#FrozenMechanicals Crisis: Monica Corton’s Comment to Copyright Royalty Board

July 26, 2021

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

SENT VIA ELECTRONIC DELIVERY

RE: DETERMINATION OF ROYALTY RATES AND TERMS FOR MAKING AND DISTRIBUTING PHONORECORDS, DOCKET NUMBER 21-CRB-0001-

PR (2023-2027) (Phonorecords IV)

Honorable Judges:

My name is Monica Corton, and I am the CEO and Founder of Go to Eleven Entertainment, 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 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 (when multiple 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 rates for mechanical licenses. For many years (2006-2021), I have gone along with this explanation, but after fifteen (“15”) years of having no increase 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

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.

To date, the justification for not increasing our physical and digital download mechanical royalty rates has been a fear of potentially stalling or disrupting the transition to the distribution of music digitally. We now are long past that transition, and the major record labels who are pressing for a freeze or no increase in our mechanical rates now are very stable businesses. Indeed, they are flourishing. Universal Music Publishing Group is expected to go public, the major labels are signing more catalog than ever before, and they all are claiming a very healthy, booming industry in the media and to their investors. Part of the reason they are so financially sound is because they are not paying their fair share in mechanical royalties to creators when it comes to physical product, digital download, ringtone, and music bundle mechanical royalties.

You might ask, “Why are the parties outlined in the Motion to Adopt Settlement of Statutory Royalty Rates and Terms for Subpart B Configurations agreeing to this freeze on mechanical rates?” Let’s look at who the parties are that are agreeing: all the major labels, all of their sister music publishing companies, such as Sony Music, Universal Music Publishing, Warner/Chappell Music, and the Nashville Songwriters Association International (“NSAI”). The odd man out is NSAI, a songwriter organization based in Nashville. Why would songwriters approve of a rate that does not allow them to make a living from the mechanical licensing of their songs? The answer is unclear as many NSAI members, when asked, tell me that they are unaware that their organization is selling out their member’s copyrights for an under-market mechanical rate price in the 2023-2027 mechanical rate negotiations with the CRB. A perusal of the NSAI website shows nothing about NSAI’s participation in these negotiations or the positions it is taking in such negotiations. If their membership does not know that NSAI is agreeing to freeze these mechanical rates, how can the songwriter member of NSAI be a “willing buyer, willing seller”?

The NMPA’s Motion to Adopt Settlement states “the Settlement represents the consensus of buyers and sellers representing the vast majority of the market for “mechanical” rights for Subpart B Configurations”, yet this is incorrect. It seems likely that songwriters represented by the major labels have no idea that their publisher is agreeing to not increase their mechanical royalties for another 5 years, for a total twenty-one (“21”) years of non-increases in physical product, digital download, ringtone, and music bundle mechanical rates. While these songwriters have been denied any increased rates, nearly everything else in the world has

increased in price substantially. There is no food item, rent, mortgage, car, gasoline, school or tax rate that has not increased from 2006 to 2021 and will not increase from 2023 to 2027.

Further, another concern is that the NMPA has kept the negotiations for this subsection very quiet. As a member of many of the music trade organizations and someone who is paying attention to the pulse of independent publishers and songwriters, I can attest that there has been no discussion of these frozen mechanical rates. Outside of the major companies that control copyrights, there is vast market of independents, foreign music publishers/songwriters, and do-it- yourself (“DIY”) creators who have no voice in these hearings or rate settings.

These are the people who are having a much harder time making a living from their music. Many of them have songs that sell a lot of physical product and digital downloads, as physical product is still doing well in many niche markets where independent music publishers/songwriters and DIY creators live. These creators are not well-educated in music publishing, either from an industry knowledge of licensing perspective or a legal perspective (where they would follow the day-to- day happenings of the CRB hearings.) They are the silent 40+% of the market that makes up the independent side of music publishing. We are a mighty group. We represent thousands of creators, and our numbers are increasing the balance of the business every year, so much so that Sony Music just bought AWAL, a formerly independent label that administered master rights for thousands of DIY creators and was owned by Kobalt. Please read (https://www.rollingstone.com/pro/features/why-did-sony-music-just-spend-430- million-on-kobalt-indie-label-awal-1122350/).

