Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)
Copyright Royalty Judge David R. Strickler Chief Copyright Royalty Judge Jesse M. Feder Copyright Royalty Judge Steven Ruwe US Copyright Royalty Board 101 Independence Ave SE Washington, DC 20024
To Your Honors:
My name is Abby North. I am a music publishing administrator based in Los Angeles. My views expressed in this letter are solely my own.
With my husband, I am a copyright owner of the classic song “Unchained Melody,” among other copyrights. I also administer musical works on behalf of songwriters, their families and heirs. My clients depend on royalties to pay for life’s essentials.
It is imperative that the Judges understand that despite what some parties may argue, Subpart B royalties absolutely are meaningful to songwriters.
There is no dispute over the fact that streaming is the most prominent form of music distribution, as reported in the popular press. But mounting evidence shows a significant and consistent growth in vinyl production. CDs remain popular among some listeners. Other listeners prefer to have permanently available digital copies, i.e., downloads.
Vinyl, once written off for dead, has enjoyed almost 15 years of consecutive growth, with more than 19 million vinyl records sold in the US so far this year. Per Digital Music News, this is an increase of 108% over the previous year. The Judges need only look to this year’s Record Store Day on July 17 for confirmation of the vinyl resurgence.
Amazon Music now offers a “Vinyl of the Month” club, curated by “the experts at Amazon Music.”
Vinyl pressing plants are overwhelmed by the volume of orders they are fulfilling, and it is commonly understood in the industry that vinyl sales would be far higher if production could keep up with demand.
Vinyl is now treated as a merchandise item by many labels and artists, and as such it is a significant contributor to the overall earnings of many artists, from the smallest independent to Taylor Swift.
An artist/songwriter of Taylor Swift’s stature may not rely on earnings from vinyl, but other songwriters most certainly do. This is particularly true of artist/songwriters who have seen their high margin vinyl sales cannibalized by streaming (as was noted in the recent report by the UK Parliament’s Digital Culture Media & Sport Committee on the Economics of Music Streaming). And ALL songwriters rely on any source of revenue available for exploitation of their songs.
As a rightsholder and administrator of legacy and current copyrights, I can testify that mechanicals from physical and download media are a substantial share of overall royalties.
In reviewing my clients’ 2Q21 statements, one legacy songwriter received 57% of his period royalties from physical mechanicals and 9% from download mechanicals. Another writer had uniquely high grand rights and sync royalties for the period, but still saw 17% of overall royalties from physical and download mechanicals. If we remove the grand rights and sync amounts, the overall total from physical and download mechanicals is 35%.
It is clear that streaming rates, even at 15.1%, are not sustainable for most songwriters. It is obvious that without a more equitable streaming revenue distribution model, we will continue to see songwriters leave the business entirely, or at least be forced to pick up side gigs to increase their income.
These facts provide the undeniable case against freezing the Subpart B rate at $.091 per unit. Arguments I have heard from insiders defending their decision to freeze the rates are that downloads will decline if Apple stops supporting iTunes, and that physical sales are so negligible that they just do not matter. Walk into any record store or follow fans to the merch stands at a concert and you will see and hear the real story. Also, Apple is not the only distributor of digital downloads.
It appears that significant and impactful decisions are allowed to be made by a tiny group of participants that is in the room primarily because this group has tens of millions of dollars to fund legal expenses. This very small group with undeniably substantial resources and very deep pockets decided that it is in support of a rate freeze.
This very small group is now asking the Judges to apply its private deal to each and every songwriter in the world. And yet, almost none of these songwriters were included in that decision to freeze the rate.
The ability for just two trade organizations to have such an oppressive global impact is staggering. What about the rest of the songwriters and independent publishers and their due process rights?
Respectfully, I implore the Judges to keep in mind that the NMPA does not represent all music publishers, and the NMPA itself owns no copyrights. At best, the NMPA Board of Directors could speak solely for the music publishers that employ them.
NSAI is one of many United States songwriter organizations, and like the NMPA, owns no copyrights. It most certainly does not represent all songwriters from all US songwriter organizations, and it certainly does not represent songwriters around the world who are not affiliated with songwriter organizations.
As an illustration of global songwriter opposition, both the UK’s Ivors Academy and the European Composer and Songwriter Alliance have each come out against frozen mechanicals.
I ask the Judges to recognize that NSAI and the NMPA do not have such broad authority to reasonably put forth decisions that affect all the world’s songwriters and publishers.
In the recent Web V decision, the Judges acknowledged the need for an inflation-indexed increase in the statutory rate for sound recordings. Due to the inevitable decline in buying power created by inflation, the physical and download mechanical rate must correspondingly increase.
I have no objection to a settlement related to mechanicals. I do have an objection to a freeze proposed without authority that does not both increase the old $.091 rate and also include an adjustment for inflation at a bare minimum.
To freeze the rate for 20 years ignores the debilitating impact of inflation, ignores the needs of songwriters and truly independent music publishers like me who are not represented before the CRB, and frankly, displays a willingness to undervalue music.
It is imperative that in the future, publishers and songwriters at large, domestically, and globally be given a mechanism to participate in the rate-setting process, whether or not they have millions of dollars to spend on lawyers.
Music is crucial to human well-being. The American Songbook and its many creators are a treasured element of United States, and in fact, world culture.
How can something so important, so meaningful and so rare not be deserving of a rate increase that at least mitigates the effect of inflation?
Chief Copyright Royalty Judge Jesse M. Feder Copyright Royalty Judge David R. Strickler Copyright Royalty Judge Steve Ruwe
U.S. Copyright Royalty Board
101 Independence Ave SE / P.O. Box 70977 Washington, DC 20024-0977
July 26, 2021
IN RE DETERMINATION OF ROYALTY RATES AND TERMS FOR MAKING AND DISTRIBUTING PHONORECORDS, DOCKET NUMBER 21-CRB-0001-PR (2023-2027)
(Phonorecords IV)
Honorable Judges,
I am a music lawyer in Austin, Texas, and represent songwriters throughout the state of Texas. Over the last two months, I have spent a considerable amount of time educating songwriters about the proposed settlement (“Proposed Settlement”) presented by the three major labels, the National Music Publishers Association (NMPA) and Nashville Songwriters International (NSAI) (collectively “Settlement Parties”) to freeze the statutory mechanical rate in connection with physical products and digital downloads through 2027.
