Royalties
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In its first legal response to a SoundExchange lawsuit alleging underpayment of $150 million in artist royalties, SiriusXM claimed in a court filing Friday (Sept. 22) that SoundExchange’s numbers rely on a “so-called audit” that was a “flawed and biased examination” and insists the satellite-radio giant “properly calculated its royalty payments to SoundExchange in all material respects.”
The filing, which demands a change of U.S. court venue from Virginia to New York or Washington, D.C., also bashes the royalty collection and distribution service for trying to “justify its existence, lofty executive salaries and luxurious operating style through repeated litigation against its biggest contributor.”
In a phone interview before the filing, George White, SiriusXM’s senior vp of music licensing and royalties, says the SoundExchange lawsuit, filed in August, caught his company by surprise. “We were discussing settlement with them,” adds White, a former longtime major-label executive. “We really took some time to review it.”
White says the lawsuit comes down to a difference of opinion over SoundExchange’s “method of calculating their deduction.” He argues that SiriusXM has paid SoundExchange $5 billion in performance royalties for sound recordings over the last 10 years, and contributed “the vast majority” of the $805 million the service collected last year. “The rhetoric in the suit itself and the press release around the suit seems really unfair and wholly inappropriate,” White says. “In fact, we want to make every effort to ensure everyone is compensated fairly.”
SoundExchange, which collects royalties from webcasters and non-terrestrial radio services on behalf of artists and labels, argued in its Aug. 16 lawsuit that Sirius XM was bundling its satellite radio and streaming service, mixing the revenue in order to improperly reduce its royalty bill. The U.S. government mandates different royalty rates for satellite-transmitted services (like SiriusXM’s traditional satellite radio) and webcasting under so-called statutory licenses, but SoundExchange’s lawsuit declared that “Sirius XM has unjustly enriched itself to the detriment of recording artists and copyright owners upon whose music Sirius XM has built its business.”
In its response, SiriusXM accused SoundExchange of “misguided allegations” and argued a “proper audit” would conclude the company “properly calculated its royalty payments to SoundExchange.” The company also criticized SoundExchange for taking advantage of what it called the Virginia court’s “rocket docket,” which, regional lawyers have said, results in fast-moving cases, little time for discovery and quick resolution.
“We’re very hopeful that we can proceed down the lines of having a productive settlement discussion,” White says. “I would far rather that we had a close relationship with SoundExchange that was about working to grow SiriusXM’s contributions to SoundExchange.”
SoundExchange didn’t immediately respond to Billboard‘s request for comment.
As the music streaming business matures, the way people listen to music could determine how artists get paid. Sitting back and letting a streaming service choose a song will result in a lower royalty than choosing the song yourself, if this week’s news of a new streaming model is any indication.
It’s not a phobia toward algorithms that’s driving the change. Rather, the approach rewards those artists who create the most active engagement. Songs that play in the background are deemed to be less valuable.
On Tuesday, French music streamer Deezer and Universal Music Group announced a partnership to reinvent how Deezer calculates UMG’s streaming royalties. The partnership will “[reduce] the economic influence of algorithmic programming” and reward “engaging content” with greater royalties, according to the companies’ press releases.
When they say, “algorithmic programming,” they mean the streaming service’s personalized recommendations about what song will play next. That’s a more passive, lean-back approach to listening than hunting and pecking on the app’s user interface to choose a song.
At some point between the launch of internet radio platforms and the present battle for better royalties, passive listening got a bad rap. What has the world come to, some people fret, when dreaded algorithms are deciding what music gets heard? What gives an algorithm such an important role in determining how royalties will be paid?
But algorithms are a common way to stream music. When given an on-demand streaming service, people often let an algorithm do the hard work of picking the next song. A 2021 MusicWatch survey found Spotify Premium users spent 25% of their time in “lean-back” listening rather than “lean-in” listening. That figure rose to 31% for Apple Music users and 32% for Amazon Prime Music users. In all, 48% of time spent listening to music was “lean back” listening on streaming services, broadcast radio and satellite radio.
Algorithms also drive helpful products such as Spotify’s Discover Mode, a promotional tool that allows artists and labels to find new listeners in return for a lower royalty rate. It works by increasing the likelihood a song will be recommended to a listener. It’s popular, too. From the first quarter of 2021 to the first quarter of 2022, Discovery Mode had a 98% customer retention rate, Charlie Hellman, Spotify’s vp/global head of music product said during the company’s 2022 investor day presentation.
