Frozen Mechanicals Crisis: @DavidPoeMusic’s Comment to the Copyright Royalty Board

[The great David Poe was among the first songwriters to post a comment opposing freezing the mechanical royalty rate for physical and downloads promoted by the NMPA and the Nashville Songwriters Association International. We’re going to be posting the comments, but wanted to start with David Poe’s passionate and well-reasoned comment that you can download here.]

July 12, 2021

Via Electronic Delivery

Chief Copyright Royalty Judge Jesse M. Feder

Copyright Royalty Judge David R. Strickler

Copyright Royalty Judge Steve Ruwe

US Copyright Royalty Board

101 Independence Ave SE / P.O. Box 70977 Washington, DC 20024-097

To Your Honors:

Choices you will make regarding mechanical rates will impact the current and future musicmakers’ ability to contribute to our most profound national export: art.

Musicmakers intuitively understand how we stand on the shoulders of giants. Similarly, each aspect of music- adjacent policy sets a precedent for another. And for years, the devaluation of music has been trending: when music piracy made music free, cover charges at local live venues disappeared; when media conglomeration became legal, playlists became homogenous, and far less localized; when algorithms control streaming services, offerings became more generic, by design.

A culture that declares music to be worth less can expect worthless music. It can also expect more musical careers to be sustained only by those who can afford to lose money.

Consider this: our Top Ten is full of artists who are children of the affluent — those who can afford to do this gig. Not children of millionaires: Stevie Wonder, Aretha Franklin, Bob Dylan. The quality of the contributions made by

those who come from privileged upbringings may be a matter of taste, but we can be certain that lessening the ability for musicmakers to make a credible living will beget barriers to entry and a less equitable cohort.

Beyond the cultural impact, common sense arguments against re-freezing mechanical rates that have already in place for two generations include:

  1. Money. The rate that was a little less than a dime in 2009 is functionally worth a little more than a nickel now

— its buying power will only decrease with time.

2. Ethics. Objectively speaking, the proposed freeze represents neither a free nor a fairly-regulated market. It is best characterized as “willing buyer, unwilling seller.”

3. Support from authentic shareholders. Exponentially more musicmakers and music advocacy groups oppose re-freezing mechanical rates. Organizations doing so comprise a distinctly inclusive cohort that looks like America, as well as the diverse, borderless history of music. Among groups opposing frozen mechanicals are the Songwriters Guild of America, the Alliance of Women Film Composers, the Alliance of Latin- American Composers & Authors, the Pan-African Composers and Songwriters Alliance, the Society of Composers and Lyricists, Music Answers, and the Music Creators of North America.

Groups expressing support for freezing mechanicals believe that musicmakers should make less than what we make now. Given this, any claim they make to represent the interests artists is disingenuous. While these groups’ lobbying resources are formidable, both their agenda and actual membership represent a perilously slim minority of musicmakers.

I believe the technological democratization of tools and access for artists of all mediums could enable a new American renaissance. Let us support a regulatory model that fosters that goal, and gives a diverse group of artists the means to do great work that inspires us all.

Sincerely,

David Poe
Songwriter

Frozen Mechanicals CRB Comments: Anthony Garnier

[Anthony Garnier has the honor of being the first commenter in the frozen mechanicals hearing.]

July 18, 2021

Via Electronic Delivery

Copyright Royalty Judge David R. Strickler
Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge Steven Ruwe
US Copyright Royalty Board
101 Independence Ave SE
Washington, DC 20024

To Your Honors:

As an artist whose career depends on the sustainability of songwriters, I write with considerable concern for the proposed settlement agreement in Phonorecords IV which will affect ALL songwriters, including independents who are not party to the private, non­ transparent settlement agreement.

As your Honors are aware, the “willing buyer-willing seller” concept was established as a basis for fairness in the regulatory regime of the compulsory license when the Copyright Royalty Board (CRB) was established.  Vertical  integration  (ownership,  interlocking  boards) between the major labels and major publishers poses a serious conflict of interest and engenders self­ dealing among negotiators. Concurrent to the antitrust discussions in Congress concerning vertical integration between corporations, this important “willing  buyer-willing  seller” concept is an issue which songwriters who are not party to the private agreement wish to address as a matter of fairness.

Along with hundreds of thousands of songwriters and composers, I am strongly opposed to the proposed adoption by the CRB of a freeze on mechanical royalty rates for physical phonorecords and downloads, and against other non-transparent elements of the so-called agreement presented to the CRB for adoption by the National Music Publishers Association (NMPA), the Nashville Songwriters Association lnt’I (NSAI), and the major record labels.

NMPA and NSAI have not consulted with any other songwriter organizations despite claiming to represent the interests of songwriters for the entire world. No other songwriter or composer group, neither US or otherwise, joins NSAI in agreeing that adoption of the agreement would serve the interests of music creators rather than cause irreparable harm to their members.

Their secret agreement should be binding only on the parties who opt into the secret agreements, while everyone else should be subject to a different royalty rate determined by equitable and fair marketplace conditions and principles.

Respectfully,

Anthony Garnier

1121 Viewpoint Terrace

Peekskill, NY 10566

Letter from Congressman Lloyd Doggett about Frozen Mechanicals to Librarian of Congress and Register of Copyrights

[This is a letter from Austin Congressman Lloyd Doggett (D-TX) to the Librarian of Congress (who appoints and can sack the Copyright Royalty Judges) and the head of the Copyright Office about procedures in the Copyright Royalty Board’s proceeding on frozen mechanicals. Download the original letter here.]


Dr. Carla Hayden, Librarian of Congress
Shira Perlmutter, Register of Copyrights
The Library of Congress
101 Independence Ave SE Washington, DC 20540

Dear Dr. Hayden and Ms. Perlmutter,

As a Representative covering music communities from San Antonio to Austin, the “Live Music Capitol of the World,” some of my songwriter constituents[1] are concerned about some procedural and substantive issues arising in the ongoing “Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)” currently pending before the Copyright Royalty Board (CRB). I write to seek some clarity for them and for me. The statutory rates set by the CRB are binding on all songs ever written or that may ever be written by anyone in the world who exploits songs in copyright in the United States. While referred to as a “minimum” I am told that statutory rates in practice are a maximum and are, of course, compulsory. Naturally, I am concerned that we not misstep.