The feedback I received was straightforward and foreseeable: songwriters do not wish to see this rate frozen for yet another five years. As someone who works with songwriters far removed from the major music industry hubs, like Los Angeles, Nashville and New York, and from the place where the rules are made, Washington, D.C., you quickly recognize that a significant education gap exists, and many songwriters do not comprehend basic copyright and music publishing concepts. Naturally, if songwriters do not grasp music publishing basics, they do not know about this Phonorecords IV proceeding, or government rate-settings in general.
We must remember those songwriters as this rate-setting progresses – as they too are copyright owners who are entitled to due process and transparency. There would be no music publishing business without them.
Thank you for the opportunity to comment in this proceeding and please note that the views I am expressing here are not made on behalf of any client or the State Bar of Texas.
I. Private Party Settlements Between Willing Buyers and Willing Sellers Representing Different Sides of the Same Corporate Coin Do Not Reflect an Effectively Competitive Market.
With the passage of the Music Modernization Act in 2018, the Copyright Royalty Board (CRB) was instructed in future Section 115 rate-setting proceedings, like this Phonorecords IV proceeding, to “establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.” Pub. L. No. 115-264, § 102(a)(3), 132 Stat. at 3680. In establishing such rates and terms, the Copyright Royalty Judges (“CRJs”) are to base their decision on “economic, competitive and programming information presented by the parties.” 17 U.S.C. § 115(c)(1)(F).
While Phonorecords IV is the first proceeding by which this “willing buyer/willing seller” standard will be applied in the Section 115 context, this standard and the aforementioned language have been the basis for Section 114 rate-settings which provide instructive precedent. Both the CRB and D.C. Circuit in prior Section 114 proceedings understood that proposed rates are to reflect an effectively competitive market. “Legislative history supports the conclusion that
§ 114 directs the Judges to set rates that reflect the workings of a hypothetical effectively competitive market.” 81 FR 26316, 26334. And the CRB “can and should determine whether the proffered rates reflect a sufficiently competitive market, i.e., an ‘effectively competitive’ market.” SoundExchange, Inc. v. Copyright Royalty Bd., 438 U.S. App. D.C. 332, 346, 904 F.3d 41, 55 (2018). Thus, the CRB should examine whether the mechanical rate freeze proffered by the Settlement Parties reflects an effectively competitive market.
While there has been much discourse and disagreement regarding the true meaning of the “willing buyer/willing seller” standard in prior CRB rate proceedings, this Phonorecords IV proceeding has presented a novel conundrum that the CRJs must inspect: what happens when the willing buyer and willing seller are effectively the same parties at the corporate level?
On one side of the Proposed Settlement sits the three major record labels (Sony Music Entertainment, Warner Music Group and Universal Music Group), who are to pay these mechanical royalties to music publishers and songwriters. On the other side of the proposed settlement sits the NMPA and NSAI. The NMPA’s board is comprised of representatives of the publishing company corporate affiliates of the three major labels on the other side of the negotiating table.1 Further, these major publishing company board members appear to have greater voting power than other NMPA board members on account of their gross annual revenue.2It is also worth noting that the NSAI represents only fragment of the songwriter community, and that two of the three songwriters who penned the “SONGWRITERS REFUTE FALSE CLAIMS REGARDING COPYRIGHT ROYALTY BOARD” letter3
2 “NMPA shall have two classes of voting members: executive members and general members. A member shall be an executive member if its Gross Revenue is equal to or in excess of One hundred million dollars in the prior calendar year. A member shall be a general member if its Gross Revenue is less than One hundred million dollars in the prior calendar year.” “Each executive and general member shall be entitled to one vote for each one-hundred thousand dollars of gross revenue of such member (including its affiliates) with respect to any matter to be voted on by members; provided that (i) each member shall have at least one vote, and (ii) with respect to a particular calendar year, each executive member shall have no more votes than the number of votes held by the General Member with the greatest number of votes for such year.” NMPA Inc. 2018 IRS 990, Schedule O, at 27.
3SONGWRITERS REFUTE FALSE CLAIMS REGARDING COPYRIGHT ROYALTY BOARD, available at
(presumably published in response to negative press on account of this proposed freeze) sit on NMPA boards, one on the board of NMPA Inc., and the other on the board of the NMPA SONGS Foundation.4
How these organizations wish to conduct their business is wholly up to them, as is how they choose to represent their members. Nonetheless, when I see a phrase in a motion reflecting the intentions of a group of parties riddled with conflicts of interest, “the settlement represents the consensus of buyers and sellers representing the vast majority of the market for `mechanical’ rights for [the 37 CFR 385] Subpart B Configurations”5– I believe it is important to acknowledge that there are countless millions of copyright owners that these parties do not represent. While the Proposed Settlement may represent the “consensus” of the wealthy major music publishing companies and their record label counterparts, in no manner does this settlement speak for the consensus of songwriters and independent publishers, who lack the overwhelming resources needed to participate in this proceeding and whose views were not solicited.
In sum, none of these factors lead me to believe that this Proposed Settlement reflects an “effectively competitive market.”
II. The Dire Need for Transparency.
In addition to the proposed settlement, the Settlement Parties (less the NSAI) also referenced a separate Memorandum of Understanding (“MOU”):
“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.”6
If this “Memorandum of Understanding” is irrelevant to the proposed settlement, why would it be referenced in the motion to adopt the settlement? Setting aside the broadly drafted “certain negotiated licensing processes,” the phrase “late fee waivers” is exceptionally concerning. I interpret this language to mean that money is changing hands as consideration for this proposed rate freeze – but ultimately, I cannot know this with certainty since neither the Proposed Settlement nor the MOU have been published.
