Survey Results: Physical and Download Mechanical Rates Survey–Artist Rights Watch

Many readers participated in the Physical and Download Mechanical Rates Survey that various organizations have sent to their members over the last few weeks. Here are the results of the main questions for which we had 361 respondents who self-selected their participation. (Other answers included comments which we chose not to publish for privacy reasons.). 

The results suggest that participants were mostly informed songwriters who had never been asked before what they thought about the issues in the Copyright Royalty Board. We would have to conclude that any of our regular readers would be a bit skewed toward knowledgeable because between the Trichordist, MusicTechPolicy, ARW, Hypebot and Celebrity Access we were probably carrying a very high percentage of the available information on the frozen mechanicals issues.

It also is striking how few respondents said they had ever been asked what they think about any mechanical rates (physical, download, streaming), an important and easily measurable issue. This is something to add to the learning from this episode. It may be that our data is skewed, but even so we didn’t expect that 68% would say they’d never even been asked their opinion. An easy way to find out what people think about something is to ask them. 

Please take our physical and download mechanical royalty rates survey and help decide the new rates!

We are participating in a survey being conducted by a number of songwriter groups around the world to ask our readers what you think the new un-frozen mechanical royalty rate should be since the Copyright Royalty Judges rejected the settlement that would have extended the 9.1¢ freeze. Trichordist readers have heard a lot about the frozen mechanicals but after the Judges rejected extending the freeze we have moved on now to a new phase–if the rate isn’t 9.1¢ anymore, what should it be?

This Survey Monkey questionnaire is anonymous and easy to take–3 minutes to complete–and you could really help a lot by giving your opinions on what you think the rate should be! We will post the results so everyone can see.

You can start the survey at this link. Thank you!

Is @UMG coming to the party on unfrozen mechanicals?

By Chris Castle

[This post first appeared on MusicTechPolicy]

I have it on good authority from someone close to the talks not authorized to speak on the record that Universal is taking the lead on solving the now un-frozen mechanicals crisis. This obviously needs to be confirmed and may not be final, but I think it’s well worth posting about.

Recall that the crisis pertains to the so-called “Subpart B” mechanical royalties paid by record companies for permanent downloads, vinyl and compact discs. The mechanical rate has been frozen at 9.1¢ since 2008 and the Copyright Royalty Judges recently rejected a settlement among the NMPA, NSAI, Sony, Universal and Warner to extend the freeze in the Phonorecords IV proceeding. Having rejected the proposed settlement, the next step could be knock down, drop dead, drag out litigation that would, in my view, be totally unnecessary. Or the next step could be the labels and publishers submitting a new proposed settlement and asking for the Judges’ approval. 

Also recall that the Judges hinted at a potential deal they would like to see in their rejection of the proposed settlement that would essentially uplift the current 9.1¢ rate by an inflation factor since the rate was set in 2008, bringing the minimum statutory rate for all “Subpart B” configurations to 12¢ that would be further uplifted by an annual cost of living adjustment based on the Consumer Price Index (CPI-U in this case).

We’ve written about this topic so much that you’re probably sick of hearing about it–but if this source turns out to be correct, it’s a real step in the right direction by Universal taking a leadership role that will no doubt be controversial.

As I understand it, Universal may propose a minimum statutory rate of 10¢ for permanent downloads and 12¢ for both vinyl and CD configurations. All three rates would be adjusted annually by the Consumer Price Index (in a similar way that the Judges just indexed the webcasting royalty in Webcasting V applicable to sound recordings). This rate would apply to all songs–not just to George Johnson–as one would expect.

There’s no way to know at this point today whether all the participants in the Phonorecords IV proceeding will accept these terms, including George Johnson who has held out for a much higher minimum statutory rate. Some may scratch their head over why the download rate is less, but my suspicion is that it’s because Apple and Amazon have been inflexible on increasing the wholesale price and I could understand why a label would give themselves some headroom on downloads going into what will surely be highly inflationary times but at the same time agreeing a cost of living adjustment. (When the dust settles, it may be worth a discussion in the artist rights community about whether to campaign against Apple and Amazon.)

