Category: Copyright Royalty Board

Songwriters Are Being Asked to Accept Something We’ve Never Seen Before

The freeze is back.  

The first settlement in the Phonorecords V mechanical royalty proceeding is now on file (see below). A settlement is supposed to result from a “voluntary negotiation,” so the document raises a simple question: when exactly did the negotiation happen?

78742Download

The parties describe “conversations” with other participants. Maybe there were conversations. But conversations are not the same thing as negotiation. A proposal presented as essentially a finished product, with little or no opportunity to influence its terms, is notification—not negotiation.

The Parties have had settlement conversations regarding the so-called Subpart B rates and terms with the other copyright owner Participants in the Proceeding (Songwriters Guild of America, World Collections, Inc., Eight Mile Music Companies, and George Johnson), who declined to join this settlement.

That distinction is crucial because this settlement would establish the statutory mechanical royalty rate for physical records and permanent downloads starting in 2028 through 2032.  Those rates affect every songwriter, including those ex-US songwriters whose songs are exploited in the US.  According to sources overseas, ex-US songwriter groups were not consulted, although it is customary for NMPA and NSAI to not engage with them even though they are a significant group (other than major mostly English language songwriters who are represented in the US by major publishers).

This means that it is likely that an alternative proposal or several alternative proposals will come to the Copyright Royalty Board in coming days from those who were not included in the NMPA’s settlement.  As the settlement itself anticipates, whatever deal the Judges end up adopting will be published as a tentative ruling allowing public comment, but that’s down the line.  Watch this space or the CRB website for Phonorecords V for more on deadlines, etc., if you want to comment.

To our knowledge, this is also the first time we’ve seen multiple competing settlements in a CRB phonorecords proceeding. Multiple settlements are common in webcasting and other CRB cases because different categories of music users—commercial broadcasters, NPR, college radio, religious broadcasters, and others—often negotiate different deals tailored to their own services. Mechanical royalty proceedings have traditionally been different. Everyone is negotiating one statutory rate that applies across the board divided into two broad categories by music user: labels (who pay for physical and downloads), and digital services like Spotify, Apple, Google, Amazon, and Meta (who pay for streaming mechanicals and control the global streaming market and some of which largely control AI models so lead the charge on AI theft for training).

The settlement itself also leaves some obvious questions unanswered.

Artificial intelligence is rapidly changing every aspect of music licensing, yet AI is not mentioned at all in the settlement. If downloads or streaming services increasingly contain AI-generated tracks that may not even qualify for copyright protection, should those recordings receive statutory licenses or royalties at all? The Copyright Office has repeatedly stated that works lacking sufficient human authorship cannot be registered for copyright to enjoy the protections of the Copyright Act, and the statutory license is part of the Copyright Act. If that principle eventually affects downloads or streaming (which we think it does right now), it is difficult to imagine that it will never influence the economics of physical or download mechanical royalties as well. That issue received no attention in the NMPA’s settlement.

Then there is another provision that deserves far more discussion.

The settlement continues the existing CPI adjustment mechanism that songwriter’s fought for in the last rate setting that increased the mechanical rate from the frozen 9.1¢ proposed by the NMPA and major labels to 12¢ plus a “Cost of Living Adjustment” (or “COLA”) thanks to the Judges rejection of the extended freeze. In other words, they did the opposite of what we recently suggested in Don’t Freeze Mechanicals Again.

Adopting a 12¢ base rate makes no sense—that’s the same rate as the Judges took as the base rate for the first year of the five year rate period starting in 2023 and then applied the COLA to that rate in subsequent years.  Of course, that 12¢ rate has been eroded by inflation every year and is now worth about 10¢ without the COLA, but songwriters negotiated and received that COLA which sustained the value of the rate. That’s how we got from 12¢ in 2023 to the current 13.1¢ rate in 2026 that will probably increase again for 2027 (our guess is somewhere in the 13.4¢ to 13.6¢ range).  Why wouldn’t you just take that highest rate achieved during the last year of the Phonorecords IV period (2027) and start applying the COLA to that in the first year of the Phonorecords V period (2028)?  Rather than go back to the arbitrary 12¢ reference rate? Huh?

On its first glance, adopting a COLA for the new rates sounds reasonable because it protects songwriters against inflation. But the formula contains no floor preventing the statutory rate from declining if cumulative CPI were ever to fall.

Deflation may be unlikely. That’s not the concern.  But the COLA could still cause rates to decline. All that has to happen is that inflation doesn’t rise at the same rate or greater from one year to the next and then the COLA-adjusted statutory rate will decline.