As songwriters worldwide may be bound to the decisions rendered in this Phonorecords IV, it is of the utmost importance for the CRB to work to afford songwriters with complete transparency. In a letter dated July 13, 2021,7Representative Lloyd Doggett (TX-35) asked,
“May the CRB disclose (or compel the settlement participants to disclose) the unredacted actual settlement agreements referenced in the Motion, including the MOU?”
I would also like to know the answer to this question. Further, in the event the CRB does not reject this Proposed Settlement, it should publish both the actual, unredacted proposed settlement, along with the MOU, not merely the regulations giving effect to the settlement. If songwriters and independent music publishers worldwide are to be bound to these terms, they deserve to have the opportunity to review and to be able to provide meaningful comment on these actual documents at a minimum.
III. Songwriters and Independent Music Publishers Should Not Face a Rate Freeze In The Midst of a Vinyl Resurgence, During a Worldwide Pandemic.
With the constant consumption of music 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 musicians 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 2020.8Additionally, vinyl record sales increased by more than 28% from 2019 to 2020.9 Further, physical and downloads accounted for 15% of worldwide revenue for U.S. recorded music in 2020.10 Just within the last couple of months, Taylor Swift broke the modern- era weekly vinyl album sales record.11Record Store Day Drop #1 sparked 1.3 million vinyl album sales during the week ending June 17, 2021, with 942,000 records sold at independent record stores — resulting in the largest weekly vinyl sales at the indie sector in MRC Data history.12Those Record Store Day figures represent over $1.1 million dollars in mechanical royalties generated within a weekly period (assuming 10 tracks per album at the current statutory rate of 9.1 cents) – which I believe is economically significant for songwriters.
Given the vinyl resurgence, mechanical royalties from physical product sales are a crucial revenue stream for all songwriters, and particularly for independent songwriters who have struggled financially on account of COVID-19 and do not have the resources to compete for the streaming numbers generated by top artists signed with major labels. The effects of COVID-19 are properly taken into account when approximating a free market agreement because of what
U.S. Treasury Secretary Janet Yellen described as “long-term scarring”13which is projected to exceed the period of the Phonorecords IV rate setting. For context, 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 calculator14). The “rate” for the ad- supported tier of Spotify was even lower.
Not only is the music industry experiencing a vinyl resurgence, but also, even CD sales are seeing a boost. According to a July 14, 2021, report from Billboard:
“Vinyl sales, which have grown for the past decade, more than doubled between January and June, up 108.2% to 19.2 million from 9.2 million in the first six months of last year. Even CD sales, which have been steadily and precipitously declining, posted a modest 2.2% gain, to 18.9 million units.”15
IV. What’s Changed Since 2014? The Willing Buyer/Willing Seller Standard was Supposed to Result in Fairer Rates.
Every person reviewing the comments in this proceeding should go back and review the Copyright Office’s 2015 “Copyright and the Music Marketplace Study.”16Copyright owners and their representatives within the study shared a common judgement: the then-current 801(b)(1) four-factor test standard resulted in deflated rates — however, this quagmire could be remedied by the adoption of the “willing buyer/willing seller standard.”17According to the NMPA and Harry Fox Agency’s joint comment in 2014:
“Continued application of the 801(b) standard will ensure that the statutory royalty rate is held artificially low, and that songwriters and music publishers will continue to be treated unfairly in the marketplace.”18
Phonorecords IV is the first proceeding in the Section 115 context by which this “willing buyer/willing seller” standard is to be applied. If the Proposed Settlement is accepted by the CRJs, songwriters and music publishers are no better off than they were under the former 801(b)(1) standard; the statutory rate will continue to be held artificially low through 2027, and songwriters and music publishers will continue to endure unfair treatment in the marketplace.
Proposing a freeze for the Subpart B rates during the first Section 115 proceeding applying the “willing buyer/willing seller” standard produces a disastrous ripple-effect with respect to other current and future rate-settings. In the current Phonorecords III remand, Pandora not only has used the Proposed Settlement to make the case that the streaming mechanicals rate in the 2012 settlement was a “good benchmark,” but also used this argument to rationalize the 2012 rate being too high.19
Equally perplexing upon retrospect is commentary from the NSAI. After stating the organization’s support of eliminating Section 115 entirely (which as an aside, I agree with), the NSAI stated:
“We favor a willing buyer-willing seller free marketplace approach to determining mechanical royalty rates. We believe the underlying work is more valuable that the present 9.1 [sic] rate established by the Copyright Royalty Board.”20
It does not sit well when the organization representing songwriters is party to a settlement proposing extending the freeze at 9.1 cents, seven years after advocating for a “willing buyer/willing seller” rate-setting standard because songs were more valuable than the 9.1 cent rate.
V. Rates Should not be Frozen Just Because Certain Settlement Parties Deem a Format is Not Worth the Fight.
It is evident that trade organizations representing the publishers and songwriters in this proceeding and prior proceedings have not wished to advocate for an increased mechanical rate for physical products, as they prefer to concentrate on categories that they believe to be economically significant, such as the interactive streaming categories.21This lack of advocacy was not intended to demonstrate that rate freeze at 9.1 cents reflected the appropriate value of mechanical royalties for physical products, but instead that physical medium revenue was not going to make much of an economic difference within the next five years.22It is understandable that the NMPA and NSAI have concentrated their efforts on the abysmal streaming services and I applaud the organizations for such efforts. The NSAI also reechoed these sentiments in early June, 2021:
“Based on industry revenue analysis, it is anticipated that physical mechanical royalties will amount to less than 1% of the total mechanical royalty revenue in the United States during 2023-2028, the rate period this CRB proceeding covers. History and experience told us not to create a powerful opponent when there is a strong possibility of losing with little to gain. So, we decided to focus on the digital streaming services and streaming rates during the next trial. While 1% of revenue is meaningful, waging war was not worth the risk, especially since the rate may have been lowered!”23
To date, I have not seen this industry revenue analysis claiming that physical mechanical royalties will amount to less than 1% of the total U.S. mechanical royalty revenue over the next five years. Even if this is the consensus of various industry experts, the figure is simply a prediction. And as the data in Section III shows, the physical format has become increasingly
popular and provides a meaningful revenue stream for songwriters and publishers — despite prior economic predictions from industry leaders.