I do think it’s commendable if Universal is taking the first step toward bringing fairness to a process that has been unfair for many years. We’ll see what happens, but it looks like it could be light at the end of the tunnel. Watch this space.

Copyright Royalty Judges Reject “Settlement” Extending Freeze on Physical Mechanicals

By Chris Castle

More on this to come, but the Copyright Royalty Judges have rejected the frozen mechanicals settlement in a very well-reasoned and methodical filing in the docket for Phonorecords IV. I will reproduce the conclusion of the filing here, but you should read the whole thing.

The upshot of the Judges’ ruling rejecting the extension of the frozen rates is that both George Johnson as a participant and a host of commenters brought up many valid points about problems with the settlement. I suppose the next step will be for the Judges to either set rates themselves and let the parties react to them or ask the parties to resubmit a new proposal in line with the Judge’s ruling.

Either way, the settlement is rejected and we have to thank the Judges who listened thoughtfully, George Johnson who toils alone representing himself (and the independent songwriter’s view) as an actual participant in the proceeding, and all the songwriters, independent publishers, lawyers and songwriter groups who took the time to comment.  And of course a huge thank you to all the Trichordist readers who supported fairness and justice and all the heartfelt comments against frozen mechanicals.

The wheels of justice turn slowly, but they do turn. Don’t forget it–the price of liberty is eternal vigilance.

Here is the Judges conclusion:

Rightsholders are free to choose their representation in these proceedings. Admittedly, individual songwriters and self-publishers have traditionally chosen not to expend the resources necessary to participate in these proceedings at the same level as trade organizations and major technology companies. Nonetheless, the outcomes of these proceedings can have a significant impact on the lives of the individual rightsholders. In this proceeding, the Judges received lengthy comments from SGA, which claims to represent thousands of songwriters. For SGA’s comments to have independent influence, however, SGA would have needed to join the proceeding as a participant. Nonetheless, with regard to the present proposed settlement, the comments of non-participants cumulatively served to amplify those of the objecting participant.

Pursuant to section 801(b)(7)(A)(ii), based on the totality of the present record—including the Judges’ application of the law to that record, as well as GEO’s objections, which, as noted supra, are consistent with the non-participant comments—the Judges find that the proposed settlement does not provide a reasonable basis for setting statutory rates and terms. Furthermore, the Judges find a paucity of evidence regarding the terms, conditions, and effects of the MOU. Based on the record, the Judges also find they are unable to determine the value of consideration offered and accepted by each side in the MOU. These unknown factors, as highlighted in the record comments, provide the Judges with additional cause to conclude that the proposed settlement does not provide a reasonable basis for setting statutory rates and terms.

Frozen Mechanicals Crisis: 2nd Comment of @helienne @davidclowery @theblakemorgan Opposing Conflict of Interest in Frozen Mechanicals–‘Let the future have a vote’

SECOND REOPENING PERIOD COMMENTS OF HELIENNE LINDVALL, DAVID LOWERY AND BLAKE MORGAN 

            Helienne Lindvall, David Lowery and Blake Morgan (collectively, the “Writers”) thank the Judges for the opportunity and respectfully submit the following comments responding to the Copyright Royalty Judges’ notice (“Second Notice”) soliciting comments on additional materials (“Reply”) received by the Judges[1] from the National Music Publishers Association, Nashville Songwriters Association International, Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Corp. (collectively, the “Majors”)[2] regarding the so-called [frozen] “Subpart B” statutory rates and terms[3] relating to the making and distribution of physical or digital phonorecords of nondramatic musical works in the docket referenced above (“Proceeding”). 

