Final Determination Set for Songwriter, Publisher Streaming Royalties for 2018-2022

June 23, 2023 E Jazz Reporter

Music

Once the Copyright Royalty Board’s Phonorecords III decision is published by Federal Register, streaming services will have six months to rectify now-incorrect payments for the last five years.

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The Copyright Royalty Board issued its final determination on Thursday (June 22) for songwriters’ and publishers’ U.S. streaming royalty rates during the Phonorecords III period of 2018 to 2022, reaffirming its previous decision to increase the rates 44% incrementally.

This new filing triggers the start of a complicated reconciliation process to account for the past five years of royalties under the new rates. Once the Federal Register publishes the determination — which is expected within the next 60 days — streamers and publishers have six months to review their accounting for the period and rectify any additional royalties owed to the other party. This is likely result in a financial boost for the music business. Any adjusted payments from either side that lag behind this six month period will result in fines.

This final determination also triggers a 30 day clock, permitting participants in the CRB proceedings to file an appeal with the DC circuit court. Given that this verdict has already taken five years to be reached, however, sources close to the involved participants tell Billboard it’s unlikely any appeals will be filed.

Participants in the Phono III remand proceeding include National Music Publishers’ Association, Nashville Songwriters Association International, songwriter George Johnson, Spotify, Pandora, Google and Amazon.

As previously reported, the ruling increases royalties each year during the five-year period — from 11.4% to 15.1% of service revenue by 2022 — but also affirmed key requests from streaming services during their lengthy appeal, limiting royalties based on total content cost (TCC) and reinstating a rate ceiling step in the formula.

Proceedings to decide how to pay songwriters and publishers for U.S. mechanicals during 2018-2022 began over five years ago. In 2018, a CRB determination set the headline rate moving upwards from 10.5% of a streamer’s revenue in 2018 to 15.1% in 2022 and increased the subscriber count calculations for discounted family and student plans to 1.5 times and 0.5 times, respectively.

The 2018 determination also removed the publishing rate ceiling mechanism that prevents the publishers from automatically benefiting with higher payments when their label counterparts are able to negotiate higher rates for their master recordings. Many of the details from the previous determination for Phono III were especially favorable to the music business, so streaming services took issue with it, especially its removal of the rate ceiling.

Hoping to regain some of the more streamer-friendly stipulations in Phono II, Spotify, Pandora, Google and Amazon launched an appeal in early 2019 that was successful and resulted in a “remand” process that dragged on until now. Apple did not participate in the appeal.

UPDATE: This story was updated June 22 at 9:15 p.m. EST to correct that the Federal Register must first publish the determination before the six-month countdown begins for the involved parties to rectify any payment issues.

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