Tag: Copyright Royalty Board

#FrozenMechanicals Crisis: Comments to CRB by Twelve International Songwriter Groups Opposing Frozen Mechanicals Part 2

[Editor Charlie sez: This post demonstrates that no single songwriter group–including NSAI–speaks for every songwriter in the world and that songwriters around the world do not want their incomes smashed. So that’s a bit of a pickle.]

Part 2 of 2 parts, read part 1 here.

COPYRIGHT ROYALTY BOARD (CRB)

In re DOCKET NO. 21-CRB-0001-PR-(2023-2027)

Making and Distributing Phonorecords (Phonorecords IV)

Notice of Proposed Rulemaking re: 37 C.F.R. Part 385 Subpart B

Comments Submitted by the Songwriters Guild of America, Inc.,  the Society of Composers & Lyricists, Music Creators North America, and the individual music creators Rick Carnes and Ashley Irwin

These Comments Are Endorsed by the Following Music Creator Organizations:

Alliance for Women Film Composers (AWFC). https://theawfc.com

Alliance of Latin American Composers & Authors (AlcaMusica) https://www.alcamusica.org

Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news

European Composers and Songwriters Alliance (ECSA), https://composeralliance.org

The Ivors Academy (IVORS), https://ivorsacademy.com 

Music Answers (M.A.), https://www.musicanswers.org

Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org

Screen Composers Guild of Canada (SCGC), https://screencomposers.ca

Songwriters Association of Canada (SAC), http://www.songwriters.ca

[Continued from Part 1]

IV. Discussion of Objections By Independent Music Creators


A. The Willing Buyer-Willing Seller Standard and the Conflicts of Interest Inherent in the Present Settlement Negotiation Process

In evaluating whether the terms of the settlement proposal set forth in the May 25 Motion to Adopt “provide a reasonable basis for setting statutory terms or rates,” the US Copyright Act establishes a blueprint in §115(c)(1)(F) for determining the reasonability and adequacy of any such proposed, industry-wide agreement:   

The Copyright Royalty Judges shall 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(emphasis added).

The US Treasury Department provides further insight into the “willing buyer-willing seller” construct in the Code of Federal Regulations:[21]

Valuation of Property; in general:  The value of the property is the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of relevant facts (emphasis added).

Thus, while under certain circumstances the US Copyright Act provides that private agreements and licenses may be entered into between copyright owners and prospective users that apply various other indicia and metrics to gauge the advisability of one particular royalty rate over another, that latitude does not exist in regard to proposals for the adoption of industry-wide settlements by the CRB “binding on all copyright owners of musical works” per §801(b)(7)(A).

The circumstances under which the settlement negotiations were conducted that produced the proposed royalty rate freeze set forth in the May 25 Motion to Adopt can be fairly characterized  –under the above standards– as being exactly the opposite of what both Congress and the Executive Branch have in mind in defining “reasonability” under the “willing seller-willing buyer” formula.  Rather than arm’s length negotiations between parties on opposites sides of the table, the referenced discussions that produced the settlement agreement instead seem to have taken place solely among vertically integrated parties and their trade association agents, apparently with little or no input from independent music creators and copyright owners[22] upon whom “those rates and terms [will be] binding.”

More to the point, the corporate parties participating in such settlement discussions could by definition plausibly have been compromised by the conflicts of interest inherent in the fact that the corporate overseers of each major label participating in the “negotiation” likewise control the affiliated music publishers of each such label.  UMG is not only one of the three largest record labels in the world, it also is one of the world’s three largest music publisher owners of copyrights in musical compositions, with both UMG entities reporting to the same corporate ownership (Vivendi, Inc. of France).[23]  The same holds true for both WMG (in regard to the multinational corporation Access Industries headquartered in New York)[24] and SME (in regard to the Sony Corporation of Japan).[25]  

Together, these three international conglomerates control close to 70% of the market for sound recordings and musical compositions in the world.[26]  All three represent both sides in any Subpart B mechanical royalty rate discussions, rendering the concept of “willing buyer-willing seller” almost farcical in relation to fashioning a fair proposal to the CRB.  Simply put, in this case, the buyers are the sellers (and the prospective licensors are the prospective licensees). 