The Writers previously submitted comments[4] (“Prior Comment”) responding to the Judges’ notice[5] (“First Notice”) soliciting comments on the Major’s proposed purported settlement (the “Proposed Settlement”)[6] of the Subpart B rates.  The Writers along with attorney Gwendolyn Seale[7] attempted to submit additional comments in response to the Majors’ filing but were not able to timely file that response.[8]  The Writers appreciate the Judges’ decision to reopen the comment period in order to afford the public, and those that would be bound by the rates and terms set by the Proposed Settlement,[9] an opportunity to comment on those additional materials filed by the Majors and to further participate in the rulemaking.[10]

I.  SUMMARY
            As a general comment on the record to date in Phonorecords IV, the Writers are mystified by the histrionics that have become associated with this Proceeding both on the record and in the press. A voluntary negotiation is just a deal, often made by people who are paid to always be closing. The Writers believe that Congress intended that voluntary negotiation produce a fair result on a reasonable timetable.  

 While not directly at issue in the reopened comment period, what is clearly the case is that the settlement of the Subpart B rates has unnecessarily become a major gating item for the streaming side of this Proceeding, geese and ganders being what they are.  Despite the extensive voluntary negotiation period for the Subpart B rates by the Majors, the Judges—and, frankly, songwriters around the world–are presented instead with a cornucopia of chaos across the board; the cherry on top is the frozen mechanicals crisis.  However, in this season of hope the Writers are confident that the Judges will lead us all out of this daunting situation.

The Writers are not interested in the personalities, the arm-waving or the finger-pointing.  They are interested in the results, particularly because neither they nor anyone they authorized had input into the negotiation that produced either the Proposed Settlement or the impasse.

There is at least one easy way to fix this and recognize the intrinsic value of songs:  Raise the statutory rate proposal for Subpart B configurations in at least some relation to the streaming rate increase.  A song is no less valuable because of the medium in which it is exploited.[11] 

As the Writers will argue, just like the voluntary agreement on Subpart B that led to this impasse was reached by the Majors, those same parties can go back to the drawing board to reach an appropriate conclusion with a higher Subpart B rate.  

Neither the public nor the songwriters are well served (and frankly neither are the Judges) by thrashing about and waiving arms. This may serve well the people who are paid by the hour but it hasn’t served people who are paid by the song.  At all.  “Victory” without winning may pass for success in Washington, but it does not in the writer room or at a songwriter’s kitchen table.

            The Proposed Settlement is a crystallization of everything that is wrong with the licensing and payment practices that have arisen under the compulsory license regime where no is yes, more is less and the Kool-Aid whispers “Drink Me.”  

While the Writers will focus in this comment on the frozen mechanicals issue that has become emblematic of the current crisis, it must be said that the decade-plus MOU [black box] agreements are a backward looking and inequitable insider arrangement that permits a mindset of sloppiness and a “kick the can down the road” mentality that debilitates the entire music publishing business.[12]  It’s no accident that the Mechanical Licensing Collective—run by largely the same cast of characters under a jaw-dropping Congressional governance mandate—has been sitting on $424,000,000 of other peoples’ money for nine months during a pandemic with no visible compliance with another Congressional mandate of paying songwriters correctly in Title I of the Music Modernization Act.[13]  

            The MLC and the sequence of MOUs are both descended from the same ancestors a generation ago.  Each have essentially the same business model and each are somehow inexplicably viewed as a “win” for the songwriters.  The irony of splicing the genetic code of the ancien régime MOU [black box insider settlements] to the future is not lost on anyone.  If the failure to match money and songs in the MOU process is still a problem after fifteen years as well as the much-trumpeted Title I of the Music Modernization Act, it’s not the horse’s fault.  It’s the rider’s.

            It would be a real pity for the CRB to perpetuate this unfairness by adopting the Proposed Settlement.  With respect, it is bad law, bad policy, and a failure to even try to bend the arc of the moral universe.  Conversely, rejecting the Proposed Settlement would provide the kind of steely oversight tragically lacking in the current regime.  Please let the future have a vote, just once.

