| Against Frozen Mechanicals | Supporting Frozen Mechanicals |
| Songwriters Guild of America | National Music Publishers Association |
| Society of Composers and Lyricists | Nashville Songwriters Association International |
| Alliance for Women Film Composers | |
| Songwriters Association of Canada | |
| Screen Composers Guild of Canada | |
| Music Creators North America | |
| Music Answers | |
| Alliance of Latin American Composers & Authors | |
| Asia-Pacific Music Creators Alliance | |
| European Composers and Songwriters Alliance | |
| Pan African Composers and Songwriters Alliance | |
| North Music Group | |
| Blake Morgan | |
| David Lowery | |
| ATX Musicians |
Category: Artist Rights
Professor Kevin Casini (@KCEsq) Asks Congress and the CRJs for Meaningful Public Comment on Frozen Mechanical Royalty Settement
May 27, 2021
| Senator Richard Blumenthal 90 State House Square Hartford, CT 06103 Senator Chris Murphy Colt Gateway 120 Huyshope Avenue, Suite 401 Hartford, CT 06106 | Hon. C.J. Jesse M. Feder Hon. J. David R. Strickler Hon. J. Steve Ruwe US Copyright Royalty Board 101 Independence Ave SE / P.O. Box 70977 Washington, DC 20024-0977 |
Senators Blumenthal and Murphy, and Honorable Judges of the Copyright Royalty Board:
I am a Connecticut resident, attorney, and law professor, and the views expressed here are mine, and not necessarily those of any local or state bar association, or any employer. I am an active participant in politics local, state, and federal. I am a registered non-affiliate in New Haven. And I need your attention for about ten minutes.
On May 18, 2021, a “Notice of Settlement in Principle” was filed by parties to the proceedings before the Copyright Royalty Board about its Determination of Royalty Rates and Terms for Making and Distributing Phonorecords.[1] That Notice was followed on May 25, 2021 by a Motion To Adopt Settlement Of Statutory Royalty Rates And Terms For Subpart B Configurations, filed by the NMPA, Sony, Universal and Warner and NSAI.[2] I write today in reference to that proposed settlement.
This settlement outlines the terms by which mechanical royalty[3] and download rates will remain locked at the current rate of 9.1¢. The same almost-dime for each copy of a work manufactured and distributed. The same almost-dime that it’s generated since 2006. A paltry sum to be certain but a far cry from the 2¢ royalty rate mechanical royalties imposed for the better part of seventy years.[4] Starting in 1977, Congress mandated that the mechanical royalty be increased incrementally until 2006 when the rate of 9.1¢ was achieved. And there it has remained.
This proposed private settlement would extend that 2006 freeze until 2027.
In March 2017, a precursor to Phonorecords IV found the Copyright Royalty Board ruling that interactive streaming services must pay more in mechanical royalties over the course of the next five years.[5] Surely more than a simple inflation adjustment, but nonetheless a sign that the CRB thought costs and values needed to become more aligned for streaming—which is paid by the streaming platforms unlike the physical and download mechanical which is paid by the record companies. Now comes Phonorecords IV, and a proposed settlement from the major publishers and their affiliated major labels. Before this proposal can be accepted by the CRB, I asked for the simple opportunity of public comment.
As you well know, in nearly all other administrative proceedings public comment is an integral and indispensable component of the process. To see that the CRB may allow for a public comment period by members of the public beyond the participants in the proceeding or parties to the settlement is a step in the right direction, and my hope is that this development will be broadcast far and wide so that the CRB, and in turn, Congress, may get a full picture of the status of mechanical royalty rates, especially from those that are historically underrepresented. “Public comments” should be comments by the public and made in public; not comments by the participants made publicly.
Let me back up and state that I have a great deal of respect and admiration for the work put into the landmark copyright legislation that came about at the end of 2018, and for those that made it happen. So too for the members of the CRB, and in this space, I thank those Judges for taking the time to read a letter from an adjunct law professor with no economic stake in the outcome, but rather an interest in, and duty of, candor to the Court.
In an age of unprecedented political polarization, the consensus built in the passage of the Music Modernization Act showed that politics aside, when it’s time to make new laws that fix old problems, Congress can still get the job done. I know well the sweat-equity poured into its creation by the very same people that propose this settlement. I have found myself on the same side fighting the same fight as them many times. They have proven capable of navigating your halls and taking on those that would seek to devalue (or worse) the work of the songwriter, and musician. In this instance, I would like to see them fight the fight yet again. recognize the reasoning and intention behind the proposed settlement. Comment by the public made publicly is a way for that to happen.[6]
Our state, Connecticut, has a long and storied history with music. In 1956, The Five Satins recorded what would go on to be one of the most recognizable and beloved doo-wop songs in history. “In The Still of the Night” was ranked 90th in Rolling Stone’s list of Top 500 songs of all time.[7] Five years later, the 1961 Indian Neck Folk Festival was where a young Bob Dylan’s first recorded performance.[8] That young man turned into a fine songwriter, as evidenced by the 4,000+ covers recorded of his works, and his record sale last year of his publishing royalties.[9] And no one will forget Jim Morrison’s arrest at the old New Haven Arena, December 1967. Ticket price: $5.00. Connecticut is home to more than 14,000 registered songwriters, only a small percentage of whom have engaged a music publisher. These writers are considered “self-publishing”, but the reality is, they have no publishing. Ironically, it is these independent writers who rely disproportionately on physical sales, direct downloads, and Bandcamp Fridays.[10]
A year ago, I made the unilateral decision to pivot our consulting company, Ecco Artist Services, to purposefully work with, and advocate for, the traditionally and historically underserved and underrepresented in the music industry. Freezing the growth of rates for physical and digital sales that are already digging out of the residual effects of 70 years at 2¢ strikes at the heart of that community’s ability to generate revenues from their music.