The point is that, for what may be the first time in the history of the statutory rate and certainly since the modern Copyright Act took effect in 1978, songwriters are being asked to accept a statutory mechanical royalty structure under which the minimum statutory rate could actually move backward, and very likely will decline.

A simple solution exists. The regulation could easily provide that each year’s rate is the greater of (1) the COLA-adjusted calculation or (2) the prior year’s rate. That would preserve the existing inflation formula while ensuring the statutory royalty never declines.

Why wasn’t that included?  Or better yet, why wasn’t an actual value based increase included since we are still digging out of two prior freezes of the statutory rate one from 1909-1978 when the rate froze at 2¢ and the other from 2006-2022 when the rate froze at 9.1¢.

That’s a fair question.

So is another one.

If we’re going to lock in the statutory mechanical royalty through 2032, shouldn’t there have been a meaningful discussion—not just among the settling parties, but across the songwriting community—about AI, future valuation, whether there should be a statutory minimum for streaming and whether the statutory minimum itself should ever be permitted to decrease?

Those conversations are coming. The only question is whether they should have happened before the settlement was filed instead of afterward.  We had hoped for a longer table with more voices.  Whether that happens remains to be seen.

USCO Mechanical Rates -w- SupplementDownload
by Trichordist

Don’t Freeze Mechanicals Again

The compulsory mechanical license was created by Congress in the Copyright Act of 1909 as a response to the rise of player pianos and piano rolls, which threatened to place control of a new music reproduction technology in the hands of a few dominant companies. To prevent monopoly control, Congress established a compulsory license allowing anyone to reproduce a musical composition upon payment of a statutory royalty. That royalty was set at 2 cents per song. Remarkably, the 2-cent rate remained unchanged for nearly seven decades, surviving the birth of commercial radio, records, tapes, and the modern recording industry until the Copyright Act of 1976. Given that the dominant music users are either monopolies themselves or effectively monopolies (Google, Amazon, Spotify), the entire purpose of the compulsory license seems laughable today, but oh, well—they’re from Washington and they’re here to help.

The Copyright Act of 1976 did more than end the 2-cent mechanical royalty freeze. It established a framework for periodic review of statutory rates so that songwriters would not again be trapped for generations at a rate set by Congress decades earlier. Over time, Congress refined that system, eventually replacing ad hoc adjustment proceedings with the modern Copyright Royalty Board (CRB). Today, the CRB conducts recurring rate-setting proceedings that evaluate economic conditions and marketplace developments. While the process is often contentious, the result has generally been upward movement in mechanical royalties, reflecting inflation, changing markets, and the enduring value of musical works.

USCO Mechanical Rates -w- SupplementDownload

The next mechanical royalty rate-setting hearings before the Copyright Royalty Board are upon us (called “Phonorecords V” follow it here). Like so many other aspects of the CRB, it seems that awareness of the hearing varies inversely to its economic importance for songwriters—meaning that the more it affects your pocketbook, the fewer people appear to know about it. Let’s see if we can change that dynamic.

The CRB will set rates for streaming mechanicals, a whole saga unto itself, but the Board also sets rates for the sale of physical records like vinyl and permanent downloads. It was these rates that created a dust up the last time around in Phonorecords IV, because the first tentative settlement was rejected by the Judges. Had the Judges not rejected the first settlement, the insiders would have frozen the physical/download rates for another five years in addition to the freeze that was already in place since 2006 for a total of 21 years.

The PR V resolution should be simple: whatever inflation-adjusted rate that is in effect at the end of the Phonorecords IV rate period should become the starting point for the next rate period in Phonorecords V. Why? Because the CRJs proposed the 12¢ PR IV base reference rate (plus COLA) as a compromise recognizing that the statutory rate had not been adjusted for inflation from 2006 through 2023. Having adopted an actual inflation-adjusted rate through a revised settlement in PR IV, choosing to revert to 12¢ in 2026 for PR V would effectively disregard the very rationale that justified the compromise in the first place. There’s nothing economically magical about a 12¢ rate in 2022 that should inform a new rate in 2028.

Yet there is a risk that some stakeholders may argue that the 12¢ reference rate established in Phonorecords IV should remain the permanent benchmark and that future proceedings should effectively restart from that 12¢ figure even though they know that the real rate is actually the inflation adjusted rate. This is the kind of thing lawyers come up with and is completely divorced from reality.

We explain the frozen mechanicals crisis from 2022

If the CPI-adjusted rate reaches approximately 13.6¢ by 2027, as current inflation projections suggest, such a 12¢ approach would amount to an immediate reduction in songwriter and publisher compensation. Rough justice, that 12¢ rate would actually be worth around 11¢ today, so asking for a 12¢ reference rate is like saying would you take 11 which would be roughly a 20% reduction. That would make little sense economically, legally, or as a matter of regulatory policy.