            The Writers object to the Proposed Settlement for the following reasons and respectfully suggest constructive alternatives.  The gravamen of our objection is that (1) the Subpart B rates have already been frozen since 2006 and extending the freeze another five years is unjust; (2) no evidence has been publicly produced in the Proceeding that justifies or even explains extending the proposed freeze aside from the connection to the memorandum of understanding in the MOU4 late fee waiver (“MOU”), a document that the Majors only recently disclosed in their Reply; (3) very large numbers of songwriters and copyright owners of various domiciles around the world and national origins are unlikely to even know this Proceeding is happening and there still is no evidence that the unrepresented have appointed any of the participants to act on their behalf or were asked to consent to the purported settlement before the fact even if they were members of these organizations aside from the respective board of directors; (4) physical sales are still a vital part of songwriter revenue (which the Writers documented in the Prior Comment[14]); and (5) there are many just alternatives available to the Judges without applying an unjust settlement to the world’s songwriters who are strangers to the Proposed Settlement and in particular the MOU component (as the MOU will likely require membership in the NMPA to benefit consistent with prior MOUs).

[Read the full-length original filing here.]


[1] 86 FR 58626.

            [2] NMPA, NSAI, Sony Music Entertainment, UMG Recordings, Inc. and Warner Music Group Comments in Further Support of the Settlement of Statutory Royalty Rates and Terms for Subpart B Configurations, Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV), Copyright Royalty Board (Aug. 10, 2021).

            [3] 37 C.F.R. §385.11(a).

            [4] Comments of Helienne Lindvall, David Lowery and Blake Morgan, Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV) (July 26, 2021) available at https://app.crb.gov/document/download/25533.

[5] 86 FR 33601.

            [6] Motion To Adopt Settlement of Statutory Royalty Rates and Terms for Subpart B Configurations, Docket No. 21-CRB-0001-PR (2023-2027).

            [7]  Ms. Seale does not otherwise join in this comment.  We understand she is filing a separate comment regarding the additional materials.

            [8] The Writers’ reply was posted on The Trichordist website available at https://thetrichordist.com/2021/08/16/frozenmechanicals-crisis-unfiled-supplemental-comments-of-helienne-lindvall-davidclowery-theblakemorgan-and-sealeinthedeal/.  Parts of that unfiled comment are included in this comment.

[9] See 17 USC 801(b)(7)(a)(i).

                  [10]  As with the Writers prior submission in response to the First Notice, the Writers focus in this comment almost entirely on the Subpart B rates applicable to physical carriers under 37 C.F.R. §385.11(a).  

            [11] The Judges no doubt will be told many stories about how Subpart B configurations are not meaningful sales compared to streaming so rates deserve to be frozen.  This is a novel copyright argument without a statutory basis.  The theory is also not based on accurate facts as the Writers discuss extensively in the Prior Comment at paragraph 5 and will not repeat here.

            [12] There is a growing backlash to decades of delaying definitive action on song metadata and songwriter payments such as Credits Due campaign of the Ivors Academy and Abba’s Björn Ulvaeus.  See generally Chris Cooke, PPL Backs Björn Ulvaeus’s Credits Due Campaign, Complete Music Update (Oct. 4, 2021) available at https://completemusicupdate.com/article/ppl-backs-bjorn-ulvaeuss-credits-due-campaign/

            [13] See, e.g., H. Rep. 115-651 (115th Cong. 2nd Sess. April 25, 2018) at 5; S. Rep. 115-339 (115th Cong. 2nd Sess. Sept. 17, 2018) at 5 (“The Committee welcomes the creation of a new musical works database that is mandated by the legislation….Music metadata has more often been seen as a competitive advantage for the party that controls the database, rather than as a resource for building an industry on.” (emphasis added)).

            [14] See Prior Comment at 16.