Sadly, rate freezes for mechanical royalties are nothing new. I’ll tell you what has not been frozen since 2006: the cost of living. According to the U.S. Bureau of Labor Statistics, prices for rent of primary residence were 53.49% higher in 2021 versus 2006 (a $534.91 difference in value). Between 2006 and 2021 rent experienced an average inflation rate of 2.90% per year. This rate of change indicates significant inflation. In other words, rent costing $1,000 in the year 2006 would cost $1,534.91 in 2021 for an equivalent purchase. Compared to the overall inflation rate of 1.82% during this same period, inflation for rent was higher.[11] Milk? How about 19.48%.[12] Childcare? In Connecticut? Senators, you don’t even want to know.[13]
Now, it’s no secret the trade association for the US music publishing industry is funded by its music publisher members, and of course, as a professional trade organization, the association is bound to represent those members. Publishers have long enjoyed a better reputation amongst industry insiders than “the labels,” and for good reason, but the fact remains that writers signed to publishing deals are in contractual relationships with their publishers, and their interests are not always aligned. Such is the state of play in a consumer-driven marketplace, and especially now that publishers and labels are consolidating their businesses under the same tents.
Unfortunately, the independent songwriter lacks the resources to participate fully in the process, and although a signed songwriter may believe her interests and those of her publisher are one and the same, they may not always be. It would seem the economic analysis the publishers undertook in deciding the mechanical royalty was not worth the heavy cost and burden of fighting is the same calculus the writers need not do: they couldn’t afford the fight no matter the decision.
But I ask: if the mechanical royalty covered by the proposed settlement is a dying source of revenue, why would the fight be so onerous? By the RIAA’s 2020 year-end statistics, physical sales and downloads accounted for 15% of the music marketplace.[14] That’s a $12.2 billion marketplace, and that 15% amounts to $1.8 billion. Now, I know attorney’s fees can be exorbitant in regulatory matters, but I would think we could find a firm willing to take the case for less than that. As for sales, in 2020, 27.5 million vinyl LPs were sold in the United States, up 46-percent compared to 2019 and more than 30-fold compared to 2006 when the vinyl comeback began,[15] while some 31.6 million CD albums were sold.[16]
Median wages in the US, adjusted for inflation, have declined 9% for the American worker. Meanwhile, since the 9.1¢ rate freeze, the cost of living has gone up 31%, according to the American Institute of Economic Research[17]. The 2006 inflation rate was 3.23%. The current year-over-year inflation rate (2020 to 2021) is now 4.16%[18], which is all really to say, simply, an accurate cost-of-living increase would have a mechanical rate of at least 12¢ per sale. Twelve cents! You would think that would be an easy sell, but the streaming rates are fractions of that rate. The reality is a song would need to be streamed 250 times to generate enough money to buy it from iTunes. As my dear friend Abby North put it, the royalty amount for the digital stream of a song is a micro penny.[19]
An adjustment for inflation should require no briefing, let alone argument. If songwriters were employees, this would simply be line-item budgeted as a “cost-of-living adjustment.” If songwriters were unionized it would be a rounding error, but I digress.
A period and opportunity for the general public to comment publicly and on the record in these and other proceedings before the presentation to the CRB of this proposed settlement is in the interest of all involved. Even if it is true that the mechanical revenue is a lost and dying stream, by the RIAA’s own figures, there stand to be billions of dollars at stake. An opportunity to be heard, without having to sign with a publisher and then hope that publisher takes up the fight you want, maybe that’s all the independent writers of the industry—and, indeed, the world–need to be able to win.
In addition to a meaningful public comment period, and an inflation-adjusted cost-of-living update to the mechanical statutory royalty rate at issue, I’d ask that this letter be made a part of the Phonorecords IV public record and that you review the best practices of the Copyright Royalty Board. Not only so that those independent, self-published writers affected by its decision may voice their concerns through public comments that the CRB considers before it makes its final decision, but so that those of us that speak without financial stake in the matter can provide perspective from a policy and legal perspective.
I want to close by thanking the Board, and Copyright Office, the Judiciary Committee and the Intellectual Property Subcommittee, and the Copyright Royalty Board for their continued attention to the universe of copyright, licensing royalties, and the economy that exists therein. Lord knows there are lots of fires to be put out all over and the time spent and thought given to these policies is acknowledged and appreciated.
Kevin M. Casini
New Haven, CT
Attorney-at-Law, Adj. Professor, Quinnipiac Univ. School of Law
cc: Ms. Carla Hayden, US Librarian of Congress
Ms. Shira Perlmutter, US Register of Copyrights
[1] (Phonorecords IV) (Docket No. 21–CRB–0001–PR (2023–2027)).
[2] Available at https://app.crb.gov/document/download/25288
[3] The term “mechanical royalty” dates back to the 1909 Copyright Law when Congress deemed it necessary to pay a music publishing company for the right to mechanically reproduce a musical composition on a player-piano roll. As a result, music publishers began issuing “mechanical licenses”, and collecting mechanical royalties from piano-roll manufacturers. The times, and the tech, changed, but the name stuck.
[4] A summary of historical mechanical royalty rates is available from the U.S. Copyright Office at https://www.copyright.gov/licensing/m200a.pdf
[5] Docket No. 16-CBR-0003-PR (2018-2022) (Phonorecords III).