In sum, songwriters should not face a continued rate freeze for Subpart B configurations due to trade organizations deeming that these formats are not worth the fight.
VI. May the CRJs Determine this Proposed Settlement Applies only to the Settlement Participants?
Given the volume of songwriters who are self-published (or self-administered, as the Mechanical Licensing Collective calls it), and the number of independent music publishers who are not NMPA members and have no ties to the major publishers, the question becomes, what recourse do they have when private parties with endless resources decide to convene with their major label counterparts and propose a mechanical rate freeze? May the CRB determine that this frozen rate only applies to the Settlement Parties, but hold that a higher rate will apply to everyone else?
Conclusion
This is the first time I have commented on a CRB rate-proceeding — I was in high school during Phonorecords I and was completing law school when Phonorecords III commenced. This Phonorecords IV proceeding has taught me a lot, and has also raised a lot of questions in my mind about the process of rate-proceedings in general. Ultimately, a settlement to freeze the mechanical rate for the physical format, forged by parties who are one and the same at the corporate level during a vinyl boom in midst of a worldwide pandemic neither reflects an effectively competitive market nor is in the interest of songwriters. Making this situation all the worse is the fact that some of these Settlement Parties advocated for the repeal of the prior rate- setting standard in favor of this “willing buyer/willing seller” standard because they contended the former resulted in deflated rates and the latter would bequeath songwriters with higher rates. If this is truly the end result of CRB rate-proceedings, a process must be established by which copyright owners without the financial resources will have the ability to not only participate in such proceedings, but also have their own independent advocacy arm which can represent their interests. Because as it stands, I do not see the interests of songwriters being adequately represented in Phonorecords IV.
[The great David Poe was among the first songwriters to post a comment opposing freezing the mechanical royalty rate for physical and downloads promoted by the NMPA and the Nashville Songwriters Association International. We’re going to be posting the comments, but wanted to start with David Poe’s passionate and well-reasoned comment that you can download here.]
July 12, 2021
Via Electronic Delivery
Chief Copyright Royalty Judge Jesse M. Feder
Copyright Royalty Judge David R. Strickler
Copyright Royalty Judge Steve Ruwe
US Copyright Royalty Board
101 Independence Ave SE / P.O. Box 70977 Washington, DC 20024-097
To Your Honors:
Choices you will make regarding mechanical rates will impact the current and future musicmakers’ ability to contribute to our most profound national export: art.
Musicmakers intuitively understand how we stand on the shoulders of giants. Similarly, each aspect of music- adjacent policy sets a precedent for another. And for years, the devaluation of music has been trending: when music piracy made music free, cover charges at local live venues disappeared; when media conglomeration became legal, playlists became homogenous, and far less localized; when algorithms control streaming services, offerings became more generic, by design.
A culture that declares music to be worth less can expect worthless music. It can also expect more musical careers to be sustained only by those who can afford to lose money.
Consider this: our Top Ten is full of artists who are children of the affluent — those who can afford to do this gig. Not children of millionaires: Stevie Wonder, Aretha Franklin, Bob Dylan. The quality of the contributions made by
those who come from privileged upbringings may be a matter of taste, but we can be certain that lessening the ability for musicmakers to make a credible living will beget barriers to entry and a less equitable cohort.
Beyond the cultural impact, common sense arguments against re-freezing mechanical rates that have already in place for two generations include:
Money. The rate that was a little less than a dime in 2009 is functionally worth a little more than a nickel now
— its buying power will only decrease with time.
2. Ethics. Objectively speaking, the proposed freeze represents neither a free nor a fairly-regulated market. It is best characterized as “willing buyer, unwilling seller.”
3. Support from authentic shareholders. Exponentially more musicmakers and music advocacy groups oppose re-freezing mechanical rates. Organizations doing so comprise a distinctly inclusive cohort that looks like America, as well as the diverse, borderless history of music. Among groups opposing frozen mechanicals are the Songwriters Guild of America, the Alliance of Women Film Composers, the Alliance of Latin- American Composers & Authors, the Pan-African Composers and Songwriters Alliance, the Society of Composers and Lyricists, Music Answers, and the Music Creators of North America.
Groups expressing support for freezing mechanicals believe that musicmakers should make less than what we make now. Given this, any claim they make to represent the interests artists is disingenuous. While these groups’ lobbying resources are formidable, both their agenda and actual membership represent a perilously slim minority of musicmakers.
I believe the technological democratization of tools and access for artists of all mediums could enable a new American renaissance. Let us support a regulatory model that fosters that goal, and gives a diverse group of artists the means to do great work that inspires us all.
[Anthony Garnier has the honor of being the first commenter in the frozen mechanicals hearing.]
July 18, 2021
Via Electronic Delivery
Copyright Royalty Judge David R. Strickler Chief Copyright Royalty Judge Jesse M. Feder Copyright Royalty Judge Steven Ruwe US Copyright Royalty Board 101 Independence Ave SE Washington, DC 20024
To Your Honors:
As an artist whose career depends on the sustainability of songwriters, I write with considerable concern for the proposed settlement agreement in Phonorecords IV which will affect ALL songwriters, including independents who are not party to the private, non transparent settlement agreement.
As your Honors are aware, the “willing buyer-willing seller” concept was established as a basis for fairness in the regulatory regime of the compulsory license when the Copyright Royalty Board (CRB) was established. Vertical integration (ownership, interlocking boards) between the major labels and major publishers poses a serious conflict of interest and engenders self dealing among negotiators. Concurrent to the antitrust discussions in Congress concerning vertical integration between corporations, this important “willing buyer-willing seller” concept is an issue which songwriters who are not party to the private agreement wish to address as a matter of fairness.