NMPA’s role in these negotiations was, and is, as the trade association for music publishers operating in the US, including the above-mentioned major music publishing firms that serve as their most powerful and influential board members by far– and who answer to the same owners as those against whom they and NMPA are allegedly negotiating.  It is unclear what level of input independent music publishers were enabled to exercise in the negotiations, including those with representatives on the board of the trade association.  

In regard to NSAI, its demonstrably uniform alignment with NMPA on a broad array of music industry issues over recent years has in our view appeared so unwavering as to approach potential inseparability.  As a result, we believe we are correct to be concerned that the organization cannot be said in this instance to represent music creator rights and interests in an independent, unbiased manner.  In an informal survey conducted by the well-respected music industry publication Trichordist, to our knowledge not a single music creator entity (either organizational or individual) responded that it intended to join NSAI and its narrow membership in support of the “royalty freeze” proposal.[27]  Organizations and individuals representing hundreds of thousands of songwriters, composers and lyricists, on the other hand, have publicly voiced objection to the proposed royalty rate freeze. 

Based upon these facts and circumstances alone, the settlement agreement produced by the Settling Parties can in no way be considered to have been fashioned upon “willing buyer-willing seller” principles.  As such, respectfully, it should not be relied upon as the basis for a conclusion by the CRB that the proposed settlement “[provides] a reasonable basis for setting statutory terms or rates,” per §801(b)(7)(A) of the Copyright Act and otherwise.

B. Lack of Transparency in the Negotiating and Settlement Process

As previously noted, the Independent Music Creator Community remains additionally concerned over the general lack of transparency that has marked the entire process described above.  We are especially disquieted by the unexplained contents of a “separate Memorandum of Understanding addressing certain related issues” referenced in the March 2 Notice as having been negotiated among the three major labels and publishers and NMPA, with the conspicuous absence of NSAI. 

Has such an MOU been presented to the CRB for approval or adoption?  Has it been seen by NSAI?  Is NSAI endorsing it?  These are important, additional details and questions that require comprehensive answers to complete a full evaluation of any settlement alleged to be reasonable and based upon “willing buyer-willing seller” principles.

Further on the issue of transparency, we also are compelled to raise the issue of NSAI’s public statements purportedly made to explain its support for a five-year continuation of the Subpart B royalty rate freeze. These statements give insight into the level of factual distortion that may have been foisted upon NSAI during negotiations, and that may have hampered it in evaluating the advisability of the settlement, as discussed below.

C. Misleading Mechanical Royalty Statistics

In an open letter to its “Fellow Songwriters and Composers” published by NSAI on or about June 2, 2021,[28] the organization presented the following analysis of its position in favor of continuing the Subpart B royalty freeze:

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 [sic]. 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!

The statistics presented by NSAI in its statement are patently misleading and/or incorrect, contradicted by data published by the principle trade association of US recording companies, the Recording Industry Association of America (RIAA) (a participating party in the Phonorecords IV proceeding).  According to the RIAA’s Year-End 2020 Revenue Report,[29] the record industry’s total US revenues in both 2019 and 2020 from the combined categories of physical phonorecords and permanent downloads surpassed $1 billion in each of those years, correlating on a percentage basis to 14.3% of total revenues in 2020 and 17% of total revenues in 2019:

RIAA US RECORDING REVENUES (rounded)     2020                                        2019

VINYL                                                                      $620M (5.1%)                        $480M (4.3%)

CDs                                                                         $483M (4.0%)                        $631M (5.7%)

DOWNLOADED ALBUMS                                     $320M (2.6%)                        $369M (3.3%)

DOWNLOADED SINGLES                                      $312M (2.6%)                        $408M (3.7%)

TOTAL PERCENTAGES                                            14.3%                                      17.0%

The data published by the International Federation of the Phonographic Industry (IFPI) for 2020 regarding global recorded music revenues is even more starkly indicative of the continuing statistical and economic importance of physical phonorecords and permanent downloads.  According to IFPI, those two categories combined for over 25% of total worldwide earnings.[30]