Frozen Mechanicals Crisis: Monica Corton Tells Copyright Royalty Board that Without Parity, the Music Ecosystem Will Fail

Honorable Judges:

My name is Monica Corton, and I am the CEO and Founder of Go to ElevenEntertainment, a newly formed independent music publishing company that is funded. I have been in the music publishing business for over thirty years, twenty- seven of which were spent as the Senior Executive Vice President of Creative Affairs & Licensing at Next Decade Entertainment. My experience is in all areas of music licensing, registrations, and royalty payments, and my former clients included the catalogs of the band Boston, Harry Belafonte, Vic Mizzy (the “Addams Family Theme” and “Green Acres Theme”), Sammy Hagar, and many more.

It is my understanding that the CRB judges are being asked to accept a Motion to Adopt a freeze or a non-rate increase for all mechanical licensing uses for physical phonorecords, i.e., CDs and vinyl, permanent digital downloads, ringtones and music bundles (whenmultiple songs are downloaded in groups) for the Rate Period of 2023 to 2027. The rates for these types of uses have been frozen and have not increased for any music publisher or songwriter since 2006. In the past, the National Music Publishers Association (“NMPA”) has explained these freezes as a necessary component to their negotiation for an increase in the digital streaming rates for mechanical licenses. For many years (2006-2021), I have gone along with this explanation, but after fifteen (“15”) years of having noincrease on any physical product or digital downloads, I now believe it is completely unfair and no longer justifiable for music publishers and songwriters, particularly the

independents and DIY creators (do-it-yourself), to have been denied an increase in these rates after fifteen (15) years of allowing record labels to get away without paying any increase whatsoever, and now face being blocked from a raise for another five (“5”) years.

I originally wrote comments to you on July 26, 2021, and I have included thosecomments below. As there was an extension provided, I felt I should augment my former submission to you with a practical reason for why I believe that physical and digital download mechanical royalty rates should increase, at least by a cost of living, forsongwriters and publishers for the Rate Period 2023-2027.

The one format in physical product that seems to be surging now is vinyl. If one visitsthe Amazon.com shop, new releases of vinyl are selling anywhere from

$24.98 to $49.99 at retail. Generally, the wholesale selling price for a label is half of the retail selling price. Therefore, in this scenario, the labels are making anywhere from $12.49 to $24.99 per unit. Under the current physical mechanical rate which would stay the same if you decide not to increase the royalty rate for physical copies and digital downloads, a publisher would be paid $.91 per record with a ten (10) song cap (standard practice) for the right to use all the songs on that release. However, most singer/songwriters have what is called a controlled composition clause in their recording agreement which requires that they agree to a reduced rate of 75% of the statutory rate with a cap of ten (10) songs. This means that the real rate for most singer/songwriters onan album is $.6825 for all the songs on any given album.

Therefore, the label is making anywhere from $11.8075 to $24.3075 of which a small portion will be paid to the artist for artist royalties and some portion will be paid for the expense of making the record and distributing it. The songwriter and the publisher will thereafter, divide the $.6825 in half so that the songwriter will eventually receive $.3412 for the ENTIRE ALBUM of songs, often recording and releasing more than ten songs because creatives tend to release 12-14 songs on any given album which further reducesthe mechanical rate per song.

I ask you, does it seem fare to you that the record label should make $11.875 to

$24.3075 per record and the singer/songwriter who wrote EVERY SONG ON THE ALBUM will make $.3412?

Songwriters rarely get a say in any of these hearings. Digital rates have devastated whole swaths of our creative songwriter community. Please consider that after fifteen (15) years,it’s time to increase the physical mechanical rate and the digital

download rate for songwriters and publishers. We must create some kind of parity for songwriters in the sale of physical product and digital downloads, or our musicecosystem will begin to fail.