Along with hundreds of thousands of songwriters and composers, I am strongly opposed to the proposed adoption by the CRB of a freeze on mechanical royalty rates for physical phonorecords and downloads, and against other non-transparent elements of the so-called agreement presented to the CRB for adoption by the National Music Publishers Association (NMPA), the Nashville Songwriters Association lnt’I (NSAI), and the major record labels.
NMPA and NSAI have not consulted with any other songwriter organizations despite claiming to represent the interests of songwriters for the entire world. No other songwriter or composer group, neither US or otherwise, joins NSAI in agreeing that adoption of the agreement would serve the interests of music creators rather than cause irreparable harm to their members.
Their secret agreement should be binding only on the parties who opt into the secret agreements, while everyone else should be subject to a different royalty rate determined by equitable and fair marketplace conditions and principles.
[This is a letter from Austin Congressman Lloyd Doggett (D-TX) to the Librarian of Congress (who appoints and can sack the Copyright Royalty Judges) and the head of the Copyright Office about procedures in the Copyright Royalty Board’s proceeding on frozen mechanicals. Download the original letter here.]
Dr. Carla Hayden, Librarian of Congress Shira Perlmutter, Register of Copyrights The Library of Congress 101 Independence Ave SE Washington, DC 20540
Dear Dr. Hayden and Ms. Perlmutter,
As a Representative covering music communities from San Antonio to Austin, the “Live Music Capitol of the World,” some of my songwriter constituents[1] are concerned about some procedural and substantive issues arising in the ongoing “Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)” currently pending before the Copyright Royalty Board (CRB). I write to seek some clarity for them and for me. The statutory rates set by the CRB are binding on all songs ever written or that may ever be written by anyone in the world who exploits songs in copyright in the United States. While referred to as a “minimum” I am told that statutory rates in practice are a maximum and are, of course, compulsory. Naturally, I am concerned that we not misstep.
While I know the CRB has not rendered a decision in Phonorecords IV, I am trying to understand the process by which the CRB: (1) evaluates settlement agreements proffered by certain parties to a proceeding prior to publishing those settlements for public comment, (2) determines the application of the new “willing buyer/willing seller” standard for rate setting when buyer and seller are related parties, and (3) the degree of transparency that the CRB may require of participants in the proceeding particularly terms of private settlements that the parties voluntarily disclose related to the rates they have negotiated.
In particular, I draw your attention to the Motion To Adopt Settlement Of Statutory Royalty Rates And Terms For Subpart B Configurations, Docket No. 21-CRB-0001-PR (2023-2027) filed by the National Music Publishers Association (NMPA), Nashville Songwriters Association International, Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp.[2] This settlement has provoked concern because of its disclosed terms regarding an additional five-year freeze for “mechanical” royalty rates on phonorecords in the physical and permanent download configurations, and undisclosed terms if adopted by the CRB in its determination.
The settling parties apparently refer to both a settlement agreement relating to certain mechanical royalty rates and another agreement that refers to undisclosed “negotiated licensing processes and late fee waivers.” Those settling parties ask the CRB to adopt their settlement on an “industry-wide basis,” and I am trying to better understand what this request means. I do not wish to interfere in the CRB’s adjudication of the matters before it, but I hope you can help me understand certain procedural matters relating to the CRB itself.
I would appreciate your answering the following questions at your earliest convenience due to the ongoing nature of both Phonorecords IV and other rate setting proceedings before the CRB and thank you in advance for your courtesy.
(1) There appear to be two settlements referenced in the Motion, being the rate setting settlement summarized in draft regulations attached and this other “memorandum of understanding” (“MOU”) between Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp. (i.e., the same parties to the private rate settlement except the NSAI).
Question: May the CRB disclose (or compel the settlement participants to disclose) the unredacted actual settlement agreements referenced in the Motion, including the MOU?
(2) In the Music Modernization Act,[3] Congress directed CRB Judges to set the statutory mechanical royalty rate by utilizing a “willing buyer/willing seller” rate standard designed to model the rates that would be reflected in a free market. In the case of the “industry-wide” settlements proposed by the Motion, it appears that there may be joint ownership of some of the members of the NMPA and the record companies proposing the settlement on rates.
Question: Are the Subpart B rates subject to the “willing buyer/willing seller” rate standard?
Question: If so, what is the rule when the “willing buyer” and “willing seller” are under the same corporate umbrella?
(3) It seems that the participants in the proceeding, and certainly the participants in the settlement, are dominated by major publishers and record companies seeking to impose their private settlement on all other songwriters. If other songwriter groups are not participating in the proceeding but object to the settlement (such as songwriters from more diverse communities) I am concerned that those songwriters may have no recourse.
Question: May the CRB limit the scope of a private party settlement to the parties, but determine a higher rate applies to others?
The Motion and the “frozen mechanicals” issue has prompted considerable public debate in the United States and Europe as reported in The Trichordist artist blog[,[4] Billboard, [5] Complete Music Update[ [6] and the Creative Industries Newsletter[7]. Three NSAI songwriters have published a defense[8] of their participation in the Motion. The Trichordist notes that the CRB produces considerable frustration and passion on all sides because the process is “inequitable, unwieldy and prohibitively expensive.”[9]
On page 4 of the Motion, the parties advise the CRB that this settlement represents the “consensus of buyers and sellers representing the vast majority of the market for “mechanical ” rights for [physical, permanent downloads]…” Setting aside the issue of the settlement participants representing “buyers” and “sellers” under the same corporate umbrellas, it seems appropriate that every songwriter who will be affected by the outcome of this proceeding, from San Antonio and Austin, Memphis, to Detroit and beyond, should have the opportunity to read and comment meaningfully on the actual settlement agreement posed for adoption, and the related MOU referenced.
I look forward to your response and to continuing to work with you on these matters of such critical importance to our culture and to songwriters everywhere. Please also let me know if you have any other insights to this which may be helpful for my constituents.