While I know the CRB has not rendered a decision in Phonorecords IV, I am trying to understand the process by which the CRB: (1) evaluates settlement agreements proffered by certain parties to a proceeding prior to publishing those settlements for public comment, (2) determines the application of the new “willing buyer/willing seller” standard for rate setting when buyer and seller are related parties, and (3) the degree of transparency that the CRB may require of participants in the proceeding particularly terms of private settlements that the parties voluntarily disclose related to the rates they have negotiated.

In particular, I draw your attention to the Motion To Adopt Settlement Of Statutory Royalty Rates And Terms For Subpart B Configurations, Docket No. 21-CRB-0001-PR (2023-2027) filed by the National Music Publishers Association (NMPA), Nashville Songwriters Association International, Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp.[2]     This settlement has provoked concern because of its disclosed terms regarding an additional five-year freeze for “mechanical” royalty rates on phonorecords in the physical and permanent download configurations, and undisclosed terms if adopted by the CRB in its determination.

The settling parties apparently refer to both a settlement agreement relating to certain mechanical royalty rates and another agreement that refers to undisclosed “negotiated licensing processes and late fee waivers.” Those settling parties ask the CRB to adopt their settlement on an “industry-wide basis,” and I am trying to better understand what this request means.  I do not wish to interfere in the CRB’s adjudication of the matters before it, but I hope you can help me understand certain procedural matters relating to the CRB itself.

I would appreciate your answering the following questions at your earliest convenience due to the ongoing nature of both Phonorecords IV and other rate setting proceedings before the CRB and thank you in advance for your courtesy.

(1) There appear to be two settlements referenced in the Motion, being the rate setting settlement summarized in draft regulations attached and this other “memorandum of understanding” (“MOU”) between Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp. (i.e., the same parties to the private rate settlement except the NSAI).

Question: May the CRB disclose (or compel the settlement participants to disclose) the unredacted actual settlement agreements referenced in the Motion, including the MOU?

(2) In the Music Modernization Act,[3]  Congress directed CRB Judges to set the statutory mechanical royalty rate by utilizing a “willing buyer/willing seller” rate standard designed to model the rates that would be reflected in a free market. In the case of the “industry-wide” settlements proposed by the Motion, it appears that there may be joint ownership of some of the members of the NMPA and the record companies proposing the settlement on rates.

Question: Are the Subpart B rates subject to the “willing buyer/willing seller” rate standard?

Question: If so, what is the rule when the “willing buyer” and “willing seller” are under the same corporate umbrella?

(3) It seems that the participants in the proceeding, and certainly the participants in the settlement, are dominated by major publishers and record companies seeking to impose their private settlement on all other songwriters. If other songwriter groups are not participating in the proceeding but object to the settlement (such as songwriters from more diverse communities) I am concerned that those songwriters may have no recourse.

Question: May the CRB limit the scope of a private party settlement to the parties, but determine a higher rate applies to others?

The Motion and the “frozen mechanicals” issue has prompted considerable public debate in the United States and Europe as reported in The Trichordist artist blog[,[4] Billboard, [5]   Complete Music Update[  [6]  and the Creative Industries Newsletter[7].   Three NSAI songwriters have published a defense[8] of their participation in the Motion. The Trichordist notes that the CRB produces considerable frustration and passion on all sides because the process is “inequitable, unwieldy and prohibitively expensive.”[9]

On page 4 of the Motion, the parties advise the CRB that this settlement represents the “consensus of buyers and sellers representing the vast majority of the market for “mechanical ” rights for [physical, permanent downloads]…” Setting aside the issue of the settlement participants representing “buyers” and “sellers” under the same corporate umbrellas, it seems appropriate that every songwriter who will be affected by the outcome of this proceeding, from San Antonio and Austin, Memphis, to Detroit and beyond, should have the opportunity to read and comment meaningfully on the actual settlement agreement posed for adoption, and the related MOU referenced.

I look forward to your response and to continuing to work with you on these matters of such critical importance to our culture and to songwriters everywhere. Please also let me know if you have any other insights to this which may be helpful for my constituents.

Sincerely,

Lloyd Doggett

[1] ATX Musicians Joins Opposition to Frozen Mechanicals, The Trichordist, https://thetrichordist.com/2021/05/28/atx-musicians-joins-opposition-to- frozen-mechanicals/

[2] Available at https://app.crb.gov/docwnent/download/25288

[3] 17 U.S.C. § 115(c)(2)(A).

[4] https://thetrichordist.com/category /frozen-mechanicals/

[5] https://www.billboard.com/articles/business/9577976/songwriters-crb-royalty-rate-comments-letters

[6] https://completemusicupdate.com/article/songwriter-groups- urge-us-copyright-royalty-board-to-open­ submissions-on-proposed-new-mechanical-royalty-rate-on-discs-and-downloads/

[7]  http: //legrandnetwork.blogspot.com/2021/06/songwriters-organisations-object-to.html

[8] https://musicrow.com/2021/06/nsai-son gwriters-respond-to-criticism-of-decision-not-to-challenge-physical­ royalty-rates/

[9] https://thetrichordist.com/2021/06/03/three-nashville-songwriters-respond-on-frozen-mechanicals/

Press Release: House of Commons, Digital Culture Media and Sport Committee: New Report: Economics of music streaming

MPs call for a ‘complete reset’ of music streaming to fairly reward performers and creators 

Successful artists see ‘pitiful returns’ from streaming while some performers are frozen out of payments altogether 

Artists must be given a legal right to a fairer share of revenues from streaming, the DCMS Committee concludes, following a wide-ranging inquiry that calls for a complete reset of the market. 

The Report into the Economics of music streaming finds that comprehensive reform of legislation and further regulation is needed, not only to redress the balance for songwriters, performers and composers, but to tackle fundamental problems within the recorded music industry. 

Services that host user-generated content gain significant advantage on copyright say MPs, with YouTube emerging as a dominant player. The Report warns of ‘deep concerns’ about the unassailable position of the major music companies with a call for the Competition and Markets Authority to examine whether competition in the recorded music market is being distorted. 

Though consumers enjoy music that is historically cheap, more personalised and more readily available than ever before, streaming’s short-term pricing structure puts music at risk in the long-term, say MPs. 