When a streaming service does personalization well, it adds great value to a listening experience. Pandora was revolutionary when it launched in 2005 because it had a spooky sense of what people wanted to hear. Its Music Genome Project, a proprietary technology that classifies recordings’ various musical traits, gave it the ability to pick the right songs based on a history of giving other songs a “thumb up” or “thumb down” vote. Pandora took away the effort in digging for songs and provided a much broader catalog than broadcast or satellite radio.
Today’s music streaming services are superior to their predecessors — and their own previous iterations — specifically because they have mastered passive listening. Consider how far Spotify has come since it was launched. Spotify used to recommend songs based on a user’s social network — kind of an “if your friend likes it, you’ll like it” approach to song-picking. But it wasn’t a good listening experience. Spotify’s decision to acquire music intelligence startup The Echo Nest in 2014 was the cornerstone for a new approach to providing a personalized listening experience.
The proliferation of smart speakers only adds to the need for algorithmic listening. About two-thirds of U.S. smart speaker owners wanted to own the devices to discover new songs, according to a 2022 Edison Research survey, and their share of time spent listening to audio through a smart speaker increased 400% over the previous five years. The joy of owning a smart speaker is allowing the device and streaming service to do all the work — it’s passive listening at its best.
Most Americans use their favorite streaming service when doing things around the home such as cleaning, relaxing, cooking, eating and entertaining guests, according to the same MusicWatch study. Most people stream music when exercising. More than half of people also use their favorite streaming service when driving, although satellite and broadcast radio were preferred in the car over streaming. Streaming service Songza, acquired by Google in 2014, was built on the premise that people chose music for moods and activities. That approach to curation has since been adopted by most — if not all — streaming services.
The UMG-Deezer partnership is evidence that background listening is on its way to getting a demotion. Deezer will remove tracks of white noise, which account for 2% of its streams, from the royalty pool. That leaves more royalties for professional artists who depend on streaming to earn a living. Throughout the year, UMG has been calling out “functional music” — a term that has come to mean low-cost or generic music built for moods or activities — and drawing a distinction between artists who draw people to streaming services and sounds that people play in the background.
Taylor Swift and Drake may rule the charts, but functional music is mainstream, too. Of U.S. music streamers who listen to playlists, many of them listen to playlists for white noise (36%), rain sounds (45%) and relaxation (61%), according to a 2023 MIDiA Research survey. In recent years, streaming services have broadened their playlists and radio stations to address the fact that consumers want a variety of sounds.
Artists with small followings will get less, too. Deezer will “boost” the royalties of “professional” artists with at least 1,000 streams per month by a minimum of 500 unique listeners. That will relegate hobbyists and artists early in their career development to a different tier. Exactly how many artists will be affected isn’t clear, but Deezer says just 2% of artists on the platform have more than 1,000 monthly unique listeners.
UMG and Deezer aren’t exactly taking an innovative stance, however. The music industry — at least in the United States — has already determined that active, on-demand listening is more valuable than passive, non-interactive listening. The Deezer-UMG partnership merely codifies for an on-demand service what is standard at internet radio. In the United States, non-interactive internet radio streams from the likes of Pandora pay 0.24 cents per ad-supported stream (and 0.3 cents per subscription streams). That’s less than any on-demand stream from a premium streaming service such as Spotify, Apple Music and YouTube Music.
In effect, a streaming service pays less for non-interactive streams because it gives the listener less value than on-demand services. To qualify for the lower royalty rate, a non-interactive streaming service cannot have the same robust features as an interactive one. At Deezer, a listener can stream any song from any artist any number of times. They can listen to playlists and build playlists, too. They can listen to songs shared by friends through SMS or social media. That’s all lean-in listening, and it’s more valuable because people will pay $11 a month to do it.
Until now, on-demand services’ standard pro-rata model hasn’t separated passive from active listening. When labels negotiated licensing deals with streaming services, they have always treated one stream the same as any other stream. A stream from a user-curated playlist is treated the same as a stream from an algorithmically created radio station. Whether the listener actively hits the play button to listen to a particular track isn’t taken into account. Right or wrong, that’s how the pie has been divvied up.