[6] The CRB arguably has the statutory obligation to publish the Motion in the Federal Register for public comment, but may have the discretion to construe those commenting to the participants in the proceeding and the parties to the settlement. 17 U.S.C. § 801(b)(7). It would be unfortunate if the Judges narrowly construed that rule to the exclusion of the general public, unlike the Copyright Office regulatory practice.
[7] “Rolling Stone’s 500 Greatest Songs of All Time”. Rolling Stone. April 2010.
[8] “Looking Way Back, As Bob Dylan Turns 60” Roger Catlin, Hartford Courant May 24, 2001
https://www.courant.com/news/connecticut/hc-xpm-2001-05-24-0105241174-story.html
[9] “Bob Dylan Sells His Songwriting Catalog in Blockbuster Deal” Ben Sisario, New York Times, December 7, 2020. https://www.nytimes.com/2020/12/07/arts/music/bob-dylan-universal-music.html
[10] Bandcamp Fridays Brought in $40 Million for Artists During Covid Pandemic Ethan Millman, Rolling Stone December 15, 2020
[11] https://www.officialdata.org/Rent-of-primary-residence/price-inflation/2006-to-2021?amount=1000
[12] https://www.in2013dollars.com/Milk/price-inflation/2006-to-2021?amount=4
[13] According to the U.S. Bureau of Labor Statistics, prices for childcare and nursery school were 52.57% higher in 2021 versus 2006 (a $5,256.98 difference in value).
Between 2006 and 2021: Childcare and nursery school experienced an average inflation rate of 2.86% per year. This rate of change indicates significant inflation. In other words, childcare and nursery school costing $10,000 in the year 2006 would cost $15,256.98 in 2021 for an equivalent tuition. Compared to the overall inflation rate of 1.82% during this same period, inflation for childcare and nursery school was higher.
[14] RIAA year-end revenue statistics. https://www.riaa.com/wp-content/uploads/2021/02/2020-Year-End-Music-Industry-Revenue-Report.pdf
[15] MRC 202 Year End Report. https://static.billboard.com/files/2021/01/MRC_Billboard_YEAR_END_2020_US-Final201.8.21-1610124809.pdf
[16] Id.
[17] American Institute for Economic Research. https://www.aier.org/cost-of-living-calculator/
[18] U.S. Bureau of Labor Statistics Consumer Price Index https://www.officialdata.org/articles/consumer-price-index-since-1913/
[19] Abby North, North Music Group Letter to Congress on Frozen Mechanicals and the Copyright Royalty Board, The Trichordist (May 24, 2021) available at https://thetrichordist.com/2021/05/24/northmusicgroup-letter-to-congress-on-frozen-mechanicals-and-the-copyright-royalty-board/
Another Call for Congressional Oversight of the Proposed Settlement of Physical and Download Mechancials
[Editor T says pay close attention to Gwen Seale’s analysis of the side deal.]
Gwendolyn Seale, Esq.
May 26, 2021
The Hon. John Cornyn III
517 Hart Senate Office Building
Washington, DC 20510
The Hon. Ted Cruz
Russell Senate Office Building 127A
Washington, DC 20510
SENT VIA EMAIL
Re: Potential Settlement of Mechanical Royalty Rates in CRB Phonorecords IV
Dear Senators Cornyn and Cruz,
I am a music lawyer in Austin, Texas, and represent songwriters located throughout our great state. The views I express here are my own and are not on behalf of any of my clients or the State Bar of Texas.
I am contacting you as I am deeply troubled by the private party settlement of mechanical royalty rates pertaining to physical product and digital sales in the “Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)” currently pending before the Copyright Royalty Board (CRB).
Background / Historical Context
With the constant consumption of music occurring via the streaming services, many do not realize the degree of revenue generated from the sale of physical products (vinyl, CDs) and digital downloads in the United States. Notwithstanding the devastating pandemic which forced the majority of workers to pivot, and resulted in at the very least the temporary shutdown of a significant amount of businesses, revenue from the physical music sales amounted to $1.13 billion dollars in 2020 (YEAR-END 2020 RIAA REVENUE STATISTICS). Additionally, vinyl record sales increased by more than 28% from 2019 to 2020. Physical and downloads accounted for 15% of worldwide revenue for U.S. recorded music in 2020.
The current statutory mechanical royalty rate pertaining to physical products and digital downloads in the United States is 9.1 cents per song per record sold and has been so since 2006. To give some historical context, this statutory rate was frozen at 2¢ from 1909 to 1978. Congress mandated that the rate be incrementally increased beginning in 1978, following the passage of the 1976 Copyright Act, from 2¢ to the 9.1 ¢ minimum rate in 2006. Prior to the passage of the 1976 Copyright Act, this rate had been frozen at 2 cents for 69 years.
The participants in this current private party settlement request that the 9.1¢ rate remain frozen through 2027, which results in this rate remaining the same for over 20 years. Note that the mechanical royalties pertaining to physical product sales are paid to songwriters and publishers by record companies and not by streaming services. The Big 3 record companies also own the Big 3 music publishers who are the major members of the National Music Publishers Association, so the licensee record companies literally take the money for mechanicals out of one pocket and place it in the other—songs and recordings are tied together.