Chair of the DCMS Committee Julian Knight MP said: 

“While streaming has brought significant profits to the recorded music industry, the talent behind it – performers, songwriters and composers – are losing out. 

“Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do. 

“However, the issues we’ve examined reflect much deeper and more fundamental problems within the structuring of the recorded music industry itself. 

“We have real concerns about the way the market is operating, with platforms like YouTube able to gain an unfair advantage over competitors and the independent music sector struggling to compete against the dominance of the major labels. 

“We’ve heard of witnesses being afraid to speak out in case they lose favour with record labels or streaming services. It’s time for the Government to order an investigation by the Competition and Markets Authority on the distortions and disparities we’ve uncovered.” 

ENDS 

Key findings and recommendations: 

Government to legislate so that performers enjoy the right to equitable remuneration for streaming income 

Government to refer case to the Competition and Markets Authority to undertake full market study into the economic impact of the major music groups’ dominance 

Government should introduce robust and legally enforceable obligations to normalise licensing arrangements for UGC-hosting services, to address the market distortions and the music streaming ‘value gap’ 

A full list of conclusions and recommendations can be found in the attached report 

‘Pitiful returns’ from streaming 

Performers, songwriters and composers receive only a small portion of streaming revenue due to poor royalty rates and because of the lower valuation of song-writing and composition, compared to the value of a song’s recording. Evidence from artists and songwriters who enjoy critical success described earnings from streaming as insufficient to ‘keep the wolf from the door’ or to live off, a position magnified by the loss of income from live performances. Such ‘pitiful returns’ from music streaming are found to impact the entire creative ecosystem with session musicians frozen out altogether. 

The Report notes that several performers who gave evidence claimed that they and many of their peers were afraid of speaking out against the status quo for fear of losing favour with major record labels and streaming services. 

Equitable remuneration 

MPs call on the Government to introduce a right to equitable digital music remuneration. Though performers have a right to equitable remuneration where a commercially published sound recording is rented (broadcast via the radio, or played in public), streaming exploits the ‘making available’ right for recordings under UK copyright law. The Report says the right to equitable remuneration should be applied to the ‘making available’ right, drawing on the precedent of how the right to equitable remuneration applies to rental, as a simple yet effective solution to the problems caused by poor remuneration as it is a right already established within UK law, and applied to streaming elsewhere in the world. It also argues that this would address the inconsistency whereby equitable remuneration already applies to songwriters and composers. The Government should also consider how to increase the value of a song to give parity with a recording to support songwriters and composers. 

Case for CMA to examine Universal, Sony and Warner market dominance’ 

The Report finds a case for a full study by the CMA into the economic impact of the dominance by major music companies Universal, Sony and Warner of the UK’s music recording industry, and to a lesser extent in publishing. Further, the Government must make sure that UK law is not enabling market dominance. It should support independent labels to challenge the majors’ dominance, with creators empowered to offset the disparity in negotiating power when signing with music companies. 

Further evidence to support a referral to the CMA comes from ongoing concerns about the majors’ position in direct licensing negotiations with streaming services which allows them to benefit at the expense of independent labels and self-releasing artists, particularly regarding playlisting. 

MPs question whether with the major record labels’ market dominance on song rights, a song would be fairly valued and urge consideration by the CMA of the majors’ dominance in recording and publishing on this point. 

‘Safe harbour’ 

‘Safe harbour’ gives services that host user-generated content (UGC) such as YouTube a competitive advantage over other services, exempting them from legal liability for copyright infringement unless and until they obtain “actual knowledge” of infringing activity, in which case they must remove or to disable access to it. The Report finds these exemptions, now transposed into UK law, have had a profound impact on the market, with UCG-hosting services gaining broad limitations of liability that undermine the music industry’s leverage in licensing negotiations. It recommends the CMA examine YouTube’s dominance of the music streaming market and take steps to encourage competition. To prevent market distortion, the Government should introduce obligations enforceable in law that would ‘normalise’ licensing arrangements for UCG-hosting services. 

Legacy contracts and recoupment 

To address a wider imbalance, the Report recommends a right to recapture the rights to works after a period of time from record labels, and a right to contract adjustment if an artist’s work was successful beyond the remuneration they received. 

Performers, signed to a record deal, are paid according to the terms of their contract with their record label from streaming revenue after production costs are recouped. Many labels do not write off debts meaning that deals signed decades ago can still recoup against initial production and distribution costs. Following an appearance before the Committee, Sony announced it would “pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music” for deals before 2000. MPs call for Universal and Warner to look again at the issue of unrecouped balances with a view to enabling more of their legacy artists to receive payments when their music is streamed. 

User-centric model 

MPs heard evidence of different models to distribute streaming revenues, either the predominant pro-rata payment model or alternatives such as user-centric. They welcome the consideration by new services of ways to address fairness and transparency in remuneration. However, are concerned that current contractual agreements between the major music companies and streaming services could stifle further innovation if misused and recommend consideration by the CMA. 

The Report also make recommendations on licensing and royalty chains to increase transparency to creators. 

Further information: 

The inquiry into the Economics of music streaming was launched in October 2020. It received more than 300 pieces of written evidence. Among artists and performers who gave evidence, songwriter and producer Nile Rodgers, Radiohead’s Ed O’Brien, Elbow’s Guy Garvey and soloist Nadine Shah. It took evidence from the UK’s independent music sector, as well as major record labels Sony Music, Warner Music and Universal Music. Spotify, Amazon, Apple and YouTube also gave evidence. 

Committee membership: 

Julian Knight MP (Chair) (Conservative, Solihull); Kevin Brennan MP (Labour, Cardiff West); Steve Brine MP (Conservative, Winchester); Alex Davies-Jones MP (Labour, Pontypridd); Clive Efford MP (Labour, Eltham); Julie Elliott MP (Labour, Sunderland Central); Rt Hon Damian Green MP (Conservative, Ashford); Rt Hon Damian Hinds MP (Conservative, East Hampshire); John Nicolson MP (Scottish National Party, Ochil and South Perthshire); Giles Watling MP (Conservative, Clacton); Heather Wheeler (Conservative, South Derbyshire). 

Media queries to Anne Peacock peacocka@parliament.uk / 07753 101 017; Gina Degtyareva degtyarevae@parliament.uk / 07548 146 012. 