Are you certain that those AWAL artists, who often also are the songwriters of the songs that they record, have any idea that their new label owner is advocating for them not to get a mechanical rate increase for physical copies, digital downloads, ringtones, and music bundles for the next 5 years, after already 15 years of not receiving an increase in their mechanical rates? I would argue that a significant majority of them have no idea that this is happening.

There is reference in several places that the major labels and major publishers are party to some “side deal” which ostensibly could mean the major publishers are receiving some extra compensation for these frozen rates with some additional payments that effectively make the major music publishers mechanical rates increase their rates for physical mechanicals, digital downloads, ringtones, and music bundles. What is this settlement? Who is party to it? How will it affect the music publishing industry at large?

I would ask that the CRB consider raising the mechanical rates for physical product, digital downloads, ringtones, and music bundles to at least a standard of living increase since 2006, which I have calculated using the CPI Inflation Calculator that is provided by the U.S. Bureau of Labor Statistics (https://www.bls.gov/data/inflation_calculator.htm). This would mean that the physical mechanical rate and the digital download rate for songs under five minutes would increase to $.12 per unit and the per minute rate for anything over five minutes would increase to $.02 per minute. The ringtone rate would increase to $.33 per ringtone, and the music bundle rate should increase proportionally as well. Unfortunately, I am unclear regarding where the music bundle rates stand now, but the calculator is very easy to use, and I leave it to the CRB judges to assist reasonably in determining the increase for said music bundle mechanical royalty rate(s). These mechanical rates should take effect on January 1, 2023 and be the starting point for the next rate period. In addition, the rate should increase each year of the 5-year term as is the standard with all other mechanical rates that are set by the CRB.

I believe this is the only fair and equitable way to deal with these frozen mechanical rates, and I hope that my explanation on behalf of thousands of independent publishers and songwriters who represent the independent and DIY communities will give the CRB judges pause to reconsider the physical product, digital download, ringtone, and music bundle mechanical rates included in Subpart B for the period 2023-2027. I am happy to elaborate in any way regarding any aspect of this letter should the CRB judges like further explanation on my reasoning herein.

Best wishes,

Monica Corton
CEO & Founder

Go to Eleven Entertainment

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

Gwendolyn Seale, Esq.

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.2 It 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

1 https://www.nmpa.org/boardmembers/ .

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.

3 SONGWRITERS REFUTE FALSE CLAIMS REGARDING COPYRIGHT ROYALTY BOARD, available at

https://www.nashvillesongwriters.com/songwriters-refute-false-claims-regarding-copyright-royalty-board .

(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, 2021,7 Representative 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?”

4 https://www.nmpa.org/boardmembers/ ; https://www.songsfoundation.org/our-board-1 .

5 Motion at 4, available at https://app.crb.gov/document/download/25288.

6 Id. at 3.

7 July 13, 2021 Letter from Representative Lloyd Doggett, available at https://thetrichordist.com/2021/07/18/letter- from-congressman-lloyd-doggett-about-frozen-mechanicals-to-librarian-of-congress-and-register-of-copyrights/.

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 2020.8 Additionally, 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.11 Record 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.12 Those 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”13 which 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

8 Year-End 2020 RIAA Revenue Statistics, available at https://www.riaa.com/wp-content/uploads/2021/02/2020- Year-End-Music-Industry-Revenue-Report.pdf .

9 Id.

10 Id.

11 Keith Caulfield, Taylor Swift’s ‘Evermore’ Breaks Modern-Era Record for Biggest Vinyl Album Sales Week, BILLBOARD (May 31, 2021), available at https://www.billboard.com/articles/news/9580407/taylor-swift- evermore-record-breaking-vinyl-album-sales-week/ .