The key point is that the annual CPI adjustments adopted in Phonorecords IV are not temporary bonuses. They are part of the rate structure. The Judges did not establish a 12¢ rate and then provide a series of discretionary supplements. Rather, they established a rate that increases annually according to a defined formula. The resulting rate is the actual statutory royalty rate in effect at the time. If the rate reaches 13.6¢ in 2027, then 13.6¢ is the reference rate for PR V.

Resetting the benchmark to 12¢ would create a downward ratchet unlike anything that participants in a functioning market would expect not to mention in the post-1978 history of the Copyright Act. Songwriters and publishers would receive annual increases throughout the rate period only to see those increases erased at the start of the next one. Such a result would be arbitrary and would undermine confidence in the stability of the statutory license.

For years, the mechanical royalty remained frozen at 9.1¢ while inflation steadily eroded its economic value. Phonorecords IV represented an acknowledgment that perpetual freezes are difficult to justify in a modern economy. It would be strange indeed if the solution to one rate freeze were simply to create another.

There is also a practical problem. If the statutory rate can be reset downward whenever a new proceeding begins, then the annual CPI adjustment becomes less meaningful. Parties will spend years litigating a rate structure only to find that the resulting increases can be wiped away at the start of the next cycle. That is not how durable rate regulation is supposed to work.

The cleaner approach is the obvious one. The final rate in effect during one period should become the reference rate for the next period unless the evidentiary record demonstrates that a different rate is warranted. This is how the rate was set from 1978 to 2006 and how most regulated systems operate. The existing rate serves as the baseline, and adjustments are made from there.

The issue is ultimately one of continuity. The statutory mechanical royalty should evolve through evidence-based proceedings, not through accounting tricks that erase previously awarded increases. If the rate reaches 13.6¢ in 2027, then 13.6¢ should become the starting point for the next rate period.

The rate clock should move forward, not backward. A songwriter named Hoyt Axton worked his tail off getting the rate on a track to increase with the passing of the 1976 Copyright Act. And I for one will never forget him.

[A version of this post first appeared on MusicTechPolicy]

by thetrichordist

Phonorecords V and the “39 Steps” Problem: Time for the CRB to Fix Streaming Mechanicals

Everybody knows that the boat is leaking, everybody knows that the captain lied….
Everybody Knows by Leonard Cohen

We are now well into the next Phonorecords proceeding at the Copyright Royalty Board (CRB) where the government sets mechanical royalty rates for songwriters. Readers may remember that the last rate-setting was Phonorecords IV where Trichordist helped spread the word about the attempted end run around songwriters to freeze physical rates (vinyl & downloads) at 9.1¢ for another five years but instead resulted in an increase to 12¢ plus a cost of living adjustment which has now increased to 13.1¢. (In a demonstration of humility and lack of pomposity, these proceedings are given Roman numerals like the Super Bowl, so the current example of gladiatorial combat is titled Phonorecords V.)

Inside the years-long litigation-like proceeding, there is an issue hiding in plain sight inside the existing and ancient streaming mechanical royalty rate structure that we fondly call “the 39 steps” in honor of John Buchan, Alfred Hitchcock and Richard Hannay. Despite the blood lust for complexity from the ancien régime that clings to its one sided royalty pool, there is one part of this unfair business practice that the CRB can and should address this time around.

Start with the basics. The streaming mechanical formula—the so-called “39 steps”—is built on a simple premise: we are calculating royalties for the use of musical works protected by the Copyright Act. The inputs and deductions in that formula are not abstract accounting categories. They are supposed to reflect real payments for real statutory rights.

That premise is now under pressure because of…wait for it…artificial intelligence and the AI slop that is flooding the market.

The rise of generative AI has introduced a new category of output that does not fit neatly within the Copyright Act. The U.S. Copyright Office has made clear that works generated entirely by AI are not copyrightable, and that protection exists only to the extent of meaningful human authorship in a proportion yet to be determined. (Courts have moved in the same direction, and the Supreme Court’s denial of cert in Thaler v. Perlmutter leaves that framework intact.)

Yet the streaming mechanical formula has no explicit mechanism to deal with AI slop. That creates a risk on two fronts.

We have to consider the royalty pool itself. The compulsory mechanical license applies when the exclusive rights of a copyright owner in a musical work are implicated. If a so-called “AI track” is not a protected musical work, then there is a serious question whether it belongs in the section 115 system at all. Treating non-copyrightable output as if it were a statutory musical work risks diluting the pool for actual rightsholders.

