Back in April, songwriter organizations called on the Copyright Royalty Board to accelerate the finalization of the Phonorecords III ruling that it had handed down in July of 2022. Now, the three-judge CRB has officially issued its final determination for the five-year stretch at hand.
Notice of the CRB’s long-awaited Phonorecords III decision was just recently published, after the aforementioned songwriter groups signaled that the determination signoff could free up somewhere in the ballpark of $800 million in owed mechanical royalties. For background, Phonorecords III encompasses a 43.8 percent rate boost for on-demand streaming across 2018 and 2022.
The nearly 44 percent hike refers specifically to an increase from 10.5 percent to 15.1 percent, with the latter representing the rate for 2022. However, this headline rate was phased in under Phonorecords III, with preceding rates of 11.4 percent (2018), 12.3 percent (2019), 13.3 percent (2020), and 14.2 percent (2021).
Needless to say, given the CRB’s recent approval of rates for a half-decade period that’s already passed – proceedings formally initiated on January 5th of 2016 – the determination was slowed by legal disputes and pushback from leading streaming platforms (excepting Apple Music).
To be sure, an appellate court in October of 2020 overturned multiple components of the CRB’s existing Phonorecords III determination, prompting a reversion to the Phonorecords II rates.
Additionally, the “total content cost” portion of the CRB’s determination was among the areas with which the appellate court found fault. In another testament to the highly complex nature of the years-running Phonorecords III process, the CRB went ahead and included with its final determination north of 100,000 words’ worth of “supplementary information.”
And despite several transparency-centered concerns surrounding Phonorecords IV (spanning 2023 through 2027), a quickly negotiated settlement for the period, complete with a 15.35 percent headline rate, came to fruition one year back and received CRB approval towards 2022’s end.
Worth mentioning in conclusion is that 2022 also brought with it a material mechanical-rate increase for physical products and downloads in the U.S., with the CRB having upped the appropriate figure from 9.1 cents to 12 cents per song use. Significantly, a suggested settlement between the major labels, the National Music Publishers’ Association, and the Nashville Songwriters Association International would have left the longstanding 9.1-cent rate in place.
The Copyright Royalty Board rejected the freeze before the finalization of the 12-cent rate, though, and calls for rate-setting reform, including the potential repeal of the Section 115 compulsory license, have continued to make headlines throughout 2023.