12 Keith Caulfield, Record Store Day 2021’s First Drop Sparks 1.3 Million in U.S. Vinyl Album Sales, BILLBOARD (June 22, 2021), available at https://www.billboard.com/articles/business/chart-beat/9590304/record-store-day-2021- first-drop-sets-record.

13 David Lawder, Andrea Shalal, ‘Act Big’ Now To Save Economy, Worry About Debt Later, Yellen Says In Treasury Testimony, Reuters (Jan. 19, 2021), available at https://www.reuters.com/article/us-usa-biden-yellen- idUSKBN29O1WX.

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.”16 Copyright 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.”17 According 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

14 Audiam Spotify U.S. Mechanical Rate Calculator, available at https://resources.audiam.com/rates/ .

15 Ed Christman, Audio Streams Up 15%, Vinyl Sales Double in First Half of 2021, BILLBOARD (July 14, 2021), available at https://www.billboard.com/articles/business/9600940/streams-vinyl-cd-sales-genres-midyear-2021- analysis/ .

16 See generally, Copyright and the Music Marketplace (February 2015), available at https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf. 17 Id. at 82-83.

18 NMPA & HFA First Notice Comments at 15-16, available at https://www.copyright.gov/policy/musiclicensingstudy/comments/Docket2014_3/NMPA_HFA_MLS_2014.pdf. 19 Testimony of Michael Katz at 65-66, available at https://app.crb.gov/document/download/23858 .

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.21 This 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.22 It 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

20 NSAI Reply Comments at 7, available at https://www.copyright.gov/policy/musiclicensingstudy/comments/Docket2014_3/extension_comments/Nashville_S ongwriters_Association_International_NSAI.pdf.

21 See Phonorecords III Open Session, available at https://app.crb.gov/document/download/13897 at 3583-88; https://www.nashvillesongwriters.com/songwriters-refute-false-claims-regarding-copyright-royalty-board .

22 See https://app.crb.gov/document/download/13897 at 3583–88.

23 SONGWRITERS REFUTE FALSE CLAIMS REGARDING COPYRIGHT ROYALTY BOARD, available at

https://www.nashvillesongwriters.com/songwriters-refute-false-claims-regarding-copyright-royalty-board.

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.

Thank you,  

Gwendolyn Seale

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

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


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

Dear Dr. Hayden and Ms. Perlmutter,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sincerely,

Lloyd Doggett

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

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

[3] 17 U.S.C. § 115(c)(2)(A).

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

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

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

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

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

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

How to Register to Comment at the Copyright Royalty Board on the Frozen Mechanicals Rate Hearing

[This post first appeared on MusicTech.Solutions]

By Chris Castle

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.

There’s quite a bit of material about the problem that was posted on the Trichordist, so you can check there to read up on the background. You can also subscribe to the Artist Rights Watch podcast and listen to our first episode about frozen mechanicals. This post today assumes you already know the background and are ready to file your comment.

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:

  1. 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.

The Copyright Royalty Board Gets It Right: New Increased Inflation-Adjusted Royalty Rates for Webcasting–MusicTechPolicy

[This post first appeared on the MusicTechPolicy blog]

by Chris Castle

The Copyright Royalty Board has announced its decision on webcasting rates under §114 for 2021-25 and it’s good news for non-featured artists, featured artists and sound recording copyright owners. The rates are set for 2021, paid retroactively to January 1. 

ServiceNew Rate Per Performance 2021Old Rate Per Performance 2020Increase
Commercial Nonsubscription$0.0021$0.0018+17%
Commercial Subscription$0.0026$0.0024+8%
Noncommercial Webcaster (Non-educational)$1000 per station or channel up to 159,140 Aggregate Tuning Hours/month Overage at $0.0021 per performance$500 per station or channel up to 159,140 Aggregate Tuning Hours/month. Overage at $0.0018 per performancePer-station: +100%
Overage: +17%

After 2022, these rates are adjusted by the Consumer Price Index (CPI-U for the geeks). 