A couple of decades into the life of the pro-rata system, Deezer shows there is a greater willingness to treat active listening differently than passive listening. MIDiA Research’s Mark Mulligan called this demotion “a very welcome and long overdue move” that will “disincentivis[e] the commodification of consumption by rewarding active listening.” There’s certainly a logical argument to be made here: The artists people actively seek out arguably provide the most value — give the streaming service the most foot traffic, so to speak — while less popular artists play the important but less financially valuable role of giving breadth and depth to music catalogs.
Time will tell if and how other streaming services follow Deezer’s lead. An alternative already exists: In 2022, Warner Music Group adopted the user-centric model that SoundCloud rolled out to independent artists the prior year. That system pays royalties based on an individual subscriber’s listening rather than pooling all subscribers’ fees into a larger pool. So, a subscriber who listens to out-of-the-mainstream or independent artists is assured their money is not going to popular artists.
Over the next few years, labels and services are likely to experiment with different approaches to calculating streaming royalties. But regardless of how the dust settles, streaming services and rights holders should respect what passive listening brings to their listeners.
The U.S. Copyright Office issued a ruling on Tuesday (Sept. 5), confirming that songwriters and publishers are owed late fees when streaming services do not pay royalties to the Mechanical Licensing Collective (The MLC) on time. This, however, does not apply to the major adjustments in royalty payments currently underway following the re-setting of Phonorecords III rates (2018-2022), according to the office.
Late fees have been an ongoing debate between the music publishing industry and streaming services dating back to the passage of the Music Modernization Act (the MMA) in 2018. That landmark law switched how streaming services licensed music, from a song-by-song piecemeal system — which many considered ineffective and cumbersome — to a blanket licensing regime instead.
The law took effect starting Jan. 1, 2021, requiring digital music providers like Spotify and Apple Music to go to the newly created MLC to obtain a blanket mechanical license to reproduce music on these platforms. As part of the new system, streamers had to pay out royalties owed to the MLC, which then pays the writers and publishers, each month. More specifically, the law stipulates mechanicals are due “45 calendar days after the end of the monthly reporting period.”
After that, any lagging payment is considered late and subject to additional penalties, according to the MMA. For the current period of Phonorecords IV (2023-2027), the Copyright Royalty Board judges say that a streaming service must pay a late fee of 1.5% per month, or the highest lawful rate, whichever of those two is lower, for any payment owed to the music’s copyright owners that hadn’t been paid on time. The late fees accrue from the due date until the copyright owner receives payment.
The main source of debate around late fees is whether they should apply in the case of a monthly payment that needs adjustment after it is paid out. Streaming services have argued that “‘[i]f a service is following the regulations by making a reasonable estimate of an input it does not know the value of, it should not be penalized with a late fee even if it so happens that the estimate is too low.”
On the other side, the MLC has argued that allowing such exceptions would incentivize the streaming services to intentionally draw up payment estimates that undervalue what is owed to songwriters and publishers.
The Tuesday ruling by the Copyright Office settles the debate: “The Office concludes that the statute’s due date provisions are unambiguous. The statute’s reference to ‘due date for payment’ clearly refers to the date on which monthly royalty payments are required to be delivered to the MLC, i.e., no later than forty-five days after the end of the monthly reporting period.”
“This is a major victory for music creators who have waited far too long to be made whole from the appeal which significantly delayed their compensation,” says NMPA President and CEO David Israelite. “The USCO’s decision reiterates our assertion that the due dates are unambiguous and any past-due payments to the MLC must come with appropriate statutory penalties.”
In two weeks, Oliver Anthony went from an unknown artist to the owner of the No. 1 track on the Hot 100 chart with the surprise hit “Rich Men North of Richmond” — and in the process went from earning less than $200 in weekly royalties to roughly $356,000 in his chart-topping week.
“Rich Men North of Richmond” generated an estimated $218,000 in royalties for both recorded music and music publishing from track purchases and on-demand audio streams in the week ended Aug. 17, Billboard estimates based on Luminate data. And because he owns his master – released through digital distributor Vydia – and publishing, Anthony will pocket all that money. The track, released through digital distributor Vydia, generated 147,000 track sales and 17.5 million audio on-demand streams over that time period. Luminate did not track any on-demand video streams for the recording. The track also earned Anthony a small amount of publishing royalties from 517 spins at radio.