Visit the DCMS Committee website 

Committee Twitter: @CommonsDCMS 

Specific Committee Information: cmscom@parliament.uk / 020 7219 6188 

Data protection: The personal information you supply will be processed in accordance with the provisions of the General Data Protection Regulation and the Data Protection Act 2018. Full details of how your data will be used can be found here. You may unsubscribe from this mailing list at any time. 

The @ArtistRights Watch Podcast: Episode 1: The Frozen Mechanicals Crisis with Guest @CrispinHunt

Nik Patel, David Lowery, and Chris Castle feature in this podcast where they discuss the current issues of artists’ rights in the music industry. Find the Artist Rights Watch on your favorite podcast platform here https://linktr.ee/artistrightswatchpod Please subscribe, rate and share!

On the first episode of the Artist Rights Watch, Nik Patel, David Lowery, and Chris Castle sit down with Ivors Academy Chair, Crispin Hunt to talk about the frozen mechanical royalties crisis currently playing out in the United States and how it threatens UK songwriters and indeed songwriters around the world.

Crispin gives us his invaluable analysis of how the frozen mechanicals crisis affects songwriters around the world and the highly effective #brokenrecord and #fixstreaming campaigns that Ivors Academy supports in the UK that has lead to a parliamentary inquiry and legislation introduced in the UK Parliament.

The “frozen mechanicals” crisis is rooted in a private deal between big publishers and their big label affiliates to essentially continue the freeze on the already-frozen U.S. mechanical royalty rate paid by the record companies for CDs, vinyl and permanent downloads. The private deal freezes the rate for another five years but does not even account for inflation. Increasing the royalty rate for inflation, does not actually increase songwriter buying power.

The major publishers and labels have asked the Copyright Royalty Board in the US to make their private deal the law and apply that frozen rate to everyone.

In the past, the music industry has experienced a $0.02 mechanical royalty rate that lasted for 70 years, and with the current mechanical royalty rate of $0.091 being set in 2006, advocates hope it’s not a repeat of the past.

In this Artist Rights Watch episode, we cover its numerous implications and consequences such as controlled compositions clauses, the Copyright Royalty Board, CPI and fixed increases, how the UK compares, and potential resolutions.

Below are some links for further reading on frozen mechanicals and Crispin Hunt:

Take the Artist Rights Watch Survey on Mechanical Royalty Rates

How to file your comment with the Copyright Royalty Board on the frozen mechanicals crisis!

Controlled Compositions Clauses and Frozen Mechanicals. Chris Castle

https://musictechpolicy.com/2020/10/10/controlled-compositions-clauses-and-frozen-mechanicals/embed/#?secret=Rftsxg1vsl

What Would @TaylorSwift13 and Eddie @cue Do? One Solution to the Frozen Mechanical Problem. Chris Castle

https://musictech.solutions/2021/05/13/what-would-taylor-and-eddie-do-one-solution-to-the-frozen-mechanical-problem/embed/#?secret=N8n44nO4gn

The Trichordist posts on frozen mechanicals

https://thetrichordist.com/category/frozen-mechanicals/

The Ivors Academy Joins the No Frozen Mechanicals Campaign

Year-End 2020 RIAA Revenue Statistics

Click to access 2020-Year-End-Music-Industry-Revenue-Report.pdf

Below are our social links and terms of use:

Crispin: https://twitter.com/crispinhunt

Chris: http://www.christiancastle.com/chris-castle

David: https://twitter.com/davidclowery?s=20

https://www.instagram.com/davidclowery/

Nik: https://www.instagram.com/nikpatelmusic/

Website: https://artistrightswatch.com
Facebook: https://www.facebook.com/artistrightswatch
Twitter: https://twitter.com/ArtistRights?s=20

Terms of Use: https://artistrightswatchdotcom.files.wordpress.com/2021/01/arw-podcast-terms-of-use-v-1-i-1.pdf

Guest Post by @SealeInTheDeal: A Foreseeable Result of the Phonorecords IV Private Settlement: Opening Pandora’s Box

By Gwendolyn Seale

Over the last six weeks, the Trichordist has chronicled the frozen mechanicals saga occurring at the Copyright Royalty Board in the government’s rate setting for the compulsory mechanical license commonly called “Phonorecords IV.” (Congress mandated that these government rate settings occur every five years and are numbered sequentially.) 

Songwriters, independent music publishers, music lawyers and advocates have penned articles and contacted their representatives in Congress to express their concerns about the private party settlement which would extend the existing freeze on the statutory mechanical rate with respect to physical products and permanent downloads for yet another five years.  That private party settlement among the Big Three record companies, the National Music Publishers Association and the Nashville Songwriters Association International is expected to be opened to public comment later today.  (Friday news dump?)  These entities then submitted that settlement to the Copyright Royalty Board asking the CRB to impose the terms of that private settlement on the rest of the world.  And it now appears that these secret deals may be backfiring.

The frozen rate most prominently applies to permanent downloads and physical sales like vinyl.  Why the Big Three want to freeze mechanical royalty rates on the booming vinyl business is anyone’s guess.

The sticking point for most people commenting in the Trichordist is that the terms of the private settlement are not disclosed to the CRB or to the public, especially a side deal between the Big Three and the NMPA.  Songwriters around the world have no way of knowing the terms of these deals unless the Copyright Royalty Board forces their disclosure.

These entities who are before the CRB in Phonorecords IV, along with those vocal in opposition against their private party settlement have been in this arena for far longer than I. When the Phonorecords I proceeding occurred in 2006, I was merely a freshman in high school — and I was completing my final year of law school as the Phonorecords III proceeding began. Needless to say, there has been a significant amount of information and procedure to digest.

Upon learning of the settlement by the Big Three labels, the NMPA and the NSAI, several thoughts came immediately to mind:

1) The settlement and side agreement referenced must be disclosed immediately.

 2) How can this freeze be rationalized, especially during the midst of a worldwide vinyl resurgence?

3) Why would an organization representing songwriters agree to such a freeze? (As an aside, as I was teaching a course on copyright and songwriter revenue streams to 30 older songwriters two weeks ago, they were shocked and moreover disheartened to learn this — as physical sales, not streaming revenue, pays their bills. One said: ”I can stand out on the street in Smithville, Texas, with my guitar and a tip jar and earn more in a couple hours than I will ever earn from streaming”).