On the basis of these numbers, it would seem a near impossibility for mechanical royalties attributable to physical phonorecords and permanent downloads (projected by NSAI to be less than 1% of US mechanical revenues by 2027) to represent anywhere near such a tiny comparable percentage to total recording revenue in the same categories.  That is especially so when one takes into account the fact that recording revenues from vinyl recordings are actually growing at a substantial rate (a 30% increase in 2020), not diminishing.  In fact, recent reports for the first half of 2021 indicate that this vinyl growth trend is actually accelerating.  Vinyl sales in quarters one and two of 2021 reportedly rose a whopping 108% over the same period in 2020,[31] and demand for vinyl records is outpacing manufacturing capabilities on both a national and global basis.[32] 

Thus, while no one can plausibly argue that “traditional” mechanical uses of music have not shifted significantly toward streaming on demand in the digital age, that is not to say that Subpart B uses in the US are disappearing or anything close to it.  Subpart B mechanical royalty income remains a substantial and continuing revenue source for many music creators and independent music publishers, almost certainly amounting to tens of millions of dollars per year out of the $823.5 million in mechanical royalties NMPA reports are generated annually in the US.[33]  

And make no mistake about it.  Those tens of millions in annual Subpart B revenues are keeping thousands of songwriters and composers financially afloat in an age that continues to be dominated by unlicensed uses of music on the Internet, and far-below market value royalty rates being paid for music streaming.  The freezing of the Subpart B royalty rate starting in 2006 has inarguably caused significant financial harm to creators in an era when they could least afford it. 

One independent music publishing company owner with substantial, practical insight into this issue, recently offered the following observations:

The royalty amount for digital streams is a micro-penny. Unless we are talking about top songwriters with hundreds of millions to billions of streams, there is an excellent chance he or she still may be driving an Uber to support a family.  It literally takes hundreds of streams to equal the 9.1 cent mechanical publishers receive for a physical sale or download.  That’s why the physical and download mechanical rate is so important to independent creators, and especially to those just starting out.

Vinyl sales are still strong among many retailers, including Amazon. CDs remain a significant media format, and many listeners still prefer to ‘own’ rather than temporarily cache the music they listen to.  Major music publishers do not face the same struggles as independent publishers and songwriters. They are part of multi-national conglomerates that own both the major publishers and major record labels. Major publishers that agree to freeze the statutory rate are simply leaving more money in the pockets of the labels that are their sister companies.  We, on the other hand, are trying to preserve the only sources of revenue that we have.  We don’t have another pocket.  That’s why we must fight to be heard.[34]

D. NFTs

On a very much related issue, the emergence of non-fungible tokens (NFTs) and related block chain technologies seem to have been glaringly omitted from the mechanical royalty analysis presented in NSAI’s informal statement and explanations of the proposed Subpart B settlement.   Although the longevity periods of such trends are notoriously difficult to predict, NFTs appear to be forming the basis of new, specialized and mainstream music products and associated downloads. 

As a category of recording industry revenues, NFT estimates for 2020-21 are in the tens of millions of dollars (out of billions of dollars in NFT earnings in all categories during that period so far).[35]  The question of whether this issue was raised in the Phonorecords IV Subpart B settlement negotiations is an important one, on both a conceptual and a financial basis.  Given the wide range of NFT supported consumer products that may be introduced in the near future, it is not a phenomenon that can be prudently ignored in light of its significant potential effects on the future of US and global mechanical royalties.

NFTs, which by definition are regarded as electronic and non-fungible, have since their introduction in the music realm often been bundled with specialty physical product and downloads to increase their total value.  We pose the rhetorical question of whether there shouldn’t be a conversation taking place at the CRB level as to whether an NFT that is purchased for hundreds, thousands or even millions of dollars (as some recently have been), and which includes a bundled, sometimes unique physical sound carrier or download component, shouldn’t produce more than a one-time, 9.1 cent revenue payment for music creators and copyright administrators?  Are these really sales to the public for private use under §115 of the Copyright Act, and what royalty rate should apply to them?   Might a fixed percentage of the sale price realized be a more equitable means of compensating music creators in such situations?    Millions of dollars in songwriter, composer and independent music publisher revenue may be riding on the answers to those questions.  

