The Copyright Royalty Board (CRB) has reaffirmed its decision to increase the headline rate paid by streaming services to publishers and songwriters, regarding the years between 2018 and 2022. The rates, which were previously 11.4%, will now be brought up to a total of 15.1%.
The CRB originally ruled to increase royalty rates in 2018, but many of the streaming services legally appealed the following year. Platforms such as Spotify, Amazon and Pandora argued that the decision would make their services unsustainable, given that they already pay billions of dollars in royalties. Apple Music, the second biggest streaming service, was not involved in the appeal.
However, in a minor victory for the streaming services, the percentage of label revenue has now been capped. The definition of bundling – like family plans and discount packages – has also been reverted to a previous definition more favorable to these platforms. These details were not immediately made public.
“This verdict represents mixed news,” stated the CEO of Nashville Songwriters Association International, Bart Herbison. “The good news is songwriters received the 15.1 percent headline rate we won four-and-a-half years ago. The bad news is that the definition of bundled services and of total content costs, one of the streaming rate tiers, were not what we wished.”
The decision to increase the royalty rates between 2018 and 2022 comes ahead of a similar decision for the period between 2023 and 2027. The National Music Publishers Association (NMPA) has argued for a 20% headline rate for this next trial, which is set to take place later this year.
The Importance of Streaming Royalties
Streaming royalties are currently right in the centre of the economy of the music industry. DSPs, specifically Spotify, were able to reverse the 15 year long downturn that we witnessed in the music industry. The popularisation of illegal downloading of music online resulted in the revenue generated by the music industry being brought down by half of its total value, with CD sales plummeting over the years.
Royalties earned from streaming services are usually divided at about 75/25 between record labels and publishers. Because of this, these platforms have long argued that any increase in publishing should come out of the labels’ share, since they already pay out a considerable amount of money in royalties.
The world’s three largest music publishers are also owned by the three largest label groups – Sony, Universal and Warner. This means that the majors don’t really have any interest in taking away money from one business to give to the other instead of collecting more from another party.
The president/CEO of the Digital Media Association, Garret Levin, said in a statement that they will soon begin the work to put the new rates into effect, highlighting their commitment to work with the MLC (Mechanical Licensing Collective) and with publishing companies to distribute the royalties accurately. “This proceeding is also a reminder that rate settings do not – and cannot – take place in a vacuum” he said. “Today’s decision comes as the three major label groups – which operate the world’s three largest music publishers – continue to earn the lion’s share of the industry profits while reporting consistent double-digit revenue growth as a result of streaming.”
Levin also stated on behalf of the streaming services that they “believe it’s time for all stakeholders—labels, publishers, writers, artists and the services—to engage in comprehensive discussions to figure out the right royalty-sharing balance going forward.”
In a statement released by the NMPA, their president/CEO David Israelite spoke about how the decision made by the CRB confirms “that songwriters need and deserve a significant raise from the digital streaming services who profit from their work.” He continues: “We will fight to increase the TCC, or percentage of label revenue, which amounts to an insurance policy for songwriters, in the next CRB and will also fight for stronger terms regarding bundles.”
The decision made by the CRB was also celebrated by the CEO of the Recording Academy, Harvey Mason Jr: “Today’s decision was an impactful victory for songwriters, as the Copyright Royalty Board reaffirmed the 15.1% headline rate increase in royalties paid by streaming services to publishers and songwriters for the 2018-22 time period. We applaud the judges for upholding this decision, and the NMPA for their tireless work fighting the appeal. The Recording Academy will continue to champion the songwriters and other music people in our community and fight to ensure they are fairly compensated for their contributions to the musical process.”