Mechanical royalties from physical product sales are a crucial revenue stream for independent songwriters – for Texan songwriters. In contrast, the mechanical royalty “rate” pertaining to streams on Spotify Premium during April 2020 amounted to $0.00059 per stream (according to the Audiam U.S. Mechanical rate calculator: https://resources.audiam.com/rates/ ). The “rate” for the ad-supported tier of Spotify was even lower. Note that the mechanical royalties pertaining to interactive streaming are paid by the streaming services. The streaming services are not parties to the private party settlement.
The Private Party Settlement
I find it important to provide the aforementioned context because there is a serious lack of education regarding copyright, the various royalty streams pertaining to music and the innerworkings of the music industry. And if you happen to be a songwriter, particularly a songwriter outside of the Los Angeles, New York or Nashville hubs, this education gap expands exponentially. So now, let us draw our attention to this private party settlement.
The initial area of my concern pertains to the participants requesting the settlement. On one side, you have the major record companies, consisting of Universal Music Group, Sony Music Entertainment and Warner Music Group. On the other side, you have one trade organization, the NMPA, which represents certain music publishers, including publishing company affiliates of the major record companies (Universal Music Publishing Group, Sony Music Publishing, and Warner/Chappell Music Publishing) which companies have representation on the board of the NMPA. You also have another trade organization, the Nashville Songwriters Association International, which represents a fragment of the songwriter community. This unequivocally presents a conflict of interest: how can songwriters be adequately represented when one of the two parties to the settlement, which are claims to advocate for the songwriters and publishers, is comprised of affiliated major record companies on the opposite side of the negotiation? The Trichordist asked the question—if the willing buyer and the willing seller are the same person, is that a free market?
The settlement participants stated the following in MOTION TO ADOPT SETTLEMENT OF STATUTORY ROYALTY RATES AND TERMS FOR SUBPART B CONFIGURATIONS, Docket No. 21-CRB-0001-PR (2023–2027) at 4:
“And because the Settlement represents the consensus of buyers and sellers representing the vast majority of the market for “mechanical” rights for [physical, permanent downloads, ringtones and music bundles]…”
This settlement does not represent the consensus of songwriters; this settlement represents “buyers” and “sellers” who are one in the same at the corporate level.
Songwriters should have been included in these negotiations from the outset. But, at the bare minimum, parties to transactions involving the fate of this critical revenue stream for songwriters should be transparent to the people they purport to represent. Neither of the foregoing are occurring. Only after the circulation of a rash of articles concerning this issue did the settlement participants respectfully request that the CRB post the royalty rates and terms of the settlement in the Federal Register for public notice and comment.
There are plenty of organizations that represent our country’s songwriters which could provide feedback and suggestions without the presence of conflict, and it is simply disingenuous to ask those parties for their comments following a settlement being presented to the CRB for adoption as a done deal. Any public comments are and will be utterly predictable; songwriter advocates simply ask for an increase in this mechanical rate. Songwriter advocates foresee history repeating itself, with an increase in this rate occurring sometime around this country’s Tri-centennial.
Transparency equates to honesty, and on the flip side of the coin, a lack of transparency leads to distrust. As such, along with providing my concerns about the nature of this settlement, and the dire need for honesty in connection with settlements that affect every Texan songwriter and every songwriter in this country, I request that you press the CRB to request that the settlement parties disclose not only the actual settlement agreement (not just the regulations giving effect to the settlement) but also the “Memorandum of Understanding” referenced in MOTION TO ADOPT SETTLEMENT OF STATUTORY ROYALTY RATES AND TERMS FOR SUBPART B CONFIGURATIONS, Docket No. 21-CRB-0001-PR (2023–2027) at 3.
“Concurrent with the settlement, the Joint Record Company Participants and NMPA have separately entered into a memorandum of understanding addressing certain negotiated licensing processes and late fee waivers.”
If this “Memorandum of Understanding” was irrelevant to this settlement, the language would not have been included in this motion filed by the settlement participants. Setting aside the broadly drafted “certain negotiated licensing processes,” the phrase “late fee waivers” is exceptionally concerning, given the aforementioned context. It sounds like money is changing hands and it is consideration for the frozen mechanical—but only for a select few who were invited to the multi-tiered negotiation.
Thank you for your time and I am more than happy to discuss these issues with you anytime.
Best Regards,
Gwendolyn Seale
@theBlakeMorgan Joins the List Opposing Frozen Mechanicals at the Copyright Royalty Board #irespectmusic
Blake Morgan songwriter, publisher, producer and label owner, two-time U.S. Supreme Court amicus, founder of the #irespectmusic campaign and relentless artist rights advocate joins the list opposing frozen mechanicals on vinyl and physical. “This is about so many things, but we simply must fight to keep digging out from a 68 year injustice. Big thanks to the inspirational Abby North for standing up for fairness and transparency!”
| Against Frozen Mechanicals | Supporting Frozen Mechanicals |
| Songwriters Guild of America | National Music Publishers Association |
| Society of Composers and Lyricists | Nashville Songwriters Association International |
| Alliance for Women Film Composers | |
| Songwriters Association of Canada | |
| Screen Composers Guild of Canada | |
| Music Creators North America | |
| Music Answers | |
| Alliance of Latin American Composers & Authors | |
| Asia-Pacific Music Creators Alliance | |
| European Composers and Songwriters Alliance | |
| Pan African Composers and Songwriters Alliance | |
| North Music Group | |
| Blake Morgan |
Copyright Royalty Board Responds to Coalition of Songwriter Groups on Frozen Mechanicals
A group of songwriter organizations from around the world wrote to the Copyright Royalty Board last week opposing a proposed private “settlement” between the major labels and the major publishers to freeze mechanical rates on physical and downloads at the 9.1¢ 2006 rate that was filed in the current Copyright Royalty Board (CRB) rate court hearing called “Phonorecords IV”. (You can find the entire list of filings in the case here.)