On a much broader scale, the same holds true for recorded physical products and downloads that are sold to the general public as part of mainstream NFT packages now and in the future.  Some industry analysts are predicting a further, significant resurgence of vinyl sales and downloads predicated on an NFT boom that will drive purchases of products such as artist box sets and other music collections and compilations.  As we stand on the threshold of what might be a new era reliant in important part on NFT music distribution, the extension of a new, five-year freeze on already frozen Subpart B mechanical rates would further exclude the creative community from participation in the real and potential rewards such new technologies are intended to generate.

While the future may not be clear, the fact that these issues deserve full, public airings and careful consideration before the CRB certainly is.  We should not and cannot permit silent acquiescence through privately negotiated, confidential agreements, to control the future of NFT-related mechanical royalties.  Moreover, we cannot help but wonder whether the NFT issue has been relegated to the unknown contents of the Settling Parties’ MOU (at least executed and possibly negotiated without the participation of NSAI), which we expect may be claimed by those same Settling Parties to be subject to non-disclosure requirements (including those set forth in the protective order in place for these proceedings). 

These are issues of serious concern and great financial importance to the independent music creator community.  We urge that they be addressed transparently and publicly as part of the Phonorecords IV Subpart B proceedings.  At the very minimum, it also seems that NFTs should be excluded from the “music bundles” contemplated by Subpart B.

E. Economic Bars to Effective Music Creator Participation

There is one additional, extremely important issue raised by NSAI’s explanatory statement upon which we believe it is essential to comment.  It concerns the financial ability of independent music creators to participate in CRB proceedings, and the severely compromised bargaining positions of music creators when it comes to the negotiation of so-called “industry settlements” under the current CRB rate setting system.

In defending its position in favor of the continuing Subpart B royalty rate freeze in Phonorecords IV, NSAI offered the following observation:

The question songwriters and composers should be asking is why these false critics [apparently referring to all other music creator organizations] did not participate in the trial [sic] themselves. Any of these groups or individuals could have participated, but they did not even try.

That position presents an interesting juxtaposition to this prior assertion made by NSAI within the same published statement:

What these critics are not telling you is that we did fight that battle in 2006, during CRB I, when we asked the Copyright Royalty Board to increase the physical rate, while critics were nowhere to be found.[36]  [footnote added] Instead, after our side spent more than $20 million, the judges kept the rate exactly where it was, at 9.1 cents [emphasis added].

The point made by NSAI about the necessity of huge participatory expenditures goes a long way toward explaining why the only “songwriter group” participating in the Phonorecords IV settlement discussions is NSAI.[37]  Other music creator organizations do not have millions of dollars –or anything close to it– to allow their full participation in CRB proceedings.  Neither, in reality, does NSAI.  In fact, we wonder how NSAI continues to be able to participate in $20 million battles without accepting support from other groups on its “side” whose conflicted goals and actions may be antithetical to songwriter interests, both long and short term.

Much has changed since 2006.  In practice, the prohibitive costs of participating in CRB rate setting proceedings now form a nearly impenetrable barrier to entry for any independent music creator group wishing to participate while maintaining its autonomy. To participate generally means to acquiesce to those music publishing mega-corporations with the funds to remain in control of the negotiation, settlement and/or litigation process, including the conflicted major music publisher affiliates of the major record labels (some of whom purportedly utilize revenues charged back to their songwriters and composers to pay for positions taken before the CRB that are incompatible with those same music creators’ interests—such as the approval of frozen royalty rates). 

Thus has the current Phonorecords IV Subpart B settlement negotiation process continued to move forward without independent music creator input, tainted by the appearance of conflicts of interest created through vertical integration.  Unsurprisingly, the resulting “settlements” now unfairly threaten to harm the ability of music creators to argue successfully for substantial and desperately needed increases in streaming royalty rates. 