If you’ve been following the heated controversy around the frozen mechanicals crisis, you’ll know that the Copyright Royalty Board has received a proposal from the NMPA, NSAI and the major labels to freeze the statutory rate for songwriter mechanical royalties on physical (like CDs and vinyl) and permanent downloads (like iTunes) for another five years. That proposal mentions a settlement to establish the frozen rates (which extends the rates that were first frozen in 2006 for another 5 years) and a memorandum of understanding between the NMPA and the major labels for something, we’re not quite sure what.
Filing comments with the CRB is not quite as simple as filing comments with the Copyright Office and it takes a bit of time–comments close on July 26, so do not leave setting up your account until July 26, or even July 25. I would do it today. You can set up your account before you file your comments so that the account part is all ready to go.
Here are some steps you will probably go through to set up your account:
Go to app.crb.gov. Look for “Register for an account” (the one in small print at the bottom of the list)
2. “Register for an account” will take you to a sign up page. Scroll down to “User Information”. You only need to complete the required fields with a red star (so ignore the bar number, etc.)
There is a pull down menu under “Register as” with a few different roles listed. The one you want is “Commenter”
Then complete the form completing only the required fields.
3. The CRB will then authenticate your account and send you an email confirmation. That part goes pretty quickly. However, once your account is authenticated, make sure you log on. You should be taken to a dashboard, but the question is whether your dashboard looks like this:
Note that the dashboard does not have a button to “File a comment”. If this is what you see when you log into your account, you are not done. Contact the CRB support people ecrbsupport@egov.com and tell them that your account has not been activated to comment.
4. Your account should look like this:
The comment you want to file is for Phonorecords IV. You can ignore the other dockets. It took me several trips to the support desk to get the correct filing tabs on my account, hopefully you won’t have that problem. But–just in case, don’t be running around crazy on July 26 trying to file the comment you slaved over because you left the account to the last minute.
MPs call for a ‘complete reset’ of music streaming to fairly reward performers and creators
Successful artists see ‘pitiful returns’ from streaming while some performers are frozen out of payments altogether
Artists must be given a legal right to a fairer share of revenues from streaming, the DCMS Committee concludes, following a wide-ranging inquiry that calls for a complete reset of the market.
The Report into the Economics of music streaming finds that comprehensive reform of legislation and further regulation is needed, not only to redress the balance for songwriters, performers and composers, but to tackle fundamental problems within the recorded music industry.
Services that host user-generated content gain significant advantage on copyright say MPs, with YouTube emerging as a dominant player. The Report warns of ‘deep concerns’ about the unassailable position of the major music companies with a call for the Competition and Markets Authority to examine whether competition in the recorded music market is being distorted.
Though consumers enjoy music that is historically cheap, more personalised and more readily available than ever before, streaming’s short-term pricing structure puts music at risk in the long-term, say MPs.
Chair of the DCMS Committee Julian Knight MP said:
“While streaming has brought significant profits to the recorded music industry, the talent behind it – performers, songwriters and composers – are losing out.
“Only a complete reset of streaming that enshrines in law their rights to a fair share of the earnings will do.
“However, the issues we’ve examined reflect much deeper and more fundamental problems within the structuring of the recorded music industry itself.
“We have real concerns about the way the market is operating, with platforms like YouTube able to gain an unfair advantage over competitors and the independent music sector struggling to compete against the dominance of the major labels.
“We’ve heard of witnesses being afraid to speak out in case they lose favour with record labels or streaming services. It’s time for the Government to order an investigation by the Competition and Markets Authority on the distortions and disparities we’ve uncovered.”
ENDS
Key findings and recommendations:
• Government to legislate so that performers enjoy the right to equitable remuneration for streaming income
• Government to refer case to the Competition and Markets Authority to undertake full market study into the economic impact of the major music groups’ dominance
• Government should introduce robust and legally enforceable obligations to normalise licensing arrangements for UGC-hosting services, to address the market distortions and the music streaming ‘value gap’
A full list of conclusions and recommendations can be found in the attached report
‘Pitiful returns’ from streaming
Performers, songwriters and composers receive only a small portion of streaming revenue due to poor royalty rates and because of the lower valuation of song-writing and composition, compared to the value of a song’s recording. Evidence from artists and songwriters who enjoy critical success described earnings from streaming as insufficient to ‘keep the wolf from the door’ or to live off, a position magnified by the loss of income from live performances. Such ‘pitiful returns’ from music streaming are found to impact the entire creative ecosystem with session musicians frozen out altogether.
The Report notes that several performers who gave evidence claimed that they and many of their peers were afraid of speaking out against the status quo for fear of losing favour with major record labels and streaming services.
Equitable remuneration
MPs call on the Government to introduce a right to equitable digital music remuneration. Though performers have a right to equitable remuneration where a commercially published sound recording is rented (broadcast via the radio, or played in public), streaming exploits the ‘making available’ right for recordings under UK copyright law. The Report says the right to equitable remuneration should be applied to the ‘making available’ right, drawing on the precedent of how the right to equitable remuneration applies to rental, as a simple yet effective solution to the problems caused by poor remuneration as it is a right already established within UK law, and applied to streaming elsewhere in the world. It also argues that this would address the inconsistency whereby equitable remuneration already applies to songwriters and composers. The Government should also consider how to increase the value of a song to give parity with a recording to support songwriters and composers.
Case for CMA to examine Universal, Sony and Warner ‘market dominance’
The Report finds a case for a full study by the CMA into the economic impact of the dominance by major music companies Universal, Sony and Warner of the UK’s music recording industry, and to a lesser extent in publishing. Further, the Government must make sure that UK law is not enabling market dominance. It should support independent labels to challenge the majors’ dominance, with creators empowered to offset the disparity in negotiating power when signing with music companies.
Further evidence to support a referral to the CMA comes from ongoing concerns about the majors’ position in direct licensing negotiations with streaming services which allows them to benefit at the expense of independent labels and self-releasing artists, particularly regarding playlisting.
MPs question whether with the major record labels’ market dominance on song rights, a song would be fairly valued and urge consideration by the CMA of the majors’ dominance in recording and publishing on this point.
