After speaking with the president of one of the largest independent publishing companies in the world, who has 20+ years of experience in the field (who wants to remain anonymous because of NDA agreements), his takeaway from Amazon’s Music Publishing Rights Agreement was “this is entirely unacceptable.”
Digital Music News published the contract in full earlier this week.
This publisher who I spoke to, let’s call him Joe Pub, explained that Amazon is trying to bypass Section 115 of the US Copyright Act and define its own royalty rates.
Amazon is trying to bypass US Copyright law and define its own royalty rates
Section 115 of the US Copyright Act is the rate, set by the government, that defines the mechanical royalty rates. Most people know that the statutory mechanical royalty rate is currently 9.1 cents per download or physical “phonorecord” under 5 minutes (and then 1.75 cents per minute thereafter), but few know what the rate is per stream. That’s because the streaming rate is based upon the streaming service’s number of subscribers and users. More subscribers to the service equals higher mechanical royalty rates.
For the record, Spotify, Beats and the other streaming services all follow Section 115 of the US Copyright Act and follow the defined mechanical royalty rates.
You can read what the (government-set) streaming mechanical royalty rates are here.
Once a publisher signs off on this agreement, Amazon can set their own rates AND CHANGE THEM AT ANY TIME without renegotiating with the publisher. Amazon is trying to pull an iTunes-esque user agreement with publishing rights. Big no no.
Joe Pub told me that he has been staring at the contract on his desk for the past two weeks “grumbling about it.” He doesn’t think any of his other independent publisher friends are going to sign this either.
Amazon also included a clause that forbids the publisher from removing their songs from Amazon if they keep them up on any of the other streaming services (like Spotify, Google Play or Beats).
Meaning, Amazon could say “actually remember that 21% we promised you for mechanical royalties – naw we meant 2.1%. Take it or leave it! But if you leave, you MUST leave ALL the other streaming services as well. Or we’ll sue you.”
If a publisher removes their catalog from Amazon, but leaves it up on the other streaming services, Amazon could theoretically sue this publisher for as much as they want. BUT the publisher may only sue Amazon for a maximum of $50,000.
Yup! Amazon snuck in a Limitation of Liability clause of $50,000.
And from what I hear, the distribution/label agreement is just as shady. Don’t expect Amazon to launch their streaming service any time soon. And if they do, it most likely will not contain the catalogs of most independent publishers, labels and artists.
Thanks, but no thanks, Amazon.
Thanks to Entertainment Attorney Sarah Abelson for helping me to interpret the contract!
Photo is by kennethkonica from Flickr used with the Creative Commons License.