In that regard, shortly after the March 2 Notice was filed by the Settling Parties concerning their anticipated agreement to again freeze Subpart B royalty rates in Phonorecords IV, a witness for the music streaming company Pandora in the Phonorecords III Remand proceeding filed testimony citing the March 2 Notice as proof that frozen or diminished streaming royalty rates are similarly needed as a matter of both sound policy and fairness.[38]   

This predictable backfiring of the Settling Parties’ “roll forward” strategy is likely to be the catalyst for many more, baseless claims by other members of the digital distribution community desperately seeking to avoid paying market value streaming royalty rates under the Phonorecord III Remand and the Phonorecord IV proceeding.  That sad eventuality raises even more complex, potential conflict of interest issues concerning past or current cross ownership/investment arrangements between record companies and digital distributors too labyrinthian to detail in these Comments, but worthy of future consideration.  For now, however, we should consider that the ability of a stronger, broader group of independent music creator organizations and representatives to affordably participate in future CRB rate setting proceedings might avoid many of these unfair and counter-productive results.  It is an inquiry that we believe is worth pursuing through the US Copyright Office.

In the meanwhile, to independent music creator organizations such as ours and our colleagues, the choice to officially participate in the Phonorecords IV proceedings (especially regarding the Subpart B settlement negotiations) as second-class citizens on an economically tilted playing field remained no choice at all.  We instead have chosen to rely on the comments process, and our belief in the authority and wisdom of the CRB to ensure that the principles set forth in §§115 and 801 of the US Copyright Act, among others, are diligently applied.

To us, the events of 2006 occurred too long ago to be used as a pretext not to fight now for higher, more equitable Subpart B mechanical royalty rates, which in the interim have been devalued by a third simply due to inflation, inflicting significant economic harm on creators.  Rather, we submit as independent music creator representatives that the circumstances described throughout these Comments demonstrate beyond doubt –despite the endorsement by NSAI of the Subpart B royalty rate freeze in Phonorecords IV—that the proposed settlement does not come close to providing a reasonable basis for setting royalty rate standards arrived at through a willing buyer-willing seller process.

V. Recommendations

In light of the foregoing, and with likely hundreds of millions of dollars of music creator income at stake for the future rate periods under consideration in Phonorecords IV, the independent music creator signatories to these Comments respectfully submit the following recommendations in regard to this Rulemaking:

  1. For the reasons stated throughout these Comments, we urge the CRB to decline to adopt the settlement agreement as a basis for statutory rates and terms.   Adoption of the settlement and the rules as proposed would represent a miscarriage of justice, placing the imprimatur of the CRB on a negotiation and settlement process that was unfair, non-transparent, and may have been conducted under circumstances that were anything but reasonable pursuant to (and setting crucial precedent for) the required “willing buyer-willing seller” standard.
    
  2. We further urge that the CRB publish for comment at the earliest possible time the full text of the settlement
    agreement as submitted by the Settling Parties, and the MOU referenced in the March 2 Notice.  As Congressman Lloyd Doggett of Texas wrote to the Librarian of Congress and the Register of Copyrights on July 18, 2021, “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.”[39]
    
  3. We urge that at minimum, new royalty rates be made applicable to Subpart B uses pursuant to Phonorecords IV, adjusted to reflect changes in the CPI since 2006 as a starting point, and further adjusted according to changes in the CPI each year thereafter (with a permanent floor of 9.1 cents and corresponding per minute rates for physical phonorecords and permanent downloads).   Precedent and support for such a prospective adjustment methodology can be found in §805 of the Copyright Act,[40] as well as in the CPI-based mechanical royalty rate adjustments applied during the period January 1, 1990 through December 31, 1997,[41] and recent §114 decisions, among other sources.  Moreover, at a minimum, it seems that NFTs should also be excluded from the “music bundles” contemplated by Subpart B.  If the Settling Parties wish to establish different rates through private agreements for themselves, that is their prerogative.  Non-participants in such settlements and agreements, however, should not be tied to such settlements and agreements (especially ones not negotiated at arm’s length) by the CRB.
    