‘Safe harbour’
‘Safe harbour’ gives services that host user-generated content (UGC) such as YouTube a competitive advantage over other services, exempting them from legal liability for copyright infringement unless and until they obtain “actual knowledge” of infringing activity, in which case they must remove or to disable access to it. The Report finds these exemptions, now transposed into UK law, have had a profound impact on the market, with UCG-hosting services gaining broad limitations of liability that undermine the music industry’s leverage in licensing negotiations. It recommends the CMA examine YouTube’s dominance of the music streaming market and take steps to encourage competition. To prevent market distortion, the Government should introduce obligations enforceable in law that would ‘normalise’ licensing arrangements for UCG-hosting services.
Legacy contracts and recoupment
To address a wider imbalance, the Report recommends a right to recapture the rights to works after a period of time from record labels, and a right to contract adjustment if an artist’s work was successful beyond the remuneration they received.
Performers, signed to a record deal, are paid according to the terms of their contract with their record label from streaming revenue after production costs are recouped. Many labels do not write off debts meaning that deals signed decades ago can still recoup against initial production and distribution costs. Following an appearance before the Committee, Sony announced it would “pay through on existing unrecouped balances to increase the ability of those who qualify to receive more money from uses of their music” for deals before 2000. MPs call for Universal and Warner to look again at the issue of unrecouped balances with a view to enabling more of their legacy artists to receive payments when their music is streamed.
User-centric model
MPs heard evidence of different models to distribute streaming revenues, either the predominant pro-rata payment model or alternatives such as user-centric. They welcome the consideration by new services of ways to address fairness and transparency in remuneration. However, are concerned that current contractual agreements between the major music companies and streaming services could stifle further innovation if misused and recommend consideration by the CMA.
The Report also make recommendations on licensing and royalty chains to increase transparency to creators.
Further information:
The inquiry into the Economics of music streaming was launched in October 2020. It received more than 300 pieces of written evidence. Among artists and performers who gave evidence, songwriter and producer Nile Rodgers, Radiohead’s Ed O’Brien, Elbow’s Guy Garvey and soloist Nadine Shah. It took evidence from the UK’s independent music sector, as well as major record labels Sony Music, Warner Music and Universal Music. Spotify, Amazon, Apple and YouTube also gave evidence.
Committee membership:
Julian Knight MP (Chair) (Conservative, Solihull); Kevin Brennan MP (Labour, Cardiff West); Steve Brine MP (Conservative, Winchester); Alex Davies-Jones MP (Labour, Pontypridd); Clive Efford MP (Labour, Eltham); Julie Elliott MP (Labour, Sunderland Central); Rt Hon Damian Green MP (Conservative, Ashford); Rt Hon Damian Hinds MP (Conservative, East Hampshire); John Nicolson MP (Scottish National Party, Ochil and South Perthshire); Giles Watling MP (Conservative, Clacton); Heather Wheeler (Conservative, South Derbyshire).
Media queries to Anne Peacock peacocka@parliament.uk / 07753 101 017; Gina Degtyareva degtyarevae@parliament.uk / 07548 146 012.
Visit the DCMS Committee website
Committee Twitter: @CommonsDCMS
Specific Committee Information: cmscom@parliament.uk / 020 7219 6188
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Mansplaining, anyone? If you remember Spotify’s 2014 messaging debacle with Taylor Swift, we always suspected that the Spotify culture actually believed that artists should be grateful for whatever table scraps that Spotify’s ad-supported big pool model threw out to artists. They were only begrudgingly interested in converting free users to paid subscribers, which still pays artists nothing due to the big pool’s hyper-efficient market share revenue distribution model.
And then there was another one of Spotify’s artist and label relations debacles with Epidemic Sound–Spotify’s answer to George Orwell’s “versificator” in the Music Department that produced “countless similar songs published for the benefit of the proles by a sub-section of the Music Department.”
The common threads of most of Spotify’s crazy wrong turns–and they are legion–is what they indicate: An incredible heartless arrogance and an utter failure to understand the business they are in. A business that ultimately turns on the artists and the songwriters. As long as there is an Apple Music and the other music streaming platforms, artists can simply walk across the street–which is why Taylor Swift could make Daniel Ek grovel like a little…well, let’s just leave it at grovel.
But–this long history of treating artists and especially songwriters poorly is what makes it so important to preserve Apple Music as a healthy competitor to Spotify and the only thing that stops Spotify from becoming a monopolist. A fact that seems entirely lost on their boy Rep. David Cicilline’s anti-Apple bill that “seems aimed directly at Apple and has Spotify’s litigation against Apple written all over it.” (Mr. Cicilline runs virtually unopposed in his Rhode Island elections, which if you know anything about Rhode Island politics is just the way the “Crimetown” machine likes it.)
Why are ostensibly smart people given to such arrogance? Mostly because they are rich and believe their own hype. But never has that reality been on such public display in all its putridness than in a truly unbelievable exchange at the Sync Summit in 2019 in New York between home town independent artist Ashley Jana and former Spotify engineer Jim Anderson who was being interviewed by Mark Freiser who runs that conference (and who doesn’t exactly come off like a prize puppy either).
Ashley recorded the entire exchange in (what else) a YouTube video and Digital Music News reported on it recently. Here’s part of the exchange between Ashley and Mr. Anderson after Ashley had the temerity to bring up…money!
Jana: We’re not making any money off of the streams. And I know that you know this, and I’m not trying to put you on the spot. I’m just saying, one cent is really not even that much money if you add 2 million times .01, it’s still not that much. And if you would just consider —
Anderson: Oh, I’m going to go down this road, you know that.
Interviewer (Mark Frieser): This is really not a road we’ve talked about before, but I’m gonna let him do this —
Jana: Thank you again.
Anderson: Do you want me to go down this road? I’m gonna go down this road.
Frieser: Well, if you need to.
Anderson: Wait, do I go down the entitlement road now, or do I wait a minute?
Frieser: Well, you know what, I think you should do what you need to do.
Anderson: Should we do it now?
Frieser: Yeah, whatever you feel you need to do.
