The Copyright Royalty Board delivered record labels and performing artists a modest cost of living increase on Wednesday (Dec. 1) for a select type of streaming platforms. In 2022, the per-stream royalty rate paid by webcasters such as Pandora and iHeartRadio for “non-interactive” streams will increase from 0.26 to 0.28 cents for subscription streams and from 0.21 to 0.22 cents for non-subscription performances. Non-commercial webcasters will pay 0.22 cents per stream.
Wednesday’s announcement was the culmination of the latest CRB rate proceeding, known as Web V, that established royalties some streaming services pay to record labels and recording artists under Section 114, for non-interactive performances, and Section 112, the “ephemeral” copies of sound recordings a platform needs to make those performances. The three-judge board determines some royalty rates that streaming, satellite and cable broadcasters pay to record labels, performing artists, music publishers and performing rights organizations in the United States. Streaming services pay Section 112 and 114 royalties to SoundExchange, which evenly splits a royalty between rights owner and the performing artist, with small carve outs for session musicians and SoundExchange’s administration fee.
Web V applies to services with “lean back” listening like the traditional radio experience. Most streaming royalties come from interactive, on-demand services such as Spotify and Apple Music that negotiate directly with rights owners for licenses to play their recordings. Consumers increasingly pay for services that let them choose songs or artists a la carte, without restrictions. But U.S. law allows a non-interactive service to pay a lower, statutory rate, without negotiating with rights holders, so long as they limit the listener’s ability to select artists or songs.
The Web V decision affects a relatively small segment of the U.S. recorded music business. Section 112 and 114 royalties, including additional amounts paid by SiriusXM satellite radio and cable broadcasters such as Music Choice, were $487 million in the first half of 2021 — just 7.8% of total digital revenues, according to the RIAA. Some streaming services pay Section 112 and 114 royalties directly to rights owners, however, and distribute the artists’ shares to SoundExchange.
Each year, the CRB calculates an adjustment to predetermined royalty rates based on the annual change in the Bureau of Labor Statistics’ consumer price index for all urban consumers (CPI-U), a measure of prices paid for a range of goods and services (food, energy, health care costs, shelter and transportation). On Nov. 10, the BLS announced the CPI-U increased 6.2% over the last 12 months — over three times the annual average from 2016 to 2020. Until 2016, the CRB established annual rates for each five-year period covered by a particular rate proceeding. In Web IV — it covered 2016 to 2020 — and Web V, the CRB established a rate at the beginning of a five-year term and makes annual adjustments using the CPI-U.