And then, of course, we have the Step 2 deduction for performance royalties. The regulation allows services to subtract payments for the public performance of musical works before calculating the payable pool. But what happens if a service characterizes payments to a platform like AIMPRO as “performance royalties”? If those payments are not, in fact, for the public performance of a copyrightable musical work, they should not reduce the pool. Otherwise, the 39 steps formula starts to leak money, and eventually leak in a big way.

Not only that, but if the U.S. Copyright Office ultimately articulates a workable “human authorship” framework for AI-assisted works during the Phonorecords V rate period, the downstream impact on the Copyright Act section 115 system could be profound: for the first time, the “39 steps” calculation may have to accommodate fractional copyrightability within a single work. Instead of treating a musical work as an either/or, services and the MLC could be forced to parse which portions of a track are attributable to human authorship and therefore eligible for royalties, and which are not. That would introduce a new layer of allocation on top of an already complex formula—effectively embedding micro-level authorship determinations into macro-level royalty calculations—and raising the administrative, evidentiary, and dispute-resolution burdens across the entire system.

The key point is that the CRB does not need to resolve all questions of AI copyrightability to act here for purposes of the 39 Steps. It can simply clarify what is already in the statute and the regulation: The formula applies only to payments that correspond to rights in nondramatic musical works, and deductions are limited to payments that genuinely compensate the public performance of such works. That is not a policy innovation outside the scope of the CRB’s mandate from Congress. It is a classification rule.

If there is doubt about whether a category of material such as purely generative AI output qualifies as a “musical work” for these purposes, that is a question the CRB can refer to the Register of Copyrights in a pinch. But the CRB should not leave the door open for the mechanical royalty pool to be diluted by payments for things that fall outside the Copyright Act altogether. If you get a paycheck every week this may not be that important to you, but if you live off of royalties it damn sure is.

This may also be the moment to ask a more fundamental question: whether the industry should abandon the “39 steps” construct altogether. Whatever its historical justification—particularly in Phonorecords I back in 2009, where publishers were trying to shield early services like MusicNet from crushing retroactive exposure—the current formula has outlived its usefulness. Today, it functions less as a fair pricing mechanism and more as a constraint, allowing services to use their complementary oligopoly market power to effectively cap mechanical royalties by anchoring them to a royalty pool determined in part based on what labels get paid. The result is a structurally odd feedback loop in which sound recording deals influence the value of adjacent musical works. A cleaner alternative would be a flat, escalating penny-rate framework, like what the Judges adopted for both physical and downloads as well as webcasting royalties—simpler, more transparent, and far less susceptible to strategic manipulation.

We have been here before. The history of section 115 is, in many ways, the history of closing gaps between statutory language and market behavior.

Phonorecords V presents another such moment.

The CRB should take it.

by Trichordist

Kafka’s Hypothetical Market Strikes Again: The DSPs’ Latest Move to Silence Songwriters by Throwing GMR Out of Phonorecords V

If you want to understand how the streaming services really view songwriters, look no further than their joint motion to exclude Global Music Rights (GMR) from Phonorecords V. It is not subtle. It is not principled. It is an attempt to narrow the field to those voices the services already know how to manage. (All of these services are being investigated by the Texas Attorney General “over alleged payola schemes in which they accept bribes to artificially promote certain songs, artists, or content.”)

Services’ Joint Motion to Exclude GMR (For Filing)Download

The Services—Spotify, Apple, Amazon, Pandora, and Google—argue that GMR lacks a “significant interest” because it licenses performance rights rather than mechanical rights. That argument is technically obvious and substantively hollow, a mile wide and an inch deep, if that. GMR represents songwriters whose mechanical royalties are directly at issue in this proceeding. The idea that those songwriters somehow lose their “significant interest” because their representative also licenses performance rights is not just formalism. It is exclusion by design.

Let’s be clear about what is at stake. GMR affiliates include some of the most commercially significant songwriters in the world—writers like Drake, Bruno Mars, The Weeknd, Pharrell Williams, Nicki Minaj, Post Malone, Pearl Jam, Prince, and Tyler, the Creator. Nobody else in this proceeding speaks for them. Not the NMPA, which represents publishers. Not the services, who are adverse. And certainly not a system that already tilts toward the parties who can afford to litigate at scale.

When songwriters affiliated with Global Music Rights made a choice about how to license their work, they chose a free market model. They chose to be represented by GMR and to negotiate performance royalties directly with users, in arm’s-length, private negotiations reflecting real-world value. That decision matters. It reflects a preference for market pricing over regulatory pricing, and for merit over compulsion.

But the moment you shift from performance rights to mechanical rights, that choice disappears. Why?