Best wishes, 

Monica Corton CEO & Founder

Go to Eleven Entertainment

[Read the original comment here]

Frozen Mechanicals Crisis: Independent Publisher Lynn Robin Green Tells Copyright Royalty Judges how they threaten Survival

President Lynn Robin Green
LANSDOWNE MUSIC-WINSTON MUSIC PUBLISHERS
BLOOR MUSIC-HOFFMAN HOUSE MUSIC

PO BOX 1415 BURBANK, CA 91507

I have been a Music Publisher 45 years and the FREEZING of the statutory mechanical rate which hasn’t been raised in many many years CAUSES us undue continual financial hardship.

The low streaming rates have decimated our earnings for my Writers and Administrated Publisher Clients for the last six years and have have forced us into a corner financially to try to make up for this deep loss of revenue. I administrate also 39 Publishing firms here and these streaming losses are continual.

The Mechanical sales and Sync licensing fees are our only solid source of revenue to try to compensate for these deep losses. Its imperative that THE MECHANICAL RATES BE unfrozen asap and REMADE for REALISTIC FACTUAL inflation considerations of 2021 and for a willing seller/buyer in todays actual market.

We can’t survive if this RATE of 9.1 cts IS NOT raised and adjusted FAIRLY by the CRB for these very urgently important considerations. The Parties who are trying to freeze the rates here are highly conflicted and their sole interests are purely as Parties to Technology deals- and are self projected- and they SIMPLY violate any FAIRNESS OF MECH RATES FOR ALL PUBLISHERS AND SONGWRITERS concerned.

Please listen, please consider the Creators and the Independent Music Publishers who would suffer undue catastrophe level FURTHER financial loss if that RATE is DEEMED frozen for any more additional years whatsoever. WE absolutely URGENTLY need this rate increase NOW, its beyond crucial to our way of business and I implore the CRB to listen to the Independents and Creators and KNOW the truth and hard reality of what THIS important decision represents for our future. 

WE MUST RAISE the mechanical rates, and help save this business of publishing from being plundered for large Corporate interests, WITHOUT FAIR or competitive compensation for small independent businesses.

Sincerely 

LR Green

[Read original comment as filed]

Sneaky Services Use Frozen Mechanicals Public Comments by Songwriters and Independent Publishers–to LOWER Streaming Mechanicals

Only drug dealers and Big Tech refer to their “customers” as “users.”

We really appreciate how Trichordist readers have stuck with the story we have been telling about the treachery afoot at the Copyright Royalty Board in the current review of statutory mechanical royalty rates. This is kind of dry stuff but it sure has resulted in a lot of passion from the songwriting community.

That passion is directed at the frozen mechanical–the collaboration between the big publishers and big record companies to “freeze” the statutory mechanical royalty for physical goods at 2006 levels despite the current inflationary crises and debasement of the value of even the frozen rate itself. We will have more to publish on that subject to call your attention to the voices of songwriters and publishers opposing the freeze.

Ask yourself this question: Is there any reason that a songwriter who opposes a freeze on mechanicals–the only question they were asked to respond to by the Copyright Royalty Board–would ever support a reduction in the streaming mechanical? Would anyone say, oh, well if Spotify is asking for a reduction, then by all means? If you thought the passion against frozen mechanicals ran high, you ain’t seen nothing yet.

But in one of the great acts of self-sabatoge that they are so good at, that passion is currently being hijacked by some of the biggest companies in commercial history to somehow convince us that less is more. Remember–these are the same people who benefit from the sick mass manipulation and addiction practiced and normalized by the Stanford Persuasive Technology Lab.

And now they are trying to use that trickery and psychology on songwriters to gaslight them into ignoring reality and supporting the chaos at the Copyright Royalty Board.

We will be posting a series of excerpts from public filings in coming days. If you want to skip ahead, you can read this letter from Chris Castle to the Copyright Royalty Board roasting the services for twisting the words of Helienne Lindvall, David Lowery and Blake Morgan.