The latest round of rate-setting for publishing royalties for on-demand audio streams in the US – known as ‘Phonorecords IV’ – has been settled surprisingly quickly. That headline royalty rate, which streaming services must now pay to publishers for “certain mechanical streaming rates” will be set at 15.35%, and it will be phased in over the five-year term of 2023-27.
The deal is supported by the DiMA member companies (Amazon, Apple, Google, Pandora, and Spotify), as well as the US Publisher’s bodies NSAI and the NMPA, and also includes changes to other components of the rate, including increases to the per-subscriber minimums and the “Total Content Costs (TCC)” calculations which reflect the rates that services pay to record labels.
NMPA President & CEO David Israelite is pleased with how quickly it was concluded: “Instead of going to trial and continuing years of conflict, we instead move forward in collaboration with the highest rates ever, guaranteed.”
DiMA President and CEO Garrett Levin was grateful for a fast resolution too: “Perhaps more than anything, this agreement demonstrates the potential for industry progress when parties come to the table for good faith discussions.”
The surprise is thus twofold: that this has been agreed with the US Copyright Royalty Board (CRB) so quickly, and – perhaps – that the rate was not a little higher.
Or perhaps it shouldn’t be such a shock, in hindsight: the last rate-fixing proceeding was a long, expensive, contorted affair. The ‘Phonorecords III’ rate-setting – which covered the 2018-2022 period – was set several years ago, yet appeals were still taking place this year in a bitter battle between DSPs and US publishers. In July, the CRB upheld its decision of rates being set at 15.1% for 2018-22 – a significant win for publishers.
That ruling locked in a big percentage leap from the previous period’s rate of 11.4%. But this time around, the jump is smaller – from the current 15.1% to 15.35% – and has been settled much faster. The fight over the ‘Phonorecords III’ rates took many years and was extremely expensive: perhaps this quick resolution is recognition that neither side perhaps had the stomach for another gruelling fight.
And perhaps this smaller increase is a pragmatic reflection of the huge growth that music streaming has seen in recent years. “Since this is a percentage rate, we know that as streaming continues to grow exponentially, we will see unprecedented value of songs,” is how Israelite puts it. “This moment presents an opportunity to pursue new collaborations with publishers and songwriters in the context of economic certainty that will support continued innovation,” said Levin.
(It’s worth noting that 15.35% is some way from what the NMPA had publicly proposed. They wanted streaming services to pay publishers whichever is greater on a month-by-month basis of: 20% of their service’s revenue; 40% of what is paid to record labels and other master recording owners; $1.50 per subscriber; or $0.0015 per play.)
Jody Gerson, Chairman and CEO of Universal Music Publishing Group, also welcomed the news, saying that it ensured recognition and fair pay for songwriters: “Having worked together collectively as an industry to secure a fixed increase in the Phonorecords III case last month, we are grateful for our newly strengthened partnerships with the DSPs, which will help recognize the value that songwriters bring to the world, both now and into the future.”
So for now, everyone involved can feel relieved, and pause to take a breath… until Phonorecords V, at least.
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