 4) This is perfect ammunition for the streaming services to use to justify their already abysmally-low mechanical “rates.”  

While there is much to say on points 1-3, the focus here is on point 4. Chris Castle echoed the same sentiments on June 1:

“Streaming Royalty Backfire:   If you want to argue that there is an inherent value in songs as I do, I don’t think freezing any rates for 20 years gets you there.  Because there is no logical explanation for why the industry negotiators freeze the rates at 9.1¢ for another five years, the entire process for setting streaming mechanical rates starts to look transactional.  In the transactional model, increased streaming mechanicals is ultimately justified by who is paying.  When the labels are paying, they want the rate frozen, so why wouldn’t the services use the same argument on the streaming rates, gooses and ganders being what they are?  If a song has inherent value—which I firmly believe—it has that value for everyone. Given the billions that are being made from music, songwriters deserve a bigger piece of that cash and an equal say about how it is divided.” (link: https://thetrichordist.com/2021/06/01/healing-with-sunlight-a-rate-based-solution-for-the-frozen-mechanicals-dilemma/)

It did not take a soothsayer to foresee this result; the private settlement opened Pandora’s box – begetting misery for every songwriter. Since the CRB has been quiet for the last month with respect to this proceeding, yesterday, I began delving through some of the more recent Phonorecords III remand filings. And much to my unsurprise, I came across a statement from Pandora Media’s expert witness, Professor Michael Katz, who understandably used the proposed settlement as evidence that the streaming rates were fine as is. Katz’s statement was filed on April 4 – two months before songwriters became aware of the quiet filing of the private settlement and began speaking out.  Here’s the link to Professor Katz’s testimony and you’ll find the text below beginning on page 65:  https://app.crb.gov/document/download/23858 .

Pandora not only used the settlement to make the case that the streaming mechanicals rate in the 2012 settlement was a “good benchmark,” but also, even more disastrously, used this argument to rationalize the 2012 rate being TOO HIGH.

This is what happens when there are only a select few gatekeepers, privileged with endless resources and far removed from the plight of independent songwriters, making decisions that affect literally every songwriter’s future. This is why CRB proceedings must be more easily accessible for independent songwriters and their staunch advocates. This is the consequence of the “willing buyer” and “willing seller” appearing on different sides of the same corporate coin – (and if anyone wishes to challenge me on this point be ready for some “interlocking board” remarks based on extensive research into conflicts of interest).  Songwriters deserve better than to have this crucial revenue stream frozen – especially  immediately following an eighteen-month-long worldwide pandemic.

After the release of misery and misfortune with the private settlement, hope remained at the bottom of pandora’s box—hope that the CRB would allow the songwriters affected by the private settlement to at least have an opportunity to be heard in the exclusive and expensive environment of the Copyright Royalty Board. Once the CRB publishes their request for public comments (on the Friday before the July 4 weekend), songwriters may at last have their chance.

And I firmly believe that by the CRB providing every songwriter the opportunity to express how this settlement and the proposed regulations freezing mechanicals for another five years fails to represent her interest, it will exbibit to all the inherent value of songs and restore hope that every voice matters.

International Federation of Musicians Statement on Streaming Royalties (Or lack thereof)

Since the 2000s, the development of download platforms, then streaming services, has both contracted and expanded the music market. However, despite recently accelerating growth, the value thus created is not shared fairly. Indeed, the performers whose music creates this value receive little or no revenue when their recordings are used online with relatively few exceptions.

The implementation of the fundamental principles set out below is essential to, at last, guarantee the payment of a fair remuneration to music performers for the value transfer from their work. Such implementation must, in particular, rely on the proven mechanisms of collective management or collective bargaining.

1. Right to a fair remuneration

All music performers, whether featured or non-featured, should receive fair remuneration for each online use of their recordings, regardless of the technology used to access or distribute them.

Any act that does not meet the conditions for a download (choice of track + choice of time + choice of location) should not be covered by the right of Article 10

2. Scope of the right of making available on demand

The right of making available on-demand (article 10 of the WIPO Performances and Phonograms Treaty) provides performers with “the exclusive right of authorizing the making available to the public of their performances fixed in phonograms, by wire or wireless means, in such a way that members of the public may access them from a place and at a time individually chosen by them”.

This right was formulated at the time of the transition from physical to digital distribution by download. The technological evolution that has allowed the development of streaming offers since 2008 was in no way anticipated when the WPPT was adopted in 1996. Article 10 could never have been the subject of a consensus if the community of performers had measured the risk of its erroneous application to all the uses offered by streaming platforms.

The right of making available on-demand is designed for cases where end-users choose what music they want to listen to, when to listen to it and where to listen to it. Thus, any act that does not meet the conditions for a download (choice of track + choice of time + choice of location) should not be covered by the right of Article 10.

In particular, it should not apply when a selection of tracks made by a third party (a natural person or an algorithm) is offered for listening to the consumer, following a personalization based on the choice of a style, an atmosphere, an artist or any other criterion leading to a limited and pre-established “playlist”.

3. Adaptation of remuneration schemes

Performers’ economic precariousness – highlighted during the COVID-19 pandemic – demonstrates that the exclusive right of making available on-demand (art. 10 of the WPPT), which can be assigned individually without any real compensation, is in itself unfit for embracing the current technological environment. The unilateral choice of platforms and the phonographic industry to apply this right to all forms of streaming, regardless of their level of interactivity or personalization, obviously serves the interests of these industries.

Non-featured performers generally receive a one-time, often purely symbolic, lump-sum payment in return for the transfer of their exclusive rights to the producer. Such unfair practices deprives them of a fair share of the revenue and value generated by their creative contribution. This structurally unbalanced contractual relationship can be corrected by resorting to collective bargaining.

More generally, collective bargaining constitutes a legitimate and effective means of improving the conditions for the transfer of a performer’s exclusive rights and their remuneration once assigned to the producer.

As grassroots protests by performers illustrate, the status quo is untenable. The streaming economy must switch paradigms to ensure fair remuneration for all performers and all types of online uses. Concerning non-interactive or partially interactive uses (playlists), the right to remuneration under Article 15, WPPT, which leads to an equal split of the equitable remuneration received from broadcasters and other users, constitutes a relevant reference model and precedent.