Well, that’s a good question, but the answer for now is that under section 115 of the Copyright Act, those same songwriters are forced into a compulsory license regime administered in large part through the CRB which sets the rates. They cannot opt out. They cannot negotiate freely. Instead, their work is swept into a statutory system where rates are set through a complex, expensive, and heavily lawyered process that bears little resemblance to a functioning market. It is a hypothetical market.

So we end up in a strange place, a Kafkaesque place. The same songwriter who can negotiate directly for the public performance of their work is denied that freedom when it comes to the reproduction and distribution of that same work. One side of the market is competitive and arms length. The other is managed and hypothetical.

That is not a neutral design choice. It is a structural constraint—one that continues to shape outcomes in favor of the services.

The Services claim that GMR lacks a “direct financial interest” in the outcome. That is a remarkable position. The entire proceeding is about setting the value of musical works in streaming. If the rate goes down, songwriters get paid less. If the rate goes up, they get paid more. That is the definition of a direct financial interest. The Services’ attempt to redefine “direct” to exclude the very creators whose works are being priced is not statutory interpretation. It is outcome engineering.

The Services also argue that GMR’s interest is merely “indirect” or “attenuated.” This requires ignoring the bargaining power of the songwriters who effectively are GMR. But this is the same playbook the services have used for years: isolate each rights silo, then argue that no one outside the narrowest licensing box is entitled to speak. The result is a fragmented system where the only voices that remain are those structurally aligned with the services’ preferred outcome.

Then there is the efficiency argument—the Services’ claim that allowing GMR to participate would make the proceeding “lengthy, complex, and expensive.” As opposed to what? Nasty, brutish and short?

That would be more persuasive if it were not coming from the very companies that have turned CRB proceedings into multi-year, multi-million-dollar wars of attrition. These are the largest corporations in commercial history (at least one of which is an adjudicated monopoly) arguing that the problem is too many songwriters having a voice.

Let’s call this what it is: a coordinated effort by a handful of dominant platforms to use their collective market power—and their litigation budgets—to shape the CRB process in their favor. The same companies that work relentlessly to drive down the royalties paid to songwriters are now trying to limit who is allowed to advocate for those songwriters to get fair treatment in the first place.

And here is the practical reality the Services are ignoring: even if the Judges exclude GMR, they are not solving the problem. They are postponing it. When the decision is released for public comment, the absence of these voices will not go unnoticed. It will be exposed—and it will undermine the legitimacy of the outcome. Because they’ll be back for comments which will attack the entire proceeding as arbitrary.

The CRB process already leans heavily toward those who can afford to participate. That is a structural fact. But actively excluding a representative of major songwriters—on the theory that those songwriters do not have a “significant interest” in how their own royalties are set—crosses a different line.

The Judges should reject this motion out of hand.

Because if the people who write the songs do not have a seat at the table, then whatever this process is—it is not a willing buyer, willing seller marketplace. Excluding GMR would raise the question of whether it was ever intended to be one.

by Trichordist Editor

Historical Losses from Statutory Rates–Are you ready for CRB 5 and the New Frozen Mechanicals?

The red line is the actual mechanical rate in pennies (nominal rate) compared to the blue line which is the inflation-adjusted rate (real rate). Notice that during periods without a COLA adjustment like we won for physical and CDs in CRB 4 (aka Phonorecords IV), the blue line is less than the red line.

An important feature of this graph is that the blue line continues the downward slope until it is saved by an increase in rates followed by a cost of living adjustment or stair step increases (some of which were due to a COLA).

As soon as the COLA comes off, the downward slope returns, meaning the buying power of the statutory rate declines. This is to be expected due to inflation–the downward slope will be more pronounced in times of high inflation.

Notice that this places a blank space on the area of the graph between the red and blue lines. That blank space represents lost revenue due to a fixed rate that is not adjusted for inflation. It is theoretically and industrywide loss of revenue.

It would be possible for songwriters to make the same calculation for streaming if the Copyright Office were required to publish the results of the CRB’s streaming mechanical calculation. This would be much easier because there has never been a COLA for streaming mechanicals, although there clearly ought to be.

One place to start making that case might be to calculate the industrywide loss from the failure to adjust for inflation in the rates the government forces us to take.

by Trichordist Editor

A Long-Overdue Win for Artists: CRB’s Web VI Rates Mark Major Step Toward Fairer @SoundExchange Streaming Royalties

In a landmark development for recording artists, the Copyright Royalty Board (CRB) has proposed new royalty rates under the “Web VI” proceeding, covering the period 2026 through 2030. These rates govern how much commercial broadcasters must pay for streaming sound recordings under the statutory licenses set forth in Sections 112 and 114 of the U.S. Copyright Act.

