The Copyright Royalty Board has recently made its final determination on the streaming royalty rates for songwriters and publishers in the United States during the Phonorecords III period from 2018 to 2022. This decision reaffirms the previous ruling to incrementally increase the rates by 44%. The publication of this determination in the Federal Register will prompt streaming services to rectify any incorrect payments made over the past five years within a six-month period.
The Reconciliation Process:
Following the publication in the Federal Register, streaming services and publishers will have six months to review their accounting for the Phonorecords III period and address any discrepancies in royalty payments. This process is expected to result in additional royalties being owed and will likely bring a financial boost to the music business. Failure to adjust payments within the specified time frame may result in penalties.
Appeals and Participants
Once the final determination is published, participants in the CRB proceedings will have 30 days to file an appeal with the DC circuit court. However, sources indicate that it is unlikely that any appeals will be filed, considering the lengthy duration of the proceedings. The participants involved in the Phono III remand proceeding include notable entities such as the National Music Publishers’ Association, Nashville Songwriters Association International, songwriter George Johnson, Spotify, Pandora, Google, and Amazon.
Key Details of the Determination
The final determination establishes an annual increase in royalties over the five-year period, reaching 15.1% of service revenue by 2022. Additionally, the ruling incorporates certain requests from streaming services, including limitations on royalties based on total content cost (TCC) and the reinstatement of a rate ceiling step in the formula.
Background and Previous Determinations:
The proceedings to decide streaming royalties for U.S. mechanicals during 2018-2022 began over five years ago. In 2018, a CRB determination set the initial rate and introduced changes such as increased subscriber count calculations for discounted family and student plans. It also removed the publishing rate ceiling mechanism, which had prevented publishers from automatically benefiting when label counterparts negotiated higher rates for their master recordings. Streaming services appealed this decision in 2019, leading to a lengthy “remand” process that has now reached its conclusion.
Conclusion: The final determination of streaming royalties for the Phonorecords III period brings clarity and adjustments to the payments made to songwriters and publishers. As the music industry awaits the publication of this decision in the Federal Register, the subsequent reconciliation process offers an opportunity to rectify payment discrepancies and ensure fair compensation.