Mechanical Royalty Rates Revisited

Complete Music Update:

America’s Copyright Royalty Board yesterday got around to thinking about what the country’s mechanical royalty rates should be for the next five years.

Mechanical royalties – paid to songwriters when recordings of their songs are copied and distributed – are covered by a compulsory license Stateside. Which means songwriters and music publishers are obliged to license third parties making and distributing those copies at a statutory rate, so that rate-setting processes like this one are rather important.

Traditionally the main customers of mechanical rights have been record companies, which need a license from the relevant songwriter or music publisher every time they press a CD.

In the US, unlike in Europe, it was the label which paid the mechanical royalties on downloads too, so that iTunes didn’t have to worry about making sure the owner of the song copyright was paid their share of any income.

However with streams, where both the mechanical and performing rights of the copyright are exploited, it is the digital platform that is the licensee and which therefore pays the mechanical royalties directly to the writer or publisher (or not as the case may be, as those songwriter lawsuits against various streaming services have demonstrated).

Discs and downloads also remain a decent part of the recorded music business for now of course, but – after a bit of a stand off – the US record industry reached a deal with the music publishers on mechanical royalty rates last year. Which means that the CRB hearing is very much focused on the rates paid by the streaming services, which are, after all, where all the growth is in recorded music these days.


Music Business Worldwide:

The tech giants are expected to argue to reduce the amount they pay, while the National Music Publisher’s Association and the Nashville Songwriters Association International will lobby for an increase.

NMPA wants songwriters to be paid each time their song is played, or each time a user purchases a subscription. It also wants to share the profits from the sale of technology and subscriptions that include access to music.

The US government has been setting mechanical royalty rates for over 100 years, beginning in 1909 when Congress determined that the rights would be subject to a compulsory license. This means that anyone can record a songwriter’s work for a fixed rate without permission or approval. Congress used to set this rate, but has since delegated the task to the CRB judges. The current rates were set over ten years ago when digital streaming was just starting to take off.