  4. We urge that the CRB recommend the undertaking of a study by the US Copyright Office to improve the ability of independent music creators and music publishers to more fully participate in CRB proceedings at reasonable cost.  The current inability of all but the major music publishers and their affiliated music publisher and music creator groups to effectively participate in CRB proceedings due to the costs of such participation must be effectively addressed.  Until then, it is incumbent upon the CRB to help level the playing field by taking into account the interests and predicaments of the independent music creator community, whose Constitutional, creative and economic interests the US Copyright Act is primarily intended to protect pursuant to Article I, §8 of the US Constitution.

VI. Conclusion

We thank the Copyright Royalty Judges and the CRB for this opportunity to participate in the Phonorecord IV proceedings through the submission of these Comments.

Respectfully submitted,

    

Rick Carnes                                                    Ashley Irwin

President, Songwriters Guild of America      President, Society of Composers and Lyricists

Officer, Music Creators North America         Co-Chair, Music Creators North America



List of Other Supporting Organizations

Alliance for Women Film Composers (AWFC). https://theawfc.com

Alliance of Latin American Composers & Authors (AlcaMusica) https://www.alcamusica.org

Asia-Pacific Music Creators Alliance (APMA), https://apmaciam.wixsite.com/home/news

European Composers and Songwriters Alliance (ECSA), https://composeralliance.org

The Ivors Academy (IVORS), https://ivorsacademy.com

Music Answers (M.A.), https://www.musicanswers.org

Pan-African Composers and Songwriters Alliance (PACSA), http://www.pacsa.org

Screen Composers Guild of Canada (SCGC), https://screencomposers.ca

Songwriters Association of Canada (SAC), http://www.songwriters.ca

cc:    Charles J. Sanders, Esq.

         Ms. Carla Hayden, US Librarian of Congress

         Ms. Shira Perlmutter, US Register of Copyrights

         Mr. Eddie Schwartz, President, MCNA and International Council of Music Creators (CIAM)

         The Members of the US Senate and House Sub-Committees on Intellectual Property

[1] https://www.songwritersguild.com/site/index.php

[2] https://thescl.com/

[3]  https://www.musiccreatorsna.org

[4] https://www.songwritersguild.com/site/rick-carnes

[5] https://en.wikipedia.org/wiki/Ashley_Irwin

[6] https://www.fairtrademusicinternational.org/

[7] See, e.g., http://www.americanmusicpreservation.com/songwriters.htm

[8] https://www.bls.gov/data/inflation_calculator.htm

[9] See, e.g., https://escholarship.org/content/qt332557hg/qt332557hg.pdf

[10] https://copyright.gov/licensing/m200a.pdf

[11] https://www.bls.gov/data/inflation_calculator.htm

[12] Ibid..

[13] As songwriter and recording artist Michelle Shocked has so aptly commented on this issue, “many may forgive the past, but we do not forget it.”

[14] https://app.crb.gov/document/download/25288

[15]  https://app.crb.gov/document/download/23883

[16] https://www.musiccreatorsna.org/mcna-letter-regarding-fairness-and-transparency-on-frozen-mechanicals/

[17] https://thetrichordist.com/2021/05/25/coalition-of-songwriter-groups-ask-crb-wheres-the-motion-on-insider-deal-for-frozen-mechanicals/

[18] https://app.crb.gov/document/download/25288

[19] https://www.govinfo.gov/content/pkg/FR-2021-06-25/pdf/2021-12950.pdf     

[20] 801 (b) Functions.—Subject to the provisions of this chapter, the functions of the Copyright Royalty Judges shall be as follows:

…(7)(A). To adopt as a basis for statutory terms and rates or as a basis for the distribution of statutory royalty payments, an agreement concerning such matters reached among some or all of the participants in a proceeding at any time during the proceeding, except that—

(i) the Copyright Royalty Judges shall provide to those that would be bound by the terms, rates, or other determination set by any agreement in a proceeding to determine royalty rates an opportunity to comment on the agreement and shall provide to participants in the proceeding under section 803(b)(2) that would be bound by the terms, rates, or other determination set by the agreement an opportunity to comment on the agreement and object to its adoption as a basis for statutory terms and rates; and

(ii) the Copyright Royalty Judges may decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement, if any participant described in clause (i) objects to the agreement and the Copyright Royalty Judges conclude, based on the record before them if one exists, that the agreement does not provide a reasonable basis for setting statutory terms or rates.