4. Transparency and access to information

All performers must receive and be able to access detailed information concerning the use of their recordings and the payments to which they are entitled. Payment of sums due to the artist must occur on the dates specified, must be subject to a compliance examination of platforms by performers to help assure correct payments, and must be accounted for regardless of the amount and without payment thresholds. National laws must include provisions guaranteeing the exercise of these rights.

5. Value of Music

Price competition between platforms and the priority they give to enterprise market valuation (as reflected in share price) over revenue may induce a devaluation of music in a race to the bottom on royalty payments while share price is booming. Access to a repertoire through output licenses set to grow endlessly for a flat-rate subscription – which has remained at the essentially same price point for more than ten years – does not seem capable of providing long-term sustainability for the creative sector given the dominant pro-rata royalty model.

6. User-centric model

In the vast number of cases, the pro-rata distribution of streaming revenues does not remunerate the featured artists’ right of making available, even when their contract provides (after the transfer of this right) for the payment of royalties. Instead, it creates a hyper-efficient market share distribution of revenue. This is not acceptable. It is also not acceptable for end-users to pay for music that they do not listen to, or that the music they listen to does not generate commensurate income for the artists concerned. This lack of direct correlation between listening and payment is a fundamental problem. Only the universal adoption of the “user-centric” distribution model can redress this injustice to both the fan and the performers. By allowing “niche” recordings, works or styles to generate remuneration, it also supports diversity and promotes local cultures. It should therefore be implemented, and the economic models adapted accordingly.

7. Duration of reference for the count of plays

The length of the tracks varies considerably according to the genre of music. Durations can range from less than two minutes for a variety track to several tens of minutes for a jazz or classical music track. The count of plays entitled to payment should take these differences into account by introducing a dose of proportionality. A longer track should trigger several payments as listening reaches certain thresholds to be negotiated.

By limiting the economic return on very short tracks, such an adaptation would avoid an excessively uniform offer. It would also positively affect diversity by partly redirecting payments towards less popular musical genres such as jazz or classical music. More generally, artistic creativity could be expressed more freely, without time constraints motivated by profitability objectives.

The Rolling Stones and Sir Tom Jones call on UK Prime Minister Boris Johnson to fix streaming income for musicians and to put the value of music back “in the hands of music makers”

The Rolling Stones, Pet Shop Boys, Emeli Sandé, Barry Gibb, Van Morrison, Sir Tom Jones and the Estates of John Lennon and Joe Strummer have written to the Prime Minister “on behalf of today’s generation of artists, musicians and songwriters here in the UK”. 

All the modern British recording artists named by Boris Johnson in his Desert Island Discs are now represented on the letter. 

In an unprecedented show of solidarity, they have added their names to a joint letter with artists such as Annie Lennox, Paloma Faith, Kano, Joan Armatrading, Chris Martin, Gary Barlow, Paul McCartney, Melanie C, Jimmy Page, Boy George, Noel Gallagher and Kate Bush, calling on the PM to update UK law to “put the value of music back where it belongs – in the hands of music makers.”

This renewed call comes on the back of a report last week by The World Intellectual Property Organisation (WIPO) which said this is a “systemic problem [that] cries out for a systemic solution” and concluded that streaming should start to pay more like radio: “The more global revenues surge, the harder it is for performers to understand why the imbalance is fair—because it is not…streaming remuneration likely should be considered for a communication to the public right.”

More and more people are streaming music – heightened by the pandemic – but, as the artists point out, “the law has not kept up with the pace of technological change and, as a result, performers and songwriters do not enjoy the same protections as they do in radio,” with most featured artists receiving tiny fractions of a US cent per stream” and session musicians receiving nothing at all.  

The letter suggests that “only two words need to change in the 1988 Copyright, Designs and Patents Act…so that today’s performers receive a share of revenues, just like they enjoy in radio” – a change which “won’t cost the taxpayer a penny but will put more money in the pockets of UK taxpayers and raise revenues for public services like the NHS” and which will contribute to the “levelling-up agenda as we kickstart the post-Covid economic recovery.”

The 234 signatories do not want streaming to be recognised as radio. Instead, they want streaming to share some of radio’s remuneration model so that they are paid more fairly. Legislation, despite recognising that streaming is replacing sales, is yet to recognise that the technology is on its way to replacing radio too. 

The letter is backed by the Musicians’ Union, the Ivors Academy and the Music Producer’s Guild collectively representing tens of thousands of UK performers, composers and songwriters and producers, brought together in partnership with the #BrokenRecord campaign led by artist and songwriter, Tom Gray.

The Commons DCMS Committee has been examining this issue with its Economics of music streaming inquiry, expected to report by the end of this month, but it is understood that this issue falls between the remits of both the DCMS and BEIS departments, which is why the artists have chosen to address it to the Prime Minister.  

The letter also recommends “an immediate government referral to the Competition and Markets Authority” because of “evidence of multinational corporations wielding extraordinary power” over the marketplace and the creation of an industry regulator. 

They write that these changes “will make the UK the best place in the world to be a musician or a songwriter, allow recording studios and the UK session scene to thrive once again, strengthen our world leading cultural sector, allow the market for recorded music to flourish for listeners and creators, and unearth a new generation of talent.”

Tom Gray, Founder of the #BrokenRecord Campaign, said:

“It is amazing and timely that the World Intellectual Property Organisation, who create the global treaties that underpin UK law, are now reporting that we are right. This is the moment for the UK to lead the way. British music makers are suffering needlessly. There is an extraordinary amount of money in music streaming. It is a success story for a few foreign multinationals, but rarely for the British citizens who make the music”

“This letter is fundamentally about preserving a professional class of music-maker into the future. Most musicians don’t expect to be rich and famous or even be particularly comfortable, they just want to earn a crust.”

Horace Trubridge, General Secretary of the Musicians’ Union, said:

“I’m delighted to see so many artists, performers and songwriters backing our call.  Streaming is replacing radio so musicians should get the same protection when their work is played on streaming platforms as they get when it’s played on radio.

“As the whole world has moved online during the pandemic, musicians who write, record and perform for a living have been let down by a law that simply hasn’t kept up with the pace of technological change.  Listeners would be horrified to learn how little artists and musicians earn from streaming when they pay their subscriptions.