The new rates reflect the culmination of years of advocacy by SoundExchange and artist-rights groups and represent another meaningful upward adjustments in royalty rates. The Copyright Royalty Judges have adopted a meaningful schedule of increases—both in per-stream royalties and in the minimum annual fees webcasters must pay—designed to better align statutory streaming compensation with market realities. (Unlike streaming mechanical rates, webcasting royalties are a penny rate per play.)

A Clear Victory in Numbers

YearWeb V Per-Performance RateWeb VI Per-Performance Rate% Increase Over Web VWeb V Min. Annual FeeWeb VI Min. Annual Fee / % Increase
2026$0.0021$0.0028+33.33%$1,000$1,100 / +10.00%
2027$0.0021$0.0029+38.10%$1,000$1,150 / +15.00%
2028$0.0021$0.0030+42.86%$1,000$1,200 / +20.00%
2029$0.0021$0.0031+47.62%$1,000$1,250 / +25.00%
2030$0.0021$0.0032+52.38%$1,000$1,250 / +25.00%

These increases aren’t merely arithmetic; they represent a philosophical shift in how creators are valued in the digital economy.

Structural Adjustments

Beyond the rate hikes, the CRB has adopted operational changes proposed by SoundExchange to royalty reporting and distribution. For example:

– The late fee for audit-based underpayments is reduced from 1.5% to 1.0% per month, capped at 75% of the total underpayment.
– Starting in 2027, webcasters using third-party vendors must obtain transmission and usage data or contractually guarantee its delivery.
– If a commercial broadcaster fails to file a report of use, SoundExchange may now distribute royalties based on proxy data.

These tweaks aim to close loopholes and increase reliability in royalty tracking—critical steps toward a more transparent system.

The Road Ahead

While the Web VI proposal rule will be final after June 16, 2025, it is already being hailed as a pivotal win by artist advocates. For too long, streaming-era economics have undervalued creators in favor of platforms and intermediaries.

This ruling is a recognition—long overdue and hard-won. When finalized, the Web VI clear and easy to understand rates and terms will not only ensure a greater financial contribution for featured and nonfeatured recording artists and rights holders, but also reassert the foundational principle that creators should be paid fairly when their work fuels billion-dollar platforms.

For artists and musicians navigating a shifting industry, the law is catching up with the market it governs on the side of the creators who drive the business.

Of course, don’t forget that some of these same broadcasters who pay under the statutory license for streaming do not pay anything to artists for over the air broadcast of terrestrial radio for the exact same plays of the exact same records–another reason that Congress must finally pass the American Music Fairness Act. That’s why we support the #IRespectMusic campaign and the MusicFirst Coalition. Ask Congress to support musicians here.

Pie Chart Web VDownload
by Trichordist Editor

Confirm Your Mechanical Rates Have Escalated

By Chris Castle

As you probably already know, the statutory mechanical royalty rate for physical or downloads (not streaming) has increased as of January 1, 2025. This means that all floating rate licenses (e.g., not subject to controlled comp rates) should have increased as of January 1, 2025 from 12.4¢ to 12.7¢ due to the Phonorecords IV cost of living adjustment. (And of course should have increased in prior PR IV years in 24.). And of course we have Trichordist readers to thank for helping to persuade the Copyright Royalty Judges to reject the Phonorecords IV frozen mechanical rate settlement that led to the labels agreeing to an increase from 9.1¢ to 12¢ plus a cost of living adjustment on physical and downloads that rose to 12.4¢ in 2024 and now to 12.7¢ in 2025. (But remember there is no cost of living adjustment for streaming mechanicals like Spotify.)

It’s probably just a glitch, but I understand that HFA hasn’t updated the 1/1/25 rates yet for “licensing out” in at least one instance (see screen capture below obtained this week). I’m inclined to believe that the issue is with the database and would not be a one-off, but I could be wrong. That suggests to me that every songwriter and publisher with either a newly issued license since 1/1/25 or a floating rate license in place during PR IV rate period (2023-2027) should probably confirm that the respective COLA escalations have been properly applied as of January 1 of 2024 and 2025. I would imagine that this isn’t an isolated incident, but maybe it is. No reason to let grass grow, however.

Here’s the Copyright Royalty Board’s timely notice of the new rate effective 1/1/25–which means that the HFA system does not appear to have been updated unless the screen capture reflects a one-off which seems doubtful to me.

And for reference, this is the rate for 2024 with the COLA adjustment that may also have been misapplied–everyone would have to check to know if it was misapplied to them.

by thetrichordist

The Madness of Amazon’s Song Royalty Refund Demand

You can check out any time you like, but you can never leave.
Hotel California, written by Don Felder, Glenn Frey and Don Henley

There’s no opt-out in either the Hotel California or the compulsory song license. And Amazon’s demand for a royalty refund from songwriters demonstrates once again the madness of the Copyright Royalty Board rate-setting procedures. Whether it creates enough ripples in the booming business around buying out songwriter royalties remains to be seen.

