NMPA Heralds Retroactive Phonorecords III Payments: ‘This Is a Welcome and Critical Lift’

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David Israelite

The National Music Publishers’ Association (NMPA) is heralding the royalty bump established under Phonorecords III, which covers 2018-22 but is only now seeing adjusted retroactive compensation reach songwriters and publishers for the period’s latter two years.

The NMPA just recently made clear that it’s “extremely pleased” with the north of $400 million royalties payout, which has arrived over six months after the Copyright Royalty Board (CRB), following several twists and turns, officially finalized its Phonorecords III determination.

That determination formally set in motion a 43.8 percent rate boost (to a 2022 headline rate of 15.1 percent) for on-demand streaming platforms, which, with the noteworthy exception of Apple Music, had vehemently opposed the increase. Said opposition (besides an October of 2020 appellate court ruling overturning components of the original determination and prompting a reversion to Phonorecords II rates) fueled a significant implementation delay.

Before the court-ordered pause on Phonorecords III brought about the Phonorecords II reversion, services were paying under the new framework, and the Music Modernization Act’s blanket license didn’t go into effect until 2021.

Bearing that in mind, the Mechanical Licensing Collective (MLC) has identified a decrease of about $28.82 million to the DSP pre-blanket-license unmatched royalties tranche it ingested for between 2018’s beginning and 2020’s conclusion – reducing the relevant mechanical royalties to roughly $398.06 million.

For the remainder of the five-year stretch, or 2021’s start through 2022’s end, the new Phonorecords III upward adjustment encompasses another $419.17 million in royalties ($281.36 million mechanical, $137.81 million performance), per the MLC.

Running with the points, Israelite on social media elaborated that the MLC will pay out the appropriate mechanical royalties sans fees during the “2nd or 3rd quarter.” The last third of the capital “will be paid by the PROs as public performance,” he indicated, “likely” with “normal overhead” deductions.

Worth highlighting is that a comparatively smooth process delivered a quickly negotiated settlement for Phonorecords IV, spanning 2023-27 and featuring a headline rate of 15.35 percent, in August of 2022. CRB approval – as well as calls for rate-setting reforms – arrived closer to the year’s end.

Back to the NMPA’s response to the retroactive Phonorecords III payout, president and CEO David Israelite also took the opportunity to express approval of the MLC’s role in distributing the capital.

“We are extremely pleased that songwriters and music publishers finally will receive the over $400 million they are owed in mechanical and performance royalties from the 2021-2022 period,” said Israelite, whose organization is backing Universal Music in its TikTok licensing dispute.

“Our appellate win upholding the rate increase we achieved in 2018 will finally net music creators and copyright owners the windfall they should have received years ago,” proceeded the NMPA head. “The fact that the majority of this adjustment will be distributed by the MLC in a completely transparent and expedient way is another massive benefit of the Music Modernization Act (MMA) and while we would have preferred it be paid sooner, this is a welcome and critical lift now.”

The MLC is facing an audit – while itself auditing Spotify, Apple Music, and others – as the Copyright Office reviews its designation under the MMA. Bigger picture, notwithstanding the NMPA’s approval of the royalties adjustment, it wasn’t too long ago that the organization was facing criticism over a mechanical rate pact it’d finalized for downloads and physical releases.

Though that deal, which would have left in place a longstanding rate of 9.1 cents per song use, was ultimately rejected, it managed to spur ample pushback concerning the impact of the Big Three labels’ ownership of today’s largest publishers, execs from which occupy NMPA board seats.