The Copyright Royalty Judges shall adjust the royalty fees each year to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index for All Urban Consumers (U.S. City Average, all items) (CPI-U) published by the Secretary of Labor before December 1 of the preceding year.

So it is clear that the CRB can come up with reasonable rates when they’re asked. It’s also a great example of the power of strong bargaining groups including SoundExchange, the unions, indie and major record companies, and a broad cross-section of music users.

Rates for noncommercial educational webcasters, satellite radio, audio for business establishments and some others — are decided in a different process. Their 2021 rates for these service are on the SoundExchange website.

The @IvorsAcademy Joins the No Frozen Mechanicals Campaign

The Ivors Academy joins the campaign against frozen mechanical royalties for songwriters by the Copyright Royalty Board in the US. Ivors is the UK’s independent professional association for music creators and is a community of diverse, talented songwriters and composers across all styles. Their talent creates the music that the world loves. The organization was formerly known as the British Academy of Songwriters, Composers and Authors, and is home to the Ivors Awards named after Ivor Novello. Ivors Academy are leading advocates for songwriters across Europe and are leading the #BrokenRecord and #PaySongwriters campaigns that have resulted in an inquiry into music streaming by the UK Parliament. Follow them at @IvorsAcademy.

Against Frozen MechanicalsSupporting Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 
North Music Group 
Blake Morgan 
David Lowery 
ATX Musicians 
Ivors Academy 

Three Nashville Songwriters Respond on Frozen Mechanicals

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

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

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

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

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

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

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

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

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

By Chris Castle

[This post first appeared on MusicTech.Solutions]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ATX Musicians Joins Opposition to Frozen Mechanicals

Against Frozen MechanicalsSupporting Frozen Mechanicals
Songwriters Guild of AmericaNational Music Publishers Association
Society of Composers and LyricistsNashville Songwriters Association International
Alliance for Women Film Composers 
Songwriters Association of Canada 
Screen Composers Guild of Canada 
Music Creators North America 
Music Answers 
Alliance of Latin American Composers & Authors 
Asia-Pacific Music Creators Alliance 
European Composers and Songwriters Alliance 
Pan African Composers and Songwriters Alliance 
North Music Group 
Blake Morgan 
David Lowery 
ATX Musicians 

Professor Kevin Casini (@KCEsq) Asks Congress and the CRJs for Meaningful Public Comment on Frozen Mechanical Royalty Settement

May 27, 2021

Senator Richard Blumenthal
90 State House Square
Hartford, CT 06103

Senator Chris Murphy
Colt Gateway
120 Huyshope Avenue, Suite 401
Hartford, CT 06106
Hon. C.J. Jesse M. Feder
Hon. J. David R. Strickler
Hon. J. Steve Ruwe

US Copyright Royalty Board
101 Independence Ave SE / P.O. Box 70977
Washington, DC 20024-0977

Senators Blumenthal and Murphy, and Honorable Judges of the Copyright Royalty Board:

I am a Connecticut resident, attorney, and law professor, and the views expressed here are mine, and not necessarily those of any local or state bar association, or any employer. I am an active participant in politics local, state, and federal. I am a registered non-affiliate in New Haven. And I need your attention for about ten minutes.

On May 18, 2021, a “Notice of Settlement in Principle” was filed by parties to the proceedings before the Copyright Royalty Board about its Determination of Royalty Rates and Terms for Making and Distributing Phonorecords.[1] That Notice was followed on May 25, 2021 by a Motion To Adopt Settlement Of Statutory Royalty Rates And Terms For Subpart B Configurations, filed by the NMPA, Sony, Universal and Warner and NSAI.[2] I write today in reference to that proposed settlement.