The twist here is that if the CRB approves the private settlement at the request of “the parties” and doesn’t take into account the views and evidence of people who actually write songs and have to earn a living from songwriting, it will be grotesquely unfair and possibly unconstitutional wage and price control. The CRB will have frozen the mechanical rate for physical and downloads at the 2006 rate when inflation alone has eaten away the buying power of that royalty by approximately 30%. This would be like the Minerals Management Service adopting a settlement written by Exxon.
On average–on average–the physical and download configuration make up 15% of billing for the majors and for some artists vinyl is a welcome change from fractions of a penny on streaming. And then there’s Record Store Day–hello? These are a couple of the many reasons anyone who is paying attention should reject the terms of the settlement.
The Coalition had a simple ask: Let the public comment:
In the interests of justice and fairness, we respectfully implore the CRB to adopt and publicize a period and opportunity for public comment on the record in these and other proceedings,especially in regard to so-called proposed “industry settlements” in which creators and other interested parties have had no opportunity to meaningfully participate prior to their presentation to the CRB for consideration, modification or rejection. In the present case, hundreds of millions of dollars of our future royalties remain at stake, even in a diminished market for traditional, mechanical uses of music. To preclude our ability to comment on proposals that ultimately impact our incomes, our careers, and our families, simply isn’t fair.
The Copyright Royalty Board responded! According to our sources, the Copyright Royalty Board said that they would publish the private settlement in the Federal Register and give the pubic the chance to comment. This is great news!
But we will see what they actually do. The Copyright Royalty Board does not have a great track record in understanding songwriter interests in raising the mechanical rates as we can see in this except from their final rule freezing mechanicals again in 2009:
Copyright Owners’ argument with respect to this objective is that songwriters and music publishers rely on mechanical royalties and both have suffered from the decline in mechanical income. Under the current rate, they contend, songwriters have difficulty supporting themselves and their families. As one songwriter witness explained, “The vast majority of professional songwriters live a perilous existence.” [Rick] Carnes [Testimony] at 3. [Rick Carnes signed the Coalition letter as President of the Songwriters Guild of America.] We acknowledge that the songwriting occupation is financially tenuous for many songwriters. However, the reasons for this are many and include the inability of a songwriter to continue to generate revenue-producing songs, competing obligations both professional and personal, the current structure of the music industry, and piracy. The mechanical rates alone neither can nor should seek to address all of these issues.
We simply do not accept that the Founders put the Copyright Clause in the Constitution so creators could have a side hustle for their Uber driving which is exactly where frozen mechanicals take you, particularly after the structural unemployment in the music business caused by the COVID lockdowns.
Here is a summary of who is for and who is against frozen mechanicals.
| Against Frozen Mechanicals | Proposing Frozen Mechanicals |
| Songwriters Guild of America | National Music Publishers Association |
| Society of Composers and Lyricists | Nashville Songwriters Association International |
| Alliance for Women Film Composers | |
| Songwriters Association of Canada | |
| Screen Composers Guild of Canada | |
| Music Creators North America | |
| Music Answers | |
| Alliance of Latin American Composers & Authors | |
| Asia-Pacific Music Creators Alliance | |
| European Composers and Songwriters Alliance | |
| Pan African Composers and Songwriters Alliance |
Which side are you on? If you want to write your own comment to the Copyright Royalty Board about frozen mechanicals, send your comment to crb@loc.gov
Coalition of Songwriter Groups Call on Copyright Royalty Board for Fairness and Transparency on Frozen Mechanicals
[Editor T says this is a letter from a coalition of US and international songwriter groups to the Copyright Royalty Board about the frozen mechanical issue. If you want to write your own comment to the Copyright Royalty Board about frozen mechanicals, send your comment to crb@loc.gov]
MUSIC CREATORS
NORTH AMERICA
May 17, 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 20024-0977
To Your Honors:
As a US-led coalition representing hundreds of thousands of songwriters and composers from across the United States and around the world, we are writing today to express our deep concerns over the “Notice of Settlement in Principle” recently filed by parties to the proceedings before the Copyright Royalty Board concerning its Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV) (Docket No. 21–CRB–0001–PR<(2023–2027)). For reasons explained below, several highly conflicted parties to this proceeding have apparently agreed to propose a rolling forward to the year 2027 of the current US statutory mechanical royalty rate for the use of musical compositions in the manufacture and sale of physical phonorecords (such as CDs and vinyl records). This proposal (and related industry agreements yet to be disclosed by the parties— see, https://app.crb.gov/document/download/23825) should neither be acted upon nor accepted by the CRB without the opportunity for public comment, especially by members of the broad community of music creators for whom it is financially unfeasible to participate in these proceedings as interested parties. It is our livelihoods that are at stake, and we respectfully ask to be heard even though we lack the economic means to appear formally as parties. If procedures are already in place to accommodate this request, we look forward receiving the CRB’s instructions as to how to proceed.
The current U.S statutory mechanical rate for physical phonorecords is 9.1 cents per musical composition for each copy manufactured and distributed. That rate has been in effect since January 1, 2006. It represents the high-water mark for US mechanical royalty rates applicable to physical products, a rate first established in 1909 at 2 cents. That 2-cent royalty rate, in one of the most damaging and egregious acts in music industry history, remained unchanged for an astonishing period of sixty-nine years, until 1978. Nevertheless, the recording industry now seeks to repeat that history by freezing the 9.1 cent rate for an era that will have exceeded twenty years by the end of the Phonorecords IV statutory rate setting period.