“By tightening up the law so that streaming pays more like radio, we will put streaming income back where it belongs – in the hands of artists.  It’s their music so the income generated from it should go into their hands.”

Graham Davies, Chief Executive of the Ivors Academy, said:

“Paying music creators properly, which is what so many incredible artists have spoken up to ask for on behalf of present and future musicians and songwriters, will drive the streaming industry and sustain the UK creative economy. Music should and could be a major national asset, but its potential value is currently stripped by overseas interests.

We need to keep the value of British music in our nation by supporting, nurturing and investing in our creators, whilst ensuring the handful of foreign multinational corporations which dominate the music industry and have little interest in preserving British cultural heritage, contribute more value back into the UK. These easy steps will achieve exactly that.”

Crispin Hunt, Chair of the Ivors Academy, said:

“Major Music labels delude themselves that they are the sole providers of the music economy. They are not; the musicians, producers and composers who signed this letter are the true providers of the music economy; without them, no employment in music could exist.

“Britains Music Creators should be the primary beneficiaries of the value their creativity drives.  The record companies are now glorified marketing firms, without manufacturing and distribution costs. Their extraordinary profits ought to be shared more equitably with creators. In streaming the song is king, yet songwriters are streaming’s serfs.

“British Music Creators want nothing more than a reasonable partnership with the companies that market and distribute our work. But a reasonable partnership should be based on shared rewards and responsibilities, not unilateral takings.

“With this letter, Britain’s greatest Music Creators say Music must reform, Government can and should help us fix it.”

Three Nashville Songwriters Respond on Frozen Mechanicals

You should read this post by three Nashville songwriters published in the Nashville trade website Music Row who evidently are at the center of the negotiations and decisionmaking process on frozen mechanicals at the Copyright Royalty Board and have been for many years.  (One of the signers, Lee Miller, once considered running for Marsha Blackburn’s congressional seat on the Republican ticket in 2017.)  It is a heartfelt effort, although you do have to ask yourself where are the publishers?

The post is a very illuminating look inside the CRB process that many find mysterious, and also is a good demonstration of some of the concerns expressed by writers on The Trichordist on this subject.  The three accomplished Nashville songwriters add some color commentary to the proceedings, particularly for those who may have been in high school or college during the 2006 CRB frozen mechanical rate setting that many think caused the problem. 

The songwriters express a good deal of frustration and passion which is as understandable as the frustration and passion of those who feel that the CRB process is as inequitable, unwieldy and prohibitively expensive as these songwriters seem to be telling us that it is.  Someone may want to do a point by point discussion of the many good issues that the three Nashville songwriters raise, but a couple things jump out.

First, they defend the streaming mechanical rate from the last CRB. No one criticized the streaming mechanical rate in the last CRB proceeding that is currently under appeal.  If the rate survives the appeal and reworking at the CRB, and makes its way through the MLC, every songwriter should expect to see the promised increase in their streaming royalty check.  That would be a great thing and everyone no doubt thanks everyone involved for the effort.  The topic, though, was primarily the frozen mechanical not the streaming mechanical.

Also, who paid the $20 million cost for “our side” to participate in the CRB that the three Nashville songwriters refer to?  Surely the publishers did not ask the songwriters to open up their own pocketbooks, even though each has been extraordinarily successful in their genre. 

We couldn’t find any discussion by the three Nashville songwriters of what terms are in the private settlements referred to in their own filing.  The point that many have made about public commentary about the private settlements is that the Copyright Royalty Judges can decide on who is “bound” by the settlements and that it is the motion at issue as filed that gets commented on unless the Judges ask that it be supplemented.  Commenters said the “who” should be broadly construed.  They also said that the “what” is crucially important. Many have made the point that public commentary about the settlements requires that all the terms of the settlements are made public. Until made public, the terms are private.  The only thing we know about the settlements from the three Nashville songwriters’ own CRB filing is the terms that are disclosed—frozen rates.  Even though their filing refers to settlements, we still don’t know anything further.  Maybe we will in coming days.  Any additional terms that exist may not be remarkable, but they might be.  Presumably this is the kind of thing that important people in the negotiation process would know due to their special position.  We just don’t know.

The three Nashville songwriters apparently believed they had a mandate to make decisions about what was worth pursuing in the CRB.  If they did have that belief, presumably they base that belief on some kind of vote.  Since their CRB settlement impacts every songwriter in the world, that’s the magnitude of decision that some might think is deserving of a vote of their membership, not just a board vote if that’s what happened—we just don’t know.  It’s a real privilege to be in the position to make those kinds of decisions, so you might well think that it’s the kind of thing you wouldn’t want to take on by yourself or with only the approval of a limited number of people.  But maybe not. 

Be sure to read this post and thank these songwriters for their service to the community.  They certainly deserve it.

Healing with Sunlight: A Rate Based Solution for the Frozen Mechanicals Dilemma

By Chris Castle

[This post first appeared on MusicTech.Solutions]

Well, it’s been quite a week for the frozen mechanicals issue on The Trichordist (once again cementing its leadership role in providing a platform for the voice of the people).  Many songwriter groups, publishers, lawyers and academics stepped forward with well-reasoned commentary to demand a better rate on physical and downloads and full disclosure of the secret deals between NMPA and the major label affiliates of their biggest members.  Even the mainstream press had to cover it.  So much for physical and downloads being unimportant configurations.

Readers should now better understand the century of sad history for U.S. mechanical royalties that cast a long commercial shadow around the world.  This history explains why extending the freeze on these mechanical rates in the current CRB proceeding (“Phonorecords IV”) actually undermines the credibility of the Copyright Royalty Board if not the entire rate setting process.  The CRB’s future is a detailed topic for another day that will come soon, but there are many concrete action points raised this week for argument in Phonorecords IV today–if the parties and the judges are motivated to reach out to songwriters.

Let’s synthesize some of these points and then consider what the new royalty rates on physical and downloads ought to be.

            1.  Full Disclosure of Side Deals:  Commenters were united on disclosure.  Note that all we have to go on is a proposed settlement motion about two side deals and a draft regulation, not copies of the actual deals.  The motion acknowledges both a settlement agreement and a side deal of some kind that is additional consideration for the frozen rates and mentions late fees (which can be substantial payments).  The terms of the side deal are unknown; however, the insider motion makes it clear that the side deal is additional consideration for the frozen rate. 

