Music Creators North America Demands Phonorecords IV Settlement Transparency: ‘We Are Deeply Concerned By These Recent Efforts to Shield Secret Dealings’

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Washington, D.C.’s James Madison Memorial Building, which houses the U.S. Copyright Office.

In late August, the National Music Publishers’ Association (NMPA) announced a settlement for the Phonorecords IV proceeding. Now, however, Music Creators North America (MCNA) is officially demanding the public disclosure of the compromise’s details as well as those of “related agreements.”

Songwriters Guild of America president and MCNA officer Rick Carnes and Society of Composers & Lyricists president and MCNA co-chair Ashley Irwin just recently issued the call for transparency in a letter to the Copyright Royalty Board (CRB). A copy of the approximately 750-word-long message was shared with Digital Music News.

As its name suggests, the three-judge CRB is responsible for (among other things) setting royalty rates, and the mentioned Phonorecords IV pact involves a headline rate of 15.35 percent on streaming services for songwriters and publishers for the 2023 to 2027 period.

The initially noted National Music Publishers’ Association, the Nashville Songwriters Association International (NSAI), and the Digital Media Association (which represents major streaming services including Spotify) jointly announced the rather quickly finalized deal, which would raise the royalty rate slightly from the Phonorecords III proceeding.

For further reference, the Phonorecords III rate signified a 43.8 percent hike and was issued back in 2018, at which point leading streaming platforms (sans Apple Music) promptly began working to keep the existing framework in place. The point is significant with regard to both the relative speed with which the Phonorecords IV agreement was announced and the (modest) mechanical rate increase at hand.

Lastly, in terms of pertinent background details pertaining to the multifaceted subject, it was only in March of 2022 that the CRB rejected a proposed mechanical-rate freeze (at 9.1 cents per song) for physical releases and downloads. In submitting the proposal, the National Music Publishers’ Association and the major labels likewise indicated that they had reached “an agreement in principle concerning a separate memorandum of understanding addressing certain related issues.”

Songwriters organizations and others pushed back against the development and the perceived conflict of interest, for the Big Three labels also own massive publishing companies, execs from which sit on the NMPA board. (A second settlement, unveiled in May, would up the mechanical rate for physical and downloads to 12 cents.)

In rejecting the first proposal, the CRB described as “a warning flag” the “vertical integration linking music publishers and record labels,” besides making clear that “the contracting parties cannot hide changed application of a statutory rate scheme behind a ‘private contract’ when that contract has implications for non-contracting parties.”

Shifting to the situation surrounding the MCNA letter, songwriter George Johnson, a longtime opponent of abysmal mechanical rates, moved “to compel disclosure of those groups’ unpublished, privately negotiated, proposed streaming rate deal,” per the MCNA’s description.

The NMPA and the other parties behind the settlement, in requesting that the disclosure motion be denied as moot, expressed the belief “that a practice of requiring the public filing of settlement agreements as a matter of course would have a negative impact on settlement discussions in future proceedings” – albeit while attaching a non-public (and therefore unavailable to millions of songwriters) copy of the pact.

In response, Johnson called for “the full un-redacted Settlement agreement [to] be made PUBLIC” or, alternatively, requested that the CRB “make available a redacted version of the proposed Settlement suitable for public consumption.

“Furthermore, in addition to the a.) 3 sentences redacted from the Joint Response, b.) a sealed Settlement makes it impossible for this Participant to simply know the facts I need to respond to, and that is another good reason why this Settlement should be made PUBLIC, and in full, in the name of transparency, especially for a public, government forced, compulsory license on artists,” wrote Johnson.

“Finally, GEO’s [George Johnson’s] motion is clearly not moot since this new ‘under seal’ submission by the Parties is evidence in and of itself that there was an additional agreement and possible additional terms, different than the proposed Settlement submitted by the Parties on August 31, 2022,” he wrote.

The evening of Monday, October 3rd, then saw Google and the NMPA file a “joint notice of lodging,” maintaining that they would construe an order to disclose related agreements to “include certain letter agreements executed between Google, on the one hand, and certain music publishers and the NMPA, on the other hand, on or around the execution date of the settlement agreement.

“The letter agreements are not part of the settlement agreement or understanding of the settling participants concerning the subject matter of the settlement agreement, and do not supersede any part of the settlement agreement with respect to the settling participants’ proposed Phonorecords IV rates and terms,” Google and the NMPA claimed.

“Because the letter agreements are subject to confidentiality restrictions and have each only been disclosed to their individual signatories,” Google and the NMPA continued, “each such music publisher having an extant direct license agreement with Google, Google and NMPA are lodging the letter agreements directly with the Copyright Royalty Judges, who may then make a determination as to whether the letter agreements are relevant and what, if anything, should be disclosed notwithstanding the confidentiality restrictions in each of the letter agreements.”

Bearing in mind these points, Music Creators North America’s aforesaid letter relays off the bat the organization’s “extreme dismay” with the joint response that the NMPA, the NSAI, and streaming services offered when asked to disclose the whole Phonorecords IV settlement agreement.

“We are deeply concerned by these recent efforts to shield secret dealings by parties whose interests are potentially in conflict with those of music creators… Our concerns in this regard are immeasurably heightened by the filing last evening of a Joint Notice of Lodging by NMPA and Google containing admissions that potentially ‘related agreements’ were executed among Google and certain of the music publisher endorsers of the proposed streaming settlement,” the MCNA’s message reads.

“In order to satisfy the Congressional mandate that affected parties be given opportunity to comment upon private agreements negotiated by participants to the proceedings prior to their adoption or rejection by the CRB, we respectfully urge the CRB to timely publish an un-redacted copy of the agreement under consideration in its entirety, including any and all related or potentially related agreements,” the text states towards its end.

More as this develops.