This settlement outlines the terms by which mechanical royalty[3] and download rates will remain locked at the current rate of 9.1¢. The same almost-dime for each copy of a work manufactured and distributed. The same almost-dime that it’s generated since 2006. A paltry sum to be certain but a far cry from the 2¢ royalty rate mechanical royalties imposed for the better part of seventy years.[4] Starting in 1977, Congress mandated that the mechanical royalty be increased incrementally until 2006 when the rate of 9.1¢ was achieved. And there it has remained.

This proposed private settlement would extend that 2006 freeze until 2027.

In March 2017, a precursor to Phonorecords IV found the Copyright Royalty Board ruling that interactive streaming services must pay more in mechanical royalties over the course of the next five years.[5] Surely more than a simple inflation adjustment, but nonetheless a sign that the CRB thought costs and values needed to become more aligned for streaming—which is paid by the streaming platforms unlike the physical and download mechanical which is paid by the record companies. Now comes Phonorecords IV, and a proposed settlement from the major publishers and their affiliated major labels. Before this proposal can be accepted by the CRB, I asked for the simple opportunity of public comment.

As you well know, in nearly all other administrative proceedings public comment is an integral and indispensable component of the process. To see that the CRB may allow for a public comment period by members of the public beyond the participants in the proceeding or parties to the settlement is a step in the right direction, and my hope is that this development will be broadcast far and wide so that the CRB, and in turn, Congress, may get a full picture of the status of mechanical royalty rates, especially from those that are historically underrepresented. “Public comments” should be comments by the public and made in public; not comments by the participants made publicly.

Let me back up and state that I have a great deal of respect and admiration for the work put into the landmark copyright legislation that came about at the end of 2018, and for those that made it happen. So too for the members of the CRB, and in this space, I thank those Judges for taking the time to read a letter from an adjunct law professor with no economic stake in the outcome, but rather an interest in, and duty of, candor to the Court.

In an age of unprecedented political polarization, the consensus built in the passage of the Music Modernization Act showed that politics aside, when it’s time to make new laws that fix old problems, Congress can still get the job done. I know well the sweat-equity poured into its creation by the very same people that propose this settlement. I have found myself on the same side fighting the same fight as them many times. They have proven capable of navigating your halls and taking on those that would seek to devalue (or worse) the work of the songwriter, and musician. In this instance, I would like to see them fight the fight yet again. recognize the reasoning and intention behind the proposed settlement. Comment by the public made publicly is a way for that to happen.[6]

Our state, Connecticut, has a long and storied history with music. In 1956, The Five Satins recorded what would go on to be one of the most recognizable and beloved doo-wop songs in history. “In The Still of the Night” was ranked 90th in Rolling Stone’s list of Top 500 songs of all time.[7] Five years later, the 1961 Indian Neck Folk Festival was where a young Bob Dylan’s first recorded performance.[8] That young man turned into a fine songwriter, as evidenced by the 4,000+ covers recorded of his works, and his record sale last year of his publishing royalties.[9] And no one will forget Jim Morrison’s arrest at the old New Haven Arena, December 1967. Ticket price: $5.00. Connecticut is home to more than 14,000 registered songwriters, only a small percentage of whom have engaged a music publisher. These writers are considered “self-publishing”, but the reality is, they have no publishing. Ironically, it is these independent writers who rely disproportionately on physical sales, direct downloads, and Bandcamp Fridays.[10]

A year ago, I made the unilateral decision to pivot our consulting company, Ecco Artist Services, to purposefully work with, and advocate for, the traditionally and historically underserved and underrepresented in the music industry. Freezing the growth of rates for physical and digital sales that are already digging out of the residual effects of 70 years at 2¢ strikes at the heart of that community’s ability to generate revenues from their music.

