In March 2019, Spotify, Amazon Music, YouTube and Pandora began the process of appealing a Copyright Royalty Board decision to raise the mechanical royalty rate for music publishers and songwriters, in an effort to stop the increase and lower the statutory royalties paid by on-demand services. Their apparent goal is to make more money by paying publishers and songwriters even less than they do now – at a time when Spotify’s ad-supported mechanical royalty rate is $0.0002 and its blended rate of $0.0005, and the company’s value on the stock market has skyrocketed into the tens of billions. By some measures, there is more money being made from music today, with less of it going back to songwriters, than at any other point in history.
Spotify, Amazon Music, YouTube and Pandora’s position is greedy and wrong.
Before the passage of the Music Modernization Act (MMA), the power of on-demand music streaming services to get publishers and songwriters and to accept the US government mandated statutory royalty rate was undercut by their histories of infringement. Under US copyright law when a streaming music service like Spotify uses a song without a mechanical license, and thus infringes the copyright, it loses the ability to ever license the songs again using the statutory license and the royalty rate that comes with it. As indicated in the class action and multiple direct lawsuits against the streaming services for copyright infringement, most of the world’s publishers and songwriters appeared to finally be free to negotiate a royalty rate directly with the streaming services, with no governmental interference, as the ability of the streaming services to use the statutory license was “foreclosed” under copyright law, due to their infringement.
The playing field was finally leveled.
Unfortunately, the freedom from the statutory license and government mandated statutory rate was not long lived due to the passage of the Music Modernization Act (MMA) — which the NMPA lobbied for, despite apparently knowing of the infringement, and, presumably, the potential for services to lose the statutory license. When the MMA became law, every songwriter and music publisher in the world once again lost the ability to freely negotiate royalty rates and were forced to accept the statutory rate dictated by the Copyright Royalty Board. The very same rate that Spotify, Amazon Music, YouTube and Pandora appealed in order to let them pay songwriters even less than they do now.
It is time for songwriters, publishers, performing rights organizations and trade groups (including the NMPA and the various songwriter associations) to put their past differences to the side and work together to stop the music services from hurting the music publishing business.
There are some ways to fight back. The most significant of which would be to take away the statutory license and the associated government mandated royalty rate from the streaming music services.
The conditions to take away the statutory license are listed in the MMA. Specifically, it lists five conditions allowing the termination of the blanket license and associated statutory royalty rate for Spotify, Amazon Music, YouTube and Pandora. Most notable of the five is the third that states the statutory license can be taken away if the streaming music service “…provides 1 or more monthly reports of usage to the Mechanical License Collective that, on the whole, is or are materially deficient as a result of inaccurate, missing, or unreadable data, where the correct data was available to the digital music provider…”
The “monthly usage reports” are computer outputs that contain a list of sound recordings, along with the number of times a music service streamed each one in a given month. Most, if not all, of the music services monthly usage reports are, in my experience “materially deficient.” They contain “inaccurate” data when the “correct” data was available to them. For example, they include streams of sound recordings in royalty calculations that are not allowed to be included, such as spoken word recordings or recordings that are public domain. This means publishers and songwriters receive per-stream royalties that are inaccurate, as well as lower than they should be. In addition, monthly usage reports may not include the correct data, despite information about the recordings being publicly available. And there are four additional conditions, any of which can result in termination of the blanket license yet to be analyzed.
It appears the music services may be subject to losing the statutory license, freeing the publishers and songwriters to once again negotiate their own royalty rates. With the passage of the MMA, however, that right was stripped away and handed to a newly created entity, the Mechanical Licensing Collective (The MLC). The MLC, as opposed to the streaming music service itself, now issues licenses, collects royalties from services and makes royalty payments publishers. And the ten music publishers on the board of directors of the MLC are all NMPA members.
With this consolidation of power, the MLC, in coordination with the NMPA and the music publishing industry, could pressure the DSPs by threatening to terminate their licenses unless they agree to a fair royalty rate. That would allow songwriters, music publishers and the NMPA to negotiate rates and terms without governmental interference.
The NMPA should work with the MLC and other sectors of the music publishing business to identify and confirm the deficiencies in the reporting by the music services to deprive them of the statutory license and the rate that goes with it. I and many music publishers would be more than willing to help them provide the data and analysis to help the cause. By working together, we can win this battle. Just tell us where to send the data. It’s time to send a message to the big digital services that creators are not just here to help drive up their stock prices. Artists and songwriters deserve to be paid properly for the music they create that gives these services, and our industry, value.
Jeff Price is CEO Founder of Word Collections — a global digital copyright licensing organization for spoken word and music. He previously founded and served as CEO of TuneCore and Audiam.