[21]  26 CFR § 25.2512-1

[22] See, e.g., Statement of Anthony Garnier, https://thetrichordist.com/category/frozen-mechanicals/.

[23] https://www.digitalmusicnews.com/2021/06/18/biggest-record-labels-of-2021/

[24] Ibid.

[25] Ibid

[26] Ibid

[27] See, https://thetrichordist.com/2021/06/07/the-ivors-academy-joins-the-no-frozen-mechanicals-campaign/

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

[29] https://www.riaa.com/wp-content/uploads/2021/02/2020-Year-End-Music-Industry-Revenue-Report.pdf

[30] https://www.ifpi.org/our-industry/industry-data/

[31] https://www.cnbc.com/2021/07/13/music-fans-pushed-sales-of-vinyl-albums-higher-in-first-half-of-2021.html

[32] https://static.billboard.com/files/2021/06/june-08-2021-billboard-bulletin-1623187818.pdf

[33] https://www.royaltyexchange.com/blog/u-s-music-publishing-grows-nearly-10-to-over-4b-in-2020

[34] Comments of Abby North of North Music Group.  See also, “Hit Songwriters are Driving Ubers,”  https://www.bbc.com/news/entertainment-arts-55232418

[35]  See, e.g.,  https://variety.com/2021/music/news/nft-sales-imusic-business-wild-west-1234970419/;  https://www.businessinsider.com/how-crypto-art-muscians-primary-income-nfts-record-labels-2021-3; https://www.forbes.com/sites/forbesbusinesscouncil/2021/06/09/are-nfts-the-new-crypto-a-guide-to-understanding-non-fungible-tokens/?sh=51fc14763d95  

[36] It should be noted that SGA did participate in the 2006 CRB proceedings.  Moreover, perhaps the fact that “critics” in the music creator community were “nowhere to be found” in 2006 is because all espoused the same position in favor of a royalty rate increase for Subpart B uses. 

[37] As the Independent Music Creator signatories have previously pointed out in these Comments, one individual music creator is participating in the Phonorecords IV proceedings. As always, we admire the courage and energy of Mr. George Johnson, whose efforts are appreciated by his fellow creators.  However, as Mr. Johnson has often readily admitted, his ability to match the overwhelming firepower arrayed against him at every turn in these and other proceedings before the CRB severely diminishes his capacity to serve as an effective advocate, and frequently results in his total marginalization by other participants.

[38]  See pages 65-67 at  https://app.crb.gov/document/download/23858; https://thetrichordist.com/2021/06/25/guest-post-by-sealeinthedeal-a-foreseeable-result-of-the-phonorecords-iv-private-settlement-opening-pandoras-box/   

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

[40] 805. General rule for voluntarily negotiated agreements

Any rates or terms under this title that—

(1) are agreed to by participants to a proceeding under section 803(3),

(2) are adopted by the Copyright Royalty Judges as part of a determination under this chapter, and

(3) are in effect for a period shorter than would otherwise apply under a determination pursuant to this chapter, shall remain in effect for such period of time as would otherwise apply under such determination, except that the Copyright Royalty Judges shall adjust the rates pursuant to the voluntary negotiations to reflect national monetary inflation during the additional period the rates remain in effect [emphasis added].

[41] https://copyright.gov/licensing/m200a.pdf

by Trichordist Editor

#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

by Trichordist Editor

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

by thetrichordist

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/

by Trichordist Editor

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.

by thetrichordist

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.

by Trichordist

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 
by Trichordist

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.

by Trichordist Editor

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?

by Trichordist Editor

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 
by thetrichordist