How did we get to this point in the circus act? You may have noticed that sliced bread is in close competition with fire and the wheel for second place behind Greatest Human Accomplishments. Both fire and the wheel are yielding to streaming mechanical royalty rates in the Phonorecords III remand negotiations.  Yes, the so-called “headline rates” in Phonorecords III (or “PR III”) are a Nobel-worthy accomplishment.  At least according to the press agents.

And yet something curious has happened.  I’m told that Amazon, through its agent Music Reports (MRI), has posted what is essentially a demand letter in the MRI user portal.  This demand letter instructs publishers who have directly licensed songs to Amazon to pay up because of an overpayment of streaming mechanicals due to the adjustment required by the new-ish Phonorecords III remand rates that finally set the streaming mechanical rates for the industry.  Something similar may be happening at the MLC; we’ll come to that below in just a bit.

In a testament to just how whack the Copyright Royalty Board system actually is, the PR III remand concerns royalties paid from 2018 through 2022.  That’s right—starting six years ago.  This is largely due to the failure of the publishers to obtain a waiver of the PR III decision as a negotiating chip when they gave away the rest of the farm in Title I of the Music Modernization Act (also hailed as a great gift to songwriters). But I’d say it is primarily due to the desire of digital music services like Amazon—including the largest corporations in commercial history—to crush the kitchen tables of songwriters.  Because judging by the massive overlawyering in the Copyright Royalty Board, that sure looks like the motive.

And when it comes to the services crushing the little people, money is no object, even if they spend more on litigation than the royalty increase cost them.  Evidently the sadistic psychic benefit greatly exceeds the cost.

But Amazon evidently has discovered that even after all the shenanigans with PR III, it appears that they paid too much and now they want it back.  That’s right—Amazon shamelessly wants you to cut them a check.  Because a market value over $2,000,000,000,000 is just not enough. I wonder which buffoon advised Mr. Bezos that was a good idea.

Here’s what it looks like on MRI:

A few questions come to mind.  First, realize what Amazon is saying.  They were evidently accounting to publishers at the rates for Phonorecords II during the several years that the PR III rates were on appeal and then re-litigated before the Copyright Royalty Board.  The final PR III rates (sometimes called “remand rates”) issued in August of last year (2023) were supposed to be an improvement over the PR II rates don’t you know.  At least according to the braying that accompanied the announcement.  In fact, the PR III remand rates where it all ended up were themselves supposed to be an improvement, meaning that publishers were to be paid more under PR III than under PR II. Maybe that’s the difference between an increase in the payable rates compared to an increase in the payable royalties.

So if that’s true, and if Amazon paid PR II rates during the lengthy PR III appeal, why is there now an overpayment by Amazon?  An overpayment that they now want you to pay back? Wouldn’t you expect to see the true-up on new rates result in publishers receiving a credit for increased rates?  Especially if the stream counts and subscriber totals stayed the same on these previously-issued accounting statements? (Not to mention this may be happening at other services, too.)

Some of these PR III statements pre-date and overlap with the MLC’s creation and the “license availability date” for the 2021 blanket license established under Title I of the MMA.  That means that if you or your publisher had a direct deal with Amazon during the PR III rate period, there may be overlapping periods when the MLC took over Amazon’s accountings.

It has long been the standard industry practice that overpayments are just debited to your royalty account.  Nobody asks you to cut a check. Debiting your account is not much better–you still have to pay them back, and the so-called “overpayment” will still potentially zero out your MLC accounts, too. If you did a royalty buyout that included an assumption that these royalties would be paid, your financier may come up short under either direct license or MLC.

This is particularly true for publishing administrators.  If a service were to debit an administrator’s account, that might result in the administrator having to go out of pocket in order to pay some of their publishers for the amount of the demand. If that overpayment is large enough, that administrator may owe royalties to publishers that did not have the benefit of the overpayment. This is pretty elementary math, 2 plus 2 being what it is. You don’t even have to carry the 1.

However, great news!  Amazon will give you an interest-free payday loan so you can pay down your new debt over six months. Or before they send it to collection.

Now the MLC—it’s entirely possible that Amazon is pulling the same stunt under the statutory license. However, it appears that MLC is doing what is normally done in these situations and will be debiting and crediting as necessary.  If you’re concerned, it would be worth checking and asking for an explanation from the MLC.

