Streaming royalties have become a major revenue source for many songwriters. This complex area has evolved significantly, especially in the U.S. Here’s a detailed look at the current state and history of streaming royalties.
Background
The streaming industry has been a hot topic since 2018 when the U.S. Copyright Royalty Board (CRB) approved a 44% increase in streaming royalty rates. The CRB, a three-judge panel within the Library of Congress, sets and adjusts statutory licenses, allowing outside parties to use copyrighted works by paying a set mechanical royalty instead of negotiating with each rightsholder.
The CRB meets every five years to review and adjust these rates. Here’s a timeline of key events since the CRB’s initial ruling for a 44% increase in mechanical royalty rates.
Timeline of Streaming Services & Songwriters
January 2018
After two years of testimony, the CRB ruled to increase songwriter rates for interactive streaming from 10.5% to 15.1% over five years (2018-2022). The new rate is based on the greater of either a percentage of revenue or total content costs (payments to labels negotiated by digital service providers).
October 2018
The Orrin G. Hatch Music Modernization Act was signed into law, revamping Section 115 of the U.S. Copyright Act. It combines three major pieces of legislation:
- The Music Modernization Act: Streamlines music licensing for easier payment to rights holders when their music is streamed online.
- The Classics Act: Compensates legacy artists for pre-1972 recordings.
- The AMP Act: Improves royalty payouts for producers and engineers from SoundExchange for satellite and online radio use.
February 2019
The CRB’s January 2018 rates were finalized after review by the Registrar of Copyrights. With publication in the Federal Register, parties had 30 days to appeal. Apple Music chose not to appeal.
March 2019
Amazon, Google, Pandora, and Spotify appealed the decision. Spotify explained its position in a blog post, which was countered by NMPA President and CEO David Israelite.
July 2022
The CRB reaffirmed its 15.1% rate increase decision. David Israelite praised the move, stating that songwriters and publishers would finally receive rightful royalty rates. Digital Media Association (DiMA) president Garrett Levin noted that streaming services would work with The Mechanical Licensing Collective (MLC) and music publishers to ensure accurate royalty distribution.
How The MLC helps Songwriters
The MLC, a nonprofit organization, administers blanket mechanical licenses to eligible streaming services and pays related mechanical royalties to songwriters, composers, lyricists, and publishers. Its first payments in early 2021 totaled over $24 million, with $16.4 million still pending due to unmatched royalties.
What’s Next for Songwriters?
With the CRB upholding its Phonorecords III position, the focus shifts to potential rate increases in Phonorecords IV, impacting mechanical royalty payouts from 2023 to 2027. David Israelite emphasized the need to increase the TCC (percentage of label revenue) and fight for stronger terms regarding bundles in the next CRB proceedings.