Sadly, rate freezes for mechanical royalties are nothing new. I’ll tell you what has not been frozen since 2006: the cost of living. According to the U.S. Bureau of Labor Statistics, prices for rent of primary residence were 53.49% higher in 2021 versus 2006 (a $534.91 difference in value). Between 2006 and 2021 rent experienced an average inflation rate of 2.90% per year. This rate of change indicates significant inflation. In other words, rent costing $1,000 in the year 2006 would cost $1,534.91 in 2021 for an equivalent purchase. Compared to the overall inflation rate of 1.82% during this same period, inflation for rent was higher.[11] Milk? How about 19.48%.[12] Childcare? In Connecticut? Senators, you don’t even want to know.[13]

Now, it’s no secret the trade association for the US music publishing industry is funded by its music publisher members, and of course, as a professional trade organization, the association is bound to represent those members. Publishers have long enjoyed a better reputation amongst industry insiders than “the labels,” and for good reason, but the fact remains that writers signed to publishing deals are in contractual relationships with their publishers, and their interests are not always aligned. Such is the state of play in a consumer-driven marketplace, and especially now that publishers and labels are consolidating their businesses under the same tents.

Unfortunately, the independent songwriter lacks the resources to participate fully in the process, and although a signed songwriter may believe her interests and those of her publisher are one and the same, they may not always be. It would seem the economic analysis the publishers undertook in deciding the mechanical royalty was not worth the heavy cost and burden of fighting is the same calculus the writers need not do: they couldn’t afford the fight no matter the decision.

But I ask: if the mechanical royalty covered by the proposed settlement is a dying source of revenue, why would the fight be so onerous? By the RIAA’s 2020 year-end statistics, physical sales and downloads accounted for 15% of the music marketplace.[14] That’s a $12.2 billion marketplace, and that 15% amounts to $1.8 billion. Now, I know attorney’s fees can be exorbitant in regulatory matters, but I would think we could find a firm willing to take the case for less than that. As for sales, in 2020, 27.5 million vinyl LPs were sold in the United States, up 46-percent compared to 2019 and more than 30-fold compared to 2006 when the vinyl comeback began,[15]  while some 31.6 million CD albums were sold.[16]

Median wages in the US, adjusted for inflation, have declined 9% for the American worker. Meanwhile, since the 9.1¢ rate freeze, the cost of living has gone up 31%, according to the American Institute of Economic Research[17]. The 2006 inflation rate was 3.23%. The current year-over-year inflation rate (2020 to 2021) is now 4.16%[18], which is all really to say, simply, an accurate cost-of-living increase would have a mechanical rate of at least 12¢ per sale. Twelve cents! You would think that would be an easy sell, but the streaming rates are fractions of that rate. The reality is a song would need to be streamed 250 times to generate enough money to buy it from iTunes. As my dear friend Abby North put it, the royalty amount for the digital stream of a song is a micro penny.[19]

An adjustment for inflation should require no briefing, let alone argument. If songwriters were employees, this would simply be line-item budgeted as a “cost-of-living adjustment.” If songwriters were unionized it would be a rounding error, but I digress.

A period and opportunity for the general public to comment publicly and on the record in these and other proceedings before the presentation to the CRB of this proposed settlement is in the interest of all involved. Even if it is true that the mechanical revenue is a lost and dying stream, by the RIAA’s own figures, there stand to be billions of dollars at stake. An opportunity to be heard, without having to sign with a publisher and then hope that publisher takes up the fight you want, maybe that’s all the independent writers of the industry—and, indeed, the world–need to be able to win.

In addition to a meaningful public comment period, and an inflation-adjusted cost-of-living update to the mechanical statutory royalty rate at issue, I’d ask that this letter be made a part of the Phonorecords IV public record and that you review the best practices of the Copyright Royalty Board. Not only so that those independent, self-published writers affected by its decision may voice their concerns through public comments that the CRB considers before it makes its final decision, but so that those of us that speak without financial stake in the matter can provide perspective from a policy and legal perspective.

