 100 Percenters: “With the sale of vinyl and CDs continuing to rise, songwriters getting a royalty increase shows that labels are beginning to see that we deserve better rates. We hope that with the impending CRB trial, all parties will try to work together so that songwriters can get closer to having a livable wage.” – Tiffany Red, Founder and Executive Director, The 100 Percenters

CMPA: “We are very pleased with the 32% increase included in the Subpart B settlement negotiated by the NMPA. Songwriters are in great need of better rates that more fully reflect their contributions. We hope that the CRB will recognize this in the larger streaming fight happening this year and that this bodes well for things to come.” – Don Cason, President/CEO, Church Music Publishers Association

ARA: “This settlement is a meaningful win for songwriters who will see a 33% jump in royalties for physical music sales and downloads starting in 2023 while locking in future increases to keep up with inflation for the life of the deal. We are so grateful to the many grassroots songwriter advocates who refused to accept a status quo settlement and kept banging on the door of the CRB until they were heard.” –Artist Rights Alliance

MAC: “Music Artists Coalition applauds and endorses the proposed CRB settlement which gives songwriters a much-deserved raise on physical sales and downloads. The songwriting community has successfully advocated for this rate adjustment and will continue fight for an increase where it really matters – streaming. Finally some good news for music creators!” Susan Genco, Music Artists Coalition Board member

Written by: Stuart Dredge