Inflation has already devalued the 9.1 cent rate by approximately one third. By 2027, 9.1 cents may be worth less than half of what it was in 2006. How can the US music publishing industry’s trade association, and a single music creator organization (which represents at most only a tiny sliver of the music creator community) have agreed to such a proposal?
The answer to that question is an easy one to surmise. The three major record companies who negotiated the deal on one side of the table have the same corporate parents as the most powerful members of the music publishing community ostensibly sitting on the other side of the table. Songwriter, composer and independent music publisher interests in these “negotiations” were given little if any consideration, and the proposed settlement was clearly framed without any meaningful consultation with the wider independent music creator and music publishing communities, both domestically and internationally.
How on earth can these parties be relied upon to present a carefully reasoned, arms-length “Settlement in Principle” proposal to the CRB under such circumstances, fraught as they are with conflicts of interest, without at least an opportunity for public comment? Further, how can these parties be relied upon in the future to argue persuasively that mechanical royalty rates applicable to on-demand digital distribution need to be increased as a matter of economic fairness (which they most certainly should be), when they refuse to seriously conduct negotiations on rates applicable to the physical product the distribution of which is still controlled by record companies (who not so incidentally also receive the lion’s share of music industry revenue generated by digital distribution of music)?
The ugly precedent of frozen mechanical royalty rates on physical product has, in fact, already served as the basis for freezing permanent digital download royalty rates since 2006. Is this the transparency and level playing field the community of songwriters and composers have been promised by Congress through legislation enacted pursuant to Article I, Section 8 of the Constitution?
The trade association for the US music publishing industry is supported by the dues of its music publisher members, the costs of which are often in large part passed along to the music creators affiliated with such publishers. It is thus mainly the songwriter and composer community that pays for the activities of that publisher trade association, a reality that has existed since that organization’s inception. Still, the genuine voice of those songwriters and composers is neither being sought nor heard. Further in that regard, we wish to make it emphatically clear that regardless of how the music publishing industry and its affiliated trade associations may present themselves, they do not speak for the interests of music creators, and regularly adopt positions that are in conflict with the welfare of songwriters and composers. Their voice is not synonymous with ours.
Unfortunately, the music creator community lacks the independent financial resources –in the age of continuing undervaluation of rights, rampant digital piracy and pandemic-related losses–to rectify these inequities by expending millions more dollars to achieve full participation in CRB legal and rate-setting proceedings. Clearly, such an inequitable situation is antithetical to sound Governmental oversight in pursuit of honest and equitable policies and results.
In the interests of justice and fairness, we respectfully implore the CRB to adopt and publicize a period and opportunity for public comment on the record in these and other proceedings,especially in regard to so-called proposed “industry settlements” in which creators and other interested parties have had no opportunity to meaningfully participate prior to their presentation to the CRB for consideration, modification or rejection. In the present case, hundreds of millions of dollars of our future royalties remain at stake, even in a diminished market for traditional, mechanical uses of music. To preclude our ability to comment on proposals that ultimately impact our incomes, our careers, and our families, simply isn’t fair.
Finally, we request that this letter be made a part of the public record of the Phonorecords IV
proceedings. We extend our sincere thanks for your attention to this very difficult conundrum
for music creators, and further note that your consideration is very much appreciated.
Respectfully submitted,
Rick Carnes
President, Songwriters Guild of America
Ashley Irwin
President, Society of Composers and Lyricists
Officer, Music Creators North America Co-Chair, Music Creators North America
List of Supporting Organizations
Songwriters Guild of America (SGA), https://www.songwritersguild.com/site/index.php
Society of Composers & Lyricists (SCL), https://thescl.com
Alliance for Women Film Composers (AWFC). https://theawfc.com
Songwriters Association of Canada (SAC), http://www.songwriters.ca
Screen Composers Guild of Canada (SCGC), https://screencomposers.ca
Music Creators North America (MCNA), https://www.musiccreatorsna.org
Music Answers (M.A.), https://www.musicanswers.org
Alliance of Latin American Composers & Authors (ALCAMusica), https://www.alcamusica.org
Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news
European Composers and Songwriters Alliance (ECSA), https://composeralliance.org
Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org
cc: Ms. Carla Hayden, US Librarian of Congress
Ms. Shira Perlmutter, US Register of Copyrights
Mr. Alfons Karabuda, President, International Music Council
Mr. Eddie Schwartz, President, MCNA and International Council of Music Creators (CIAM)
The MCNA Board of Directors
The Members of the US Senate and House Sub-Committees on Intellectual Property
Charles J. Sanders, Esq.
Who Are These Law Clerks, Anyway?
[This post first appeared on Artist Rights Watch]
By Chris Castle
If you’re not a lawyer, you may not be that familiar with law clerks. The title sounds very…well, clerical. But make no mistake, they are very powerful people who are largely unknown to clients but who are in the room with their judges, often every step of the way. As Wikipedia tells us:
A law clerk or a judicial clerk is an individual—generally an attorney—who provides direct assistance and counsel to a judge in making legal determinations and in writing opinions by researching issues before the court. Judicial clerks often play significant roles in the formation of case law through their influence upon judges’ decisions.
Yet, we know virtually nothing about them from the outside. If your case is heard, wouldn’t you want to know about everyone who was influencing the outcome of your case?