I want to close by thanking the Board, and Copyright Office, the Judiciary Committee and the Intellectual Property Subcommittee, and the Copyright Royalty Board for their continued attention to the universe of copyright, licensing royalties, and the economy that exists therein. Lord knows there are lots of fires to be put out all over and the time spent and thought given to these policies is acknowledged and appreciated.

Kevin M. Casini
New Haven, CT

Attorney-at-Law, Adj. Professor, Quinnipiac Univ. School of Law

cc: Ms. Carla Hayden, US Librarian of Congress

Ms. Shira Perlmutter, US Register of Copyrights


[1] (Phonorecords IV) (Docket No. 21–CRB–0001–PR (2023–2027)).

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

[3] The term “mechanical royalty” dates back to the 1909 Copyright Law when Congress deemed it necessary to pay a music publishing company for the right to mechanically reproduce a musical composition on a player-piano roll. As a result, music publishers began issuing “mechanical licenses”, and collecting mechanical royalties from piano-roll manufacturers. The times, and the tech, changed, but the name stuck.

[4] A summary of historical mechanical royalty rates is available from the U.S. Copyright Office at https://www.copyright.gov/licensing/m200a.pdf

[5] Docket No. 16-CBR-0003-PR (2018-2022) (Phonorecords III).

[6] The CRB arguably has the statutory obligation to publish the Motion in the Federal Register for public comment, but may have the discretion to construe those commenting to the participants in the proceeding and the parties to the settlement.  17 U.S.C. § 801(b)(7).  It would be unfortunate if the Judges narrowly construed that rule to the exclusion of the general public, unlike the Copyright Office regulatory practice.

[7] “Rolling Stone’s 500 Greatest Songs of All Time”. Rolling Stone. April 2010.

[8] “Looking Way Back, As Bob Dylan Turns 60” Roger Catlin, Hartford Courant May 24, 2001
https://www.courant.com/news/connecticut/hc-xpm-2001-05-24-0105241174-story.html

[9] “Bob Dylan Sells His Songwriting Catalog in Blockbuster Deal” Ben Sisario, New York Times, December 7, 2020. https://www.nytimes.com/2020/12/07/arts/music/bob-dylan-universal-music.html

[10] Bandcamp Fridays Brought in $40 Million for Artists During Covid Pandemic Ethan Millman, Rolling Stone December 15, 2020

[11] https://www.officialdata.org/Rent-of-primary-residence/price-inflation/2006-to-2021?amount=1000

[12] https://www.in2013dollars.com/Milk/price-inflation/2006-to-2021?amount=4

[13] According to the U.S. Bureau of Labor Statistics, prices for childcare and nursery school were 52.57% higher in 2021 versus 2006 (a $5,256.98 difference in value).

Between 2006 and 2021: Childcare and nursery school experienced an average inflation rate of 2.86% per year. This rate of change indicates significant inflation. In other words, childcare and nursery school costing $10,000 in the year 2006 would cost $15,256.98 in 2021 for an equivalent tuition. Compared to the overall inflation rate of 1.82% during this same period, inflation for childcare and nursery school was higher.

[14] RIAA year-end revenue statistics. https://www.riaa.com/wp-content/uploads/2021/02/2020-Year-End-Music-Industry-Revenue-Report.pdf

[15] MRC 202 Year End Report. https://static.billboard.com/files/2021/01/MRC_Billboard_YEAR_END_2020_US-Final201.8.21-1610124809.pdf

[16] Id.

[17] American Institute for Economic Research. https://www.aier.org/cost-of-living-calculator/

[18] U.S. Bureau of Labor Statistics Consumer Price Index https://www.officialdata.org/articles/consumer-price-index-since-1913/

[19] Abby North, North Music Group Letter to Congress on Frozen Mechanicals and the Copyright Royalty Board, The Trichordist (May 24, 2021) available at https://thetrichordist.com/2021/05/24/northmusicgroup-letter-to-congress-on-frozen-mechanicals-and-the-copyright-royalty-board/