            It would not be the first time that a single or small group negotiated a nonrecoupable payment or other form of special payment to step up the nominal royalty rate to the insiders in consideration for a low actual royalty rate that could be applied to non-parties.  The rate—but not the side deal–would apply to all.  (See DMX.)

            In other words, if I ask you to take a frozen rate that I will apply to everyone but you, and I pay you an additional $100 plus the frozen rate, then your nominal rate is the frozen per unit rate plus the $100, not the frozen rate alone.  Others get the frozen rate only.  I benefit because I pay others less, and you benefit because I pay you more.  Secret deals compound the anomaly.

            This is another reason why the CRJs should both require public disclosure of the actual settlement agreement plus the side deal without redactions and either cabin the effects of the rate to the parties or require the payment of any additional consideration to everyone affected by the frozen rate.  Or just increase the rate and nullify the application of the side deal.

            It is within the discretion of the Copyright Royalty Judges to open the insider’s frozen mechanical private settlement to public comment.  That discretion should be exercised liberally so that the CRJs don’t just authorize comments by the insider participants in public, but also authorize public comments by the general public on the insiders work product. Benefits should flow to the public–the CRB doesn’t administer loyalty points for membership affinity programs, they set mechanical royalty rates for all songwriters in the world.

            2.  Streaming Royalty Backfire:   If you want to argue that there is an inherent value in songs as I do, I don’t think freezing any rates for 20 years gets you there.  Because there is no logical explanation for why the industry negotiators freeze the rates at 9.1¢ for another five years, the entire process for setting streaming mechanical rates starts to look transactional.  In the transactional model, increased streaming mechanicals is ultimately justified by who is paying.  When the labels are paying, they want the rate frozen, so why wouldn’t the services use the same argument on the streaming rates, gooses and ganders being what they are?  If a song has inherent value—which I firmly believe—it has that value for everyone. Given the billions that are being made from music, songwriters deserve a bigger piece of that cash and an equal say about how it is divided.

            3.  Controlled Compositions Canard:  Controlled comp clauses are a freeze; they don’t justify another freeze.  The typical controlled compositions clause in a record deal ties control over an artist’s recordings to control over the price of an artist’s songwriting (and often ties control over recordings to control over the price for the artist’s non-controlled co-writers). This business practice started when rates began to increase after the 1976 revision to the U.S. Copyright Act.  These provisions do not set rates and expressly refer to a statutory rate outside of the contract which was anticipated to increase over time—as it did up until 2006.  Controlled comp reduces the rate for artist songwriters but many publishers of non-controlled writers will not accept these terms.  So songwriters who are subject to controlled comp want their statutory rate to be as high as possible so that after discounts they make more.  

            Because controlled comp clauses are hated, negotiations usually result in mechanical escalations, no configuration reductions, later or no rate fixing dates, payment on free goods and 100% of net sales, a host of issues that drag the controlled comp rates back to the pure statutory rate.  Failing to increase the statutory rate is like freezing rate reductions into the law on top of the other controlled comp rate freezes—a double whammy.

            It must be said that controlled compositions clauses are increasingly disfavored and typically don’t apply to downloads at all.  If controlled comp is such an important downward trend, then why not join BMG’s campaign against the practice?  If you are going to compel songwriters to take a freeze, then the exchange should be relief from controlled compositions altogether, not to double down.

            4.  Physical and Downloads are Meaningful Revenue:  Let it not be said that these are not important revenue streams.  [Ironically, Taylor Swift just broke the record for first week vinyl sales on her Evermore album.] As we heard repeatedly from actual songwriters and independent publishers, the revenue streams at issue in the insider motion are meaningful to them. Even so, there are still roughly 344.8 million units of physical and downloads in 2020 accounting for approximately $1,741.5 billion of label revenue on an industry-wide basis.  And that’s just the U.S. Remember—units “made and distributed” are what matter for physical and download mechanicals, not “stream share”.  If you don’t think the publishing revenue is “meaningful” isn’t that an argument for raising the rates?

U.S. Recorded Music Sales Volumes and Revenue by Format (Physical and Downloads) 2020 UnitsRevenue
LP/EP  22.9 million$619.6 million
Download Single257.2 million$312.8 million
Download Album  33.1 million$319.5 million
CD  31.6 million$483.3 million
Vinyl Single  0.4 million$    6.3 million

Source: RIAA https://www.riaa.com/u-s-sales-database/

            5.  Inflation is Killing Songwriters:  The frozen mechanical is not adjusted for increases in the cost of living, therefore the buying power of 9.1¢ in 2006 when that rate was first established is about 75% of 9.1¢ in 2021 dollars.

            6.  Willing Buyer/Willing Seller Standard Needs Correction:  When the willing buyer and the willing seller are the same person (at the group level), the concept does not properly approximate a free market rate under Section 115. Because both buyers and sellers at one end of the market are overrepresented in the proposed settlement, the frozen rates do not properly reflect the entire market.  At a minimum, the CRJs should not apply the frozen rate to anyone other than parties to the private settlement.  The CRJs are free to set higher rates for non-parties.

            7.  Proper Rates:  While the frozen rate is unacceptable, grossing up the frozen rate for inflation at this late date is an easily anticipated huge jump in royalty costs. That jump, frankly, is brought on solely because of the long-term freeze in the rate when cost of living adjustments were not built in.  The inflation adjusted rate would be approximately 12¢ (according to the Bureau of Labor Statistics Inflation Calculator https://www.bls.gov/data/inflation_calculator.htm).  

            Even though entirely justified, there will be a great wringing of hands and rending of garments from the labels if the inflation adjustment is recognized.  In fairness, just like the value of physical and downloads differ for independent publishers, the impact of an industry-wide true-up type rate change would also likely affect independent labels differently, too. So fight that urge to say cry me a river.

            Therefore, it seems that songwriters may have to get comfortable with the concept of a rate change that is less than an inflation true up, but more than 9.1¢.  That rate could of course increase in the out-years of Phonorecords IV.  Otherwise, 9.1¢ will become the new 2¢–it’s already nearly halfway there.  The only thing inherent in extending the frozen mechanicals approach is that it inherently devalues the song just at the tipping point.

            Let’s not do this again, shall we not?