There are ethical rules that cover judicial clerks, such as Maintaining the Public Trust: Ethics For Federal Judicial Law Clerks issued by the Judicial Conference Committee on Codes of Conduct which admonishes clerks that the rules apply to them, too:
During your clerkship, you will provide valuable assistance as your judge resolves disputes that are of great importance to the parties, and often to the public. The parties and the public accept judges’ rulings because they trust the system to be fair and impartial. Maintaining this trust is crucial to the continued success of our courts. That’s why, although you have many responsibilities that demand your attention, you must never lose sight of your ethical obligations.
While that all sounds good, how would anyone ever know exactly what the story is with the clerks who are writing opinions with their judge or justice that directly affect the outcome of your case. As the ethical rules clearly state:
Although many of your obligations are the same as those of other federal judicial employees, certain restrictions are more stringent because of your special position in relation to the judge. Some obligations continue after your service to the court concludes.
But again–how would you ever know? If you go to the bible of the revolving door, Open Secrets, you’ll notice someone is missing…the entire judicial branch of our government.
Let’s take the easy one: Conflicts of interest. When does a law clerk have a conflict of interest? The rulebook tells us:
Canon 3F(1) of the Code of Conduct advises judicial employees, including law clerks, to avoid conflicts of interest. Conflicts arise when you—or your spouse or other close relative—might be so personally or financially affected by a matter that a reasonable person would question your impartiality.
Note the disjunct: “personally or financially affected.” Either can give rise to a conflict or a question as to the clerk’s impartiality.
Conflicts come in several flavors, but two biggies are actual conflicts and potential conflicts, very routine inquiries in any conflict check. The ethical rules for clerks give examples of each: For example, an actual conflict is “The firm where you plan to work after your clerkship serves as counsel in a matter before your judge”. “Firm” in this case presumably applies to the situation where a company where the clerk plans to work appears before the judge.
A potential conflict includes “An attorney you met and talked with at a social function appears to argue a motion before your judge.” It’s not a far reach to think that the example would include a former professor, amicus, or author of an amicus brief filed or to be filed in a case before your judge.
But the point is, how would the litigants ever know any of these situations were an issue. Who keeps track of who knows whom among the clerks cloistered away in the ivory tower?
Let’s take a concrete example from the Above the Law Supreme Court Watch blog which handicaps U.S. Supreme Court clerk hires:
Joshua Revesz (Yale 2017/Garland) will be clerking for Justice Kagan in OT 2020. If his distinctive surname rings a bell, perhaps you’ve heard of his famous father: Professor Richard “Ricky” Revesz, former Dean of NYU Law School, and a former Supreme Court clerk (OT 1984/Marshall).
Readers of ARW may also recognize the name from a different place: The deep and abiding controversy over the American Law Institute’s failing Restatement of Copyright project. Professor Revesz joined the ALI in 2014 right after the noted Lowery insulter, Spotify lawyer, Lessig mentee and all round anti-copyright advocate Christopher Jon Sprigman joined the NYU faculty in 2013, presumably under then-Dean Richard Revesz.
Somehow–we don’t know exactly how–of all the lawyers in all the world, how ALI Director Revesz chose Professor Sprigman to run the Restatement of Copyright project, an undertaking that by all reports is devoted to weakening copyright and expanding loopholes for Big Tech. How do we know this? Because Sprigman pitched Revesz on the idea very soon after Revesz took over at ALI.
And the rest is history with everyone from authors to the Congress criticizing the very idea of a Restatement of Copyright; indeed, Professor Peter Menell of the UC Berkeley law school and Professor Shyamkrishna Balganesh of Columbia law school wrote an extensive critique that “explains why perfunctory extension of the common law Restatement model to copyright law produces incoherent, misleading and seemingly biased results that risks undermining the legitimacy of the eventual product.” (“The Curious Case of the Restatement of Copyright“). In other words–it’s bad.
It will come as no surprise that I would go further–I think that is exactly the purpose of the Restatement (and Professor Samuelson’s Copyright Principles Project it descends from).
Hold on, you say–what does this have to do with Clerk Revesz and his judge, Supreme Court Justice Elena Kagan, the former Dean of Harvard Law School (whose remarks at the 10 year anniversary celebration of the Berkman Center are illuminating (home to both Lessig and poker aficionado and alleged counsel to copyright infringer Mr. Tennenbaum, Charles Nesson)). Maybe nothing.
But isn’t it the kind of thing you might want to know about someone who was in close contact with someone who was deciding the outcome of your case? Or was in close contact with other clerks who were deciding the outcome of your case? How would you ever know what contacts the clerks had with anyone who might be influencing their case or who had donated money to an institution that benefited the family member of someone who had influence over your case? Either directly, over cocktail party conversation or the dinner table? I am not implying any skulduggery here, it could all have been very innocent or appear so as conflicts often do.
Did it happen? We don’t know, because when we go to Open Secrets there’s no judicial branch disclosure. Now certainly judges have to file public financial disclosures. (That’s how we knew about Judge Ware’s employment by Santa Clara Law School when he presided over the Google Buzz cy pres and ordered $500,000 be given to that university–“now-retired federal district judge James Ware rewrote the settlement to direct $500,000 to Santa Clara Law School, where he taught. The money went to fund a center for ethics.”)
While their judges are obligated to public financial disclosures, clerks do not have such obligations to litigants, much less to the public. Disposition of conflicts disclosed by clerks seem to be handled in chambers without consulting the litigants.
Given the number of clerks in chambers across the country, the possibility for conflicts are significant. When a lawyer has a conflict of interest that is waivable, she must give the client the option to waive the conflict with informed consent. But if the conflict is not waivable or the client refuses to waive, the lawyer must decline the representation.
