A recent ruling by the Copyright Royalty Board put out a new, higher baseline fee schedule for music licensing. The new fee structure comes with specific cut amounts for entities that play different roles in eventually getting songs onto a streaming service, and gives songwriters the highest licensing fee cuts they’ve had in history. The fee structure starts out fairly close to the way things are now, and brings a nearly 5% cut increase across the board leading up to 2022, which chalks up to about a 40% jump over the current fee structure. The new structure is currently an initial written determination by judges in the Copyright Royalty Board, and will need to be reviewed by the Register of Copyrights and then approved by the Library of Congress before it goes into effect.
Currently, songwriters get a cut of 10.5% in royalty fees. That’s going to increase to the greater of either 11.4% of revenue or 22% of the total content cost, once the new fee schedule takes effect. From there, the revenue percentage that will be songwriter royalty goes up by 0.9% or 1% every year until 2022, when it will finally reach 15.1% of revenue, or 26.2% of total content cost, with the licensee having to pay the songwriter whichever one of those is greater. This amounts to the largest cut that US songwriters have ever had.
This change is listed as affecting the creation of phonorecords, but when digital phonorecords are included, it comes to mean any medium that focuses around the music, including digital downloads, streaming services, and physical vinyl and CD sales. While broadcast and satellite radio services fall under a different set of rules, this determination does cover digital radio services, since they are considered streaming services and use a permanent copy of the music at hand in order to deliver it to the user. This determination comes just as the Music Modernization Act is being put on the table by the United States Congress. The Music Modernization Act seeks to create an open market for the negotiation of fees and royalties, along with a government organization to preside over that open market by handling rate dispute cases, collecting payments on behalf of artists and labels, and stepping in to keep rate negotiations reasonable.
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