Even so, it does not change anything about why there is an overpayment in the first place.  If there were ever a situation that cried out for an intensive royalty compliance exam, this is it.  It is hard to believe that all this to-ing and fro-ing with your royalty payments across multiple rates in multiple accounting periods hasn’t resulted in mistakes.  No crime, it’s complex.  That’s why we have audits. At a minimum, Amazon needs to provide publishers with a detailed breakdown of how the repayment was determined along with an explanation of where the rates changed that caused the overpayment.

That’s why Amazon and any other similarly situated service should welcome an extensive audit.  In fact, the MLC should just include the true-up (or true-down in Amazon’s case) in their already-noticed audit of Amazon. This episode also raises the question of who else is going to pull the same stunt.

This slice of life demonstrates once again how unworkable the entire Copyright Royalty Board system is for streaming mechanical royalties. The services get to drag out appeals forever, and songwriters pay the consequences. But like the man said, you can never leave. And the Music Modernization Act just got every one locked in even deeper.

[A version of this post first appeared on MusicTechPolicy]

by Trichordist

Artist Rights Institute: Estimated 2025 Inflation Adjustment for Physical and Vinyl Mechanicals

A backgrounder for artists and songwriters from the Artist Rights Institute

Summary: The fight over frozen mechanicals continues to pay off as songwriters log another cost of living increase for physical/downloads while streaming falls farther behind.

The Copyright Royalty Board adjusted the US statutory mechanical royalty for physical carriers like vinyl, CDs and downloads annually during the current rate period. This is entirely due to the success of public comments by the ad hoc songwriter bargaining group that persuaded the Copyright Royalty Judges to reject the terrible “frozen mechanicals” settlement negotiated with the NMPA, NSAI and RIAA. 

As it turned out, once the judges rejected the freeze as unfair, the labels quickly agreed to a fair result that increased the physical/download rate from a 9.1¢ base rate to the 12¢ rate suggested by the Judges which went a long way to making up for the 15 year freeze at 9.1¢. In fact, if it had just been presented to the labels to begin with, a tremendous amount of agita could have been saved all round.

Crucially, not only did the base rate increase to 12¢, the judges also approved a prospective cost of living adjustment determined by a formula using the Consumer Price Index. The end result is that unlike streaming mechanicals paid by the streaming services like Spotify (i.e., not the labels) the value of the increase from 9.1¢ to 12¢ has been protected from inflation during the rate period (2023-2027). 

Unfortunately, the streaming services were allowed to reject a cost of living for streaming mechanicals, notwithstanding the Judges’ and the services’ acceptance of an COLA-type adjustment to the multimillion dollar budget of the Mechanical Licensing Collective. That COLA is ased on a government measurement of inflation (the Employment Cost Index) comparable to the CPI-U that is used to increase the services’ financing of salaries and other costs at the Mechanical Licensing Collective. So those who are paid handsomely to collect and pay songwriters get a better deal than the songwriters they supposedly serve.

What is the increase in pennies this year for the physical/download mechanical rate? The Judges determine the inflation-adjusted rate every year during the five year rate period (2023-2027). The calculation is made in December for physical/download with reference to the CPI-U rate announced by the Bureau of Labor Statistics as of December 1, which means the rate published on November 11. The new rate goes into effect on January 1, 2025.

At this point, there does not seem to be any indication that there will be a large spike in inflation between now and November 11, so we can use the September rate (just announced in October) to make an educated guess as to what the 2025 statutory rate increase will be for physical/downloads (rounded down):

So we can safely project that the base rate will increase from 12.4¢ for 2024 to about 12.6¢ in 2025 without firing a shot. If you have a 10 x 3/4 rate controlled compositions clause, that means the U.S. controlled pool on physical will be approximately 94.5¢ instead of the old frozen rate of 68.25¢.

It’s important to note a couple things about the relevance of CPI-U as a metric for protecting royalty rates from the ravages of inflation. First of all, the CPI-U is a statistical smoothing of the specific rates for particular goods and services that it measures and doesn’t reflect the magnitude of changes of some components.

For example, the September CPI-U increased by 0.2% on a seasonally adjusted basis. However, the shelter index and the food index increased at higher rates:

The shelter index rose by 0.2%, and the food index increased by 0.4% Together, these two components contributed over 75% of the monthly increase in the all items index.

Moreover, the MLC itself receives an increase that is tied to the lesser of 3% or the Employment Cost Index (which was approximately 4.5% for the trailing 12 months ending June 30):

Chris Castle said, “These are good benchmarks to keep in mind as we head into a new rate setting period in a year or so when I expect songwriters to demand a COLA for streaming mechanicals. No more poormouthing from the services. If they can give it to MLC, they can give it to the songwriters, too.”

by Trichordist