Anderson: So maybe I should go down the entitlement road now? Or should I wait a few minutes?
Frieser: Do you want to wait a few minutes? Maybe take another question or two?
Anderson: [to the audience] Do you guys want to talk about entitlement now? Or do we talk about —
[Crowd voices interest in hearing the answer from Anderson]
Jana: I don’t think it’s entitlement to ask for normal rates, like before.
Anderson: Normal rates?
Jana: No, the idea is to make it a win-win situation for all parties.
Anderson: Okay, okay. So we should talk about entitlement. I mean, I have an issue with Taylor Swift’s comments. I have this issue with it, and we’ll call it entitlement. I mean, I consider myself an artist because I’m an inventor, okay? Now, I freely give away my patents for nothing. I never collect royalties on anything.
I think Taylor Swift doesn’t need .00001 more a stream. The problem is this: Spotify was created to solve a problem. The problem was this: piracy and music distribution. The problem was to get artists’ music out there. The problem was not to pay people money.
You really should listen to the entire video to really comprehend the arrogance dripping off of Mr. Anderson’s condescension.
Nik Patel, David Lowery, and Chris Castle feature in this podcast where they discuss the current issues of artists’ rights in the music industry. Find the Artist Rights Watch on your favorite podcast platform here https://linktr.ee/artistrightswatchpod Please subscribe, rate and share!
On the first episode of the Artist Rights Watch, Nik Patel, David Lowery, and Chris Castle sit down with Ivors Academy Chair, Crispin Hunt to talk about the frozen mechanical royalties crisis currently playing out in the United States and how it threatens UK songwriters and indeed songwriters around the world.
Crispin gives us his invaluable analysis of how the frozen mechanicals crisis affects songwriters around the world and the highly effective #brokenrecord and #fixstreaming campaigns that Ivors Academy supports in the UK that has lead to a parliamentary inquiry and legislation introduced in the UK Parliament.
The “frozen mechanicals” crisis is rooted in a private deal between big publishers and their big label affiliates to essentially continue the freeze on the already-frozen U.S. mechanical royalty rate paid by the record companies for CDs, vinyl and permanent downloads. The private deal freezes the rate for another five years but does not even account for inflation. Increasing the royalty rate for inflation, does not actually increase songwriter buying power.
The major publishers and labels have asked the Copyright Royalty Board in the US to make their private deal the law and apply that frozen rate to everyone.
In the past, the music industry has experienced a $0.02 mechanical royalty rate that lasted for 70 years, and with the current mechanical royalty rate of $0.091 being set in 2006, advocates hope it’s not a repeat of the past.
In this Artist Rights Watch episode, we cover its numerous implications and consequences such as controlled compositions clauses, the Copyright Royalty Board, CPI and fixed increases, how the UK compares, and potential resolutions.
Below are some links for further reading on frozen mechanicals and Crispin Hunt:
Blake Morgan helped to launch the American Music Fairness Act on June 24 in Washington along with Dionne Warwick, Sam Moore, a host of other artists and the bill’s sponsors Rep. Ted Deutch and Rep. Darrell Issa. We asked Blake about his impressions.
Rep. Ted Deutch and Blake Morgan at the AMFA launch
Chris Castle: I see you were back in Washington supporting new legislation to create a performance right for artists on terrestrial radio, how did that feel? Getting the band back together?
Blake Morgan: You know, it felt great. There’s a new spirit in the air, a new energy to this fight. Everyone at the launch event could feel it. It was aspirational. How can one not feel that way for something called the American Music Fairness Act?
Janita, Rep. Ted Deutch, Blake Morgan, Tommy Merrill
Any particular insights from the event?
Perhaps the one at the top of the list is that everyone was so happy––to see each other, to band together, to renew our vows to each other so to speak. To recommit ourselves in a new way to securing fair payment for artists on terrestrial radio. It was emotional. The fight for justice always is, and let’s make no mistake: this is a fight for basic fairness and justice. There’s an unmistakable excitement about the new bill, and our job––together––is to turn that excitement into volition, then into momentum, and finally into victory.
There was a quote in the recent Supreme Court ruling against the NCAA that jumped out at me: “Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate.” That’s not exactly analogous to broadcast radio, but it’s close, don’t you think?
Absolutely. Nothing could be more American than being paid fairly for one’s work. Nothing should be more American than being paid for one’s work. When it comes to music, where else in the American economy are working people told they won’t be paid for their work because instead, they’re going to receive “exposure.” That’s what AM/FM radio does. What’s more, broadcast radio can take our music without our permission, broadcast it, sell advertising around it, profit from it, and not pay the artists anything for it! As Sam Moore said at the bill’s launch event at The Capitol, “Pay us! Be nice!”
You were an active supporter of the CLASSICS Act that required pre-72 recordings be given equal treatment on digital performances. I was pleased that Rep. Deutch and Rep. Issa invited several generations of artists to the American Music Fairness Act event, will the pre-72 artists also be protected by AMFA?
Definitely, that’s such an important part of what this bill does. My godmother was Lesley Gore, the iconic 60’s hitmaker who sang the classics “It’s My Party” and “You Don’t Own Me,” among others. She died in 2015, after having never been paid one damn dime for those hits being played on AM or FM radio. AMFA may be too late for her, but I’m committed to making sure we get this passed in time for other iconic hitmakers and legends who have helped weave the very fabric of this country with their music. Who could possibly look any of those artists in the eye and tell them they shouldn’t be paid fairly. For shame.
What can the #irespectmusic community do to support the legislation?
We can do what we do best––bring music makers and music lovers together, tell people to stop wringing their hands and start rolling up their sleeves, and get active in supporting AMFA. We’re going to set up mechanisms in the coming weeks to make our voices heard with congressional members, with broadcasters (an increasing amount of which support this legislation, in fact), and with those who haven’t yet joined the push. We’re going to work hard, we’re going to work smart, and we’re going to pull ourselves closer and closer to victory with this in mind: it always seems impossible until it’s done.
The Trichordist 
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