Music Business News, January 31, 2018

The Copyright Royalty Board agreed to a 44-percent increase in songwriter royalty rates. Also, Spotify unveiled a new playlist-based music app. And the Senate moved ahead on the Music Modernization Act.


Streaming Royalty Rates Rising 44-Percent


The Copyright Royalty Board (CRB) decided to increase rates paid to songwriters in the U.S. from on-demand subscription streaming by 44-percent over the next five years, reported Music Business Worldwide.


The announcement was made on January 27. The trial that produced the ruling ended in June, 2017 and involved the National Music Publishers Association (NMPA) and the Nashville Songwriters Association (NSAI). Google, Spotify, Apple and Amazon lobbied within the tech community.


As stipulated by the ruling the overall percentage of revenue paid to songwriters will increase from 10.5 percent to 15.1 percent over the next five years. As an example, this means that if an artist was making $5,000 on music, they will make $7,200 under the new rates.


The CRB also took away the Total Content Cost (TCC) cap. According to the NMPA, this makes it so publishers can get a true percentage of what labels can negotiate in the free market, leading to noticeably higher songwriter royalties.


Additionally, the CRB raised the TCC rate which offers a significantly more balanced record label and publishing rates split in mechanical licensing history. The CRB also said it will now impose a late fee, providing additional incentive for digital music companies to pay royalties on time.


David Israelite, President and CEO of NMPA said, “Crucially, the decision also allows songwriters to benefit from deals done by record labels in the free market. The ratio of what labels are paid by the services versus what publishers are paid has significantly improved, resulting in the most favorable balance in the history of the industry … While an effective ratio of 3.82 to 1 is still not a fair split that we might achieve in a free market, it is the best songwriters have ever had under the compulsory license.”


He continued, “The court also decided in our favor regarding a late free which will force digital music services to pay songwriters faster or be subject to a significant penalty. The bottom line is this is the best mechanical rate scenario for songwriters in U.S. history, which is critically important as interactive streaming continues to dominate the market … “The decision represents two years of advocacy regarding how unfairly songwriters are treated under current law and how crucial their contributions are to streaming services.”


Israelite concluded, “While the court did not grant songwriters a per-stream rate, the increases in overall rates and favorable terms are a huge win for music creators.”


Bart Herbison, Executive Director of the NSAI also weighed in on the decision: “The CRB was a long and difficult process but songwriters and music publishers together presented a powerful case for higher streaming royalty rates. The Nashville Songwriters Association International (NSAI) thanks our songwriter witnesses Steve Bogard, Lee Thomas Miller and Liz Rose whose testimony was compelling.”


Spotify Testing a New Playlist-Based Music App


Spotify began testing an Android-only app, “Stations” in Australia, said TechCrunch.


The app has a “lean-back” option that allows users to listen to music in specific genres and playlists. The app plays the music instantly upon opening, and stations can be changed by scrolling within the app.


While “Stations” resembles Pandora, it has Spotify’s signature personalization that creates user-based playlists as soon as there is enough data from enough individualized listening to generate them.


The app has only around 100 downloads so far, suggesting it has probably only been tested within Spotify’s own staff.


When asked, a Spotify spokesperson said, “We are always testing new products and experiences, but have no further news to share at this time.”


Experts have speculated that “Stations” is Spotify’s attempt to create a standalone app that more directly competes with Pandora than Spotify’s current free, ad-supported version.


U.S. Senate Moving Forward with Music Modernization Act


A bipartisan committee of Senators introduced the Music Modernization Act last week, said Billboard.


Co-sponsored by Senators from both parties, the bill involves “comprehensive music licensing reforms” already entered into the House of Representatives. The bill is asking for a blanket mechanical license that will be administered by an agency that has yet to be created but will benefit music publishers, songwriters and digital services.


The Music Modernization Act was introduced by Republican Senators Lamar Alexander, Orrin Hatch and Sheldon Whitehouse and co-sponsored by Democratic Senators Dick Durbin, Bob Corker, Chris Coons, Johnny Isakson and Doug Jones.


David Israelite of the NMPA explained, “The MMA is the best hope for songwriters to achieve fair royalties and payments in the digital age … We are grateful to [the Senators] for their attention to the struggles of music creators and for introducing the MMA, which we hope continues to gain momentum in the Senate.”


The proposed legislation would create a blanket license, a new agency and start a song database. It would also cut out some standards used in current rate setting, substituting them by trying to set rates in a way similar to how they are set in a willing buyer/seller marketplace.


The bill also proposes changing performance rate setting methods by passing each case among Federal Judges in the New York Southern District instead of sending them all to one judge for each of the two main performance rights organizations: ASCAP; BMI.


BMI president and CEO Mike O’Neill said, “The Music Modernization Act is an important step forward in protecting the rights of the American songwriter, and we thank [the Senators] for their support of this important legislation … While we believe there is still more to do to protect the value of the performance right, we are encouraged by the inclusion of two important provisions that go a long way towards ensuring that songwriters and composers receive fair compensation for their creative work; the wheel assignment for rate court judges and the repeal of 114 (i) application to digital services. While we know this bill is not yet final, it represents an unprecedented cross-industry effort to introduce comprehensive music reform, and we look forward to working with all of the interested parties to further support this much needed legislation.”


Elizabeth Matthews, ASCAP CEO said that the MMA will help resolve some of the biggest issues for songwriters in the U.S.: “While there is more work to be done to ensure that songwriters earn fair compensation, this legislation, like the similar bill recently introduced in the House, represents important progress in an ongoing effort on industry-wide reforms that protect the rights of music creators.”


Executives representing Nashville Songwriters Association International and Songwriters of North America also backed the legislation.


The National Association of Broadcasters agreed with the main idea behind the bill, but said it needed more fine-tuning. The NAB’s statement read, “Compromise on music licensing has long proved elusive, and these lawmakers have carefully crafted legislation that benefits all of those parties … Unfortunately, the current bill text includes unrelated provisions that will almost certainly result in unjustifiable cost increases for local radio and TV broadcasters and many other music licensees, for whom the rest of the legislation is largely irrelevant. NAB has been diligently working with the bill sponsors and other stakeholders to resolve those concerns, and we sincerely appreciate the shared commitment to finding a workable solution.”


The Digital Media Association offered a complete endorsement, delivered by CEO Chris Harrison: “We support the Music Modernization Act because it creates a blanket license, which is critical to a modern licensing system and necessary for a rapidly growing industry … We look forward to continuing to work with the Bill’s sponsors in both the House and Senate to create a music licensing system that benefits everyone. Streaming services have literally saved the music industry, delivering better experiences at a better value, and growing revenue for creators. We are glad to see Congress is looking to the streaming future and moving away from the music mess of the past.”

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