Copyright Royalty Board Makes Flurry of Changes, Extends Comment Period For Music Modernization Act

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In a flurry of activity over the last few week, the Copyright Royalty Board has cemented some previous determinations for on-demand services and background music services, amended some of its regulations for rate determinations made this year, while extending a period for comment on the Music Modernization Act’s impact on other CRB regulations.

On Nov. 26, the Copyright Royalty Board issued the final regulation setting rates for the making of an ephemeral copy of a sound recording by business-establishment background services like Muzak from a voluntary settlement for the period of Jan. 1, 2019 through Dec. 31, 2023. The rates from a voluntary settlement among the interested parties -- first published by the Copyright Royalty Board on May 17 -- finalizes that music services like Mood Music will pay a minimum fee of $20,000 per year, or a rate of 12.5 percent of gross proceeds, whichever is greater, in 2019, to the owners of sound recordings, i.e. record labels. The latter rate escalates by 25 basis points each year, culminating at 13.5 percent in 2023.

On Nov. 20, the CRB judges issued their written final determination for the music publishing rates announced in late January 2018 to participants in the proceedings, with the public version still being prepared. As announced back then, the all-in royalty formula will be based on the greater of 11.4 percent of gross revenue, or 22 percent of whatever the records labels are being paid by the on-demand services. That will escalate yearly by either 90 basis points or 100 basis point until the first formula hits 15.1 percent of revenue and the latter 26.2 percent of funds paid to labels in 2022.

Two other steps in the formula determine which portion of the publishing rates are paid for the performance license, with the remainder going to the mechanical licensees. These rates are retroactive back to Jan. 1 , 2018. As part of this announcement, the CRB also ruled on various motions, agreeing with some and denying others, regarding the inner-workings of some its regulations.

Also earlier this month, on Nov. 5, the CRB issued a call for comment by Nov. 15 on which of its regulations, if any, for its various rate determinations need to be changed due to the enactment of the Music Modernization Act. That deadline for comment submissions has now been extended until Dec. 10. This is aside from whatever regulations are promulgated to set up and govern the music licensing collective created by the Music Modernization Act and overseen to a degree by the U.S. Copyright Office.