Is there a corollary for law clerks? There definitely are rules and there definitely are processes. But are the litigants ever asked if they consent to a conflicted clerk working on their case?
I’ve never heard of it. Maybe there should be such a process.
Guest Post: What Would @TaylorSwift13 and Eddie @cue Do? One solution to the frozen mechanical problem
By Chris Castle [this post first appeared on the MusicTechSolutions blog]
Who can forget how Taylor Swift stood up for songwriters, producers and artists against Apple’s bizarre decision to impose a royalty-free three month trial period on the launch of Apple Music. (Of course, songwriters, producers and artists weren’t the only ones involved, but that’s a story for another day.)
What is equally memorable is how fast Apple changed course and all the goodwill that came to Apple as a result. Faster than you can say “Arsenal”, Eddie Cue announced that Apple would scale it back. Lemonade out of lemons. Of course, the issue should have been obvious, but sometimes smart people miss the point like everyone does sometimes. (Rolling Stone has a good short post on the backstory.)
The point of the story is that when you make a mistake, it’s better to fix it quickly than let it fester. So it is with the “frozen mechanical” problem that has become all the rage in recent days. The good news is the problem can be solved with the payment of money. It won’t be easy, but as a great man once said, this is the business we’ve chosen.
The Copyright Royalty Board decides on the statutory rate that’s paid under compulsory content licenses in the United States. For mechanical royalties, the CRB makes that decision every five years which means that if there isn’t a CRB hearing going on at any given moment, wait a little while and there will be one. (Needless to say, the volume of CRB hearings varies directly with full employment for lawyers and lobbyists in Washington, DC.) The “frozen mechanical” issue dates back to 2006 (or 2009 depending on how you count it) when the CRB allowed the end of rising mechanical royalty rates on physical and permanent downloads (and a couple others). However, the sour memories of frozen mechanicals date to 1909–also a story for another day.
Instead, the CRB has allowed a private agreement among the biggest players to become the law. This has happened at least one other time and it appears that it is about to happen again according to public documents filed with the CRB on March 2, 2021 (read it here). Contrast that private agreement to the bitter struggle against the streaming services over streaming mechanicals that is still in the appeal process. Different people paying, same songwriters getting paid.
If you haven’t heard about the tentative settlement by private agreement at the CRB, it admittedly was not well socialized.
The inescapable problem is that any fixed or “frozen” rate determined at one point in time but paid over relatively long periods of time is at the mercy of inflation in the economy that may rise in that intervening time period. The Congress and the industry recognized this harsh truth in the 1976 revision to the Copyright Act and eventually indexed mechanical rates, meaning that they floated upward with the Consumer Price Index. (CPI has its own problems, but it’s a bogey that lots of people use so it’s easier than reinventing the wheel with a bespoke factor.)
Given what has been happening in the economy, it was inevitable that inflation was about to come back strong in the U.S. and global economy. Sure enough, the Department of Labor announced yesterday:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in April on a seasonally adjusted basis after rising 0.6 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment. This is the largest 12-month increase since a 4.9-percent increase for the period ending September 2008.
Yes, the CPI ignored the Fed and increased like the pesky little devil it is. There’s no reason to think that this is going to stop any time soon. (If you were born after 1960 or so, you may not remember that inflation and stagflation resulted in the prime interest rate peaking at 21.5% in December of 1980. That drove mortgage rates to 13.41% in 1981 (often plus points). And then there were the credit cards. That’s where inflation can lead. Personally, my money is on stagflation in the form of high inflation and high unemployment due to what Secretary Yellen called the scarring effects of the pandemic which the music business is experiencing in spades.)
It just wouldn’t be prudent to enter into a long term contract at a fixed rate that does not take into account inflation. Yet that is exactly what the tentative settlement wants to do with the mechanical rate for physical, downloads, and a couple other categories. Yet, we must acknowledge that it is very difficult to herd the cats to get them to agree to anything. But having gotten everyone to agree to freezing mechanicals and having gotten the CRB to agree to adopt that agreement in the past, it may be the case that the parties can get the CRB to let them increase mechanicals going forward.
In other words, take a lesson from Taylor Swift and Eddie Cue and do a quick course correction before the final settlement gets announced on May 18.
So what would that look like? Precedent suggests that the CRB (and its predecessors) have accepted two principal methods of increasing the rate, which is phased in over time: fixed penny-rate increases and CPI indexing. My suggestion would be to employ both methods in a greater of formula (so popular with streaming).
If phased in over 5 years like other rates, it seems that there could be an immediate step up to compensate songwriters for a rate was frozen starting at the time that physical was still a very significant percentage of sales back in 2006. That stepped up rate could then gradually increase with a greater of a fixed penny increase or CPI. I wouldn’t presume to tell anyone what that step up should be, but if you apply the CPI index, it should probably be about 4¢, bringing the minimum rate to 13¢ from 9.1¢. Given that big–albeit entirely justified–jump, increases over the out years might be more modest.
Now that we know that there’s a strong possibility that inflation will be in our lives for the foreseeable future, the good news is there’s still time to do something about it. The CRB has shown us that they are willing to accept radical changes in the mechanical royalty rate by adopting private settlements, so there seems to be no impediment. I’m not aware of a rule that says the CRB only adopts rules that freeze songwriters in place, so it should work to the songwriters betterment and not just to their detriment.
We should ask, what would Taylor and Eddie do?
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.
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.
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.
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.
The Trichordist 
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