Will the Copyright Royalty Board Leave Songwriters In the Deep Freeze?


In case you haven’t noticed, songwriter mechanical royalty rates are about to be set again at a faraway Congressional operation called the Copyright Royalty Board. You may say, hold on–I thought that mechanical royalties were being appealed?! True, but that’s just for the ha’penny streaming rates. The rate for physical, permanent downloads, ringtones and bundles are separate rates that were set as part of the last rate hearing.

Well…those rates were not really “set” in the traditional sense. There were no hearings, no evidence was presented, none of the usual back and forth that you see when a handful of the little intellectual elite in a far-distant capitol try to divine what a market rate should be for mechanical royalties–for which there has not been a free market in over 100 years. And you can take this to the bank–all that bluster about songwriters just want a free market that you hear from the lobbyists is a load of crap. Children have been put through years of prep school, college and law schools on what it costs to set these rates.

So when the anointed decide not to present any evidence and burn up legal fees by freezing a mechanical rate, you have to wonder what the motivation is.

The statutory rate for physical and permanent downloads have been frozen at 9.1¢ since 2006 because of these side deals that extended the 2006 rates. And they are about to do it again.

Frozen Mechanicals

The way it works is that the publishers and the record companies get in a back room and decide to freeze the rate. Then they submit their settlement to the Copyright Royalty Board (who, unlike the judicial branch, ultimately work for Congress). The CRB then announces that “the parties” having agreed, the judges will adopt the rate without hearing any evidence. And presto changeo, as if by magic every songwriter in the world whose songs are exploited under the U.S. compulsory license are subject to a deal they had no part in deciding and probably didn’t even know was on offer.

It must also be said that U.S. songwriter rates ordered by the government cast a long shadow around the world, so it’s actually worse than that.

And guess what? It’s all happening again, and it’s happening in plain sight if you happen to be someone who reads through the CRB public docket which the smart money says you are not. Possibly because you trust the lobbyists who you made rich to do it for you.

Why is this important? For one thing, if this deep freeze is allowed to go into law, the rate will have been the same for 20 years. Remember that the mechanical rate in the U.S. was frozen at 2¢ for 70 years and this is exactly how it happened. Nobody came in back in 1909 and said, “hey, let’s freeze those rates for 70 years, OK?” Nope, it just creeped and creeped and creeped until one day a songwriter named Hoyt Axton of a predecessor of the Songwriters Guild of America had enough. He lobbied and lobbied and lobbied and finally got the rate increased and eventually got it indexed to inflation.

Mechanical License Royalty Rates 1

Mechanical License Royalty Rates 2

In the words of Alan Shepard, why are they doing this to us? There’s no easy answer. The first thing they often say is that they extend the rate because they are concerned it might go down. There is no CRB in history that has lowered a previously set rate. So that’s bullshit for starters.

Then they say it is because of declining sales in these configurations. Well that wasn’t true in 2006 when CDs made up 80% of US revenues. It wasn’t true in 2009 when CDs were 55%, and it wasn’t true in 2018 when these physical and digital formats were about 20% of revenue. It’s also not true today when these formats are about 15% of billing. Is there a label out there that would say 15% of billing is trivial? So that is also bullshit.

And yet, we are told there is a proposed settlement between NMPA, NSAI, Sony, Universal and Warner that extend the deep freeze another five years if it becomes law. We don’t have the detail, but it should be coming any day now. You can read it here.

US Revenue by Source 2020

The proposed settlement also includes this rather mysterious sentence at the bottom of page 1:

NMPA, UMG, WMG and SME have also reached an agreement in principle concerning a separate memorandum of understanding addressing certain related issues.

Big reveal to follow.

So what is that all about? It couldn’t possibly be a commissionable pending and unmatched settlement for those unimportant physical and download mechanicals? You don’t think it might have something to do with cash changing hands doya?

Ya think?

And it’s all legal.