After the unlikely, whirlwind week in America’s spotlight, Anthony’s long list of accomplishments include the first artist to debut a first Hot 100 chart entry at No. 1; No. 1 on the Hot Country Songs charts; the 23rd song to top both the Hot 100 and Hot Country Songs charts simultaneously (and the first to do so by a solo male); the first solo-written Hot 100 No. 1 since Glass Animals’ “Heat Waves” in March and April 2022; and a rare independently released recording to reach No. 1 on the Hot 100.
The intense interest in “Rich Men North From Richmond” — it instantly found favor in conservative political circles and became a cultural lightning rod among liberals — bled over to the other 18 individually released tracks in Anthony’s catalog and generated an additional $139,000 from 73,000 track sales, 14.8 million audio on-demand streams, 658,000 on-demand video streams and 65,000 programmed audio streams. Anthony had four of the week’s top 10 track downloads: “Ain’t Got a Dollar” was a distant No. 2, “I’ve Got to Get Sober” was No. 5 and “I Want to Go Home” was No. 10. (Strong download sales also put “Ain’t Got a Dollar” and “I’ve Got to Get Sober” onto the Hot Country Songs chart.) In all, Anthony had 16 of the top 100 track downloads in the country last week.
Country music took the top three spots on the Hot 100 but took different routes to get there. Track purchases was the deciding factor in “Rich Men North of Richmond” beating out Luke Combs’ “Fast Car” and Morgan Wallen’s “Last Night.” “Fast Car” had just 10,000 track purchases, 7% as many as “Rich Men North of Richmond,” but its radio audience of 101.7 million was more than 100 times more than the 937,000 achieved by “Rich Men North of Richmond.” Combs’ “Last Night” had the most on-demand audio streams of the trio — 20.5 million to 17.5 million for “Rich Men North of Richmond” and 16.4 million for “Fast Car” — but the fewest track purchases with 6,000 and a radio audience — 70.5 million — about 69% the size the audience of “Fast Car.”
Daily data suggests Anthony’s hot streak will continue. This week’s track purchases of “Rich Men North of Richmond” may decline from last week but through the first two days of the tracking week purchased enough to likely give Anthony the top download for a second consecutive week. And with radio programmers following the lead of consumer purchases and streams, this week’s broadcast radio spins will easily top last week’s count. That’ll all mean more money for the independent artist — and plenty of leverage as he considers offers coming in from major labels “rushing” to sign him.
Publishers should get ready to welcome a royalty windfall now that the Copyright Royalty Board has printed its Phonorecord III final determination in the Federal Register — the last step to make the new rate structure official, concluding a more-than-four-year royalty row between publishers and streaming services.
The question is, how much that bonus will be.
While various industry estimates are all over the place with some even reaching another $400 million, by Billboard estimates, the just announced determined rates — finalized eight months after the 2017-2022 term expired — could yield up to another $250 million in underpaid mechanical royalties flowing from digital services to publishers and songwriters.
Now, digital services like Spotify, Amazon Music, YouTube and Pandora have six months to review and adjust past payments made for U.S. mechanicals to the new rates. Doing that will take a complicated assessment of past payments and applying them under the new finalized structure.
The ruling increases U.S. mechanical royalties each year during the five-year period using a multi-pronged formula based on choosing between either the royalties calculated using a “headline rate” tied to a percentage of the streaming service’s total revenue; or another pool that is calculated by using the lesser of either a percentage of total content cost — i.e. what’s paid to labels — or 80 cents per subscriber. Under the new finalized determination — which for the percentage of service revenue prong, is the same as the initial determination for the 2018-2022 term — the headline rate increased from 11.4% of service revenue in 2018 to 12.3% in 2019 to 13.3% in 2020 to 14.2% in 2021 and to 15.1% in 2022.
From there, performance royalties that are negotiated with and paid out to rights organizations like ASCAP and BMI are subtracted from the all-in pool, leaving just the mechanicals behind. The mechanicals are then measured against a 50-cents-per-subscriber floor, and whichever is bigger becomes the final mechanical royalty pool paid out to publishers and songwriters.
Until an appeal of the initial CRB rate determination initiated by independent songwriter George Johnson and joined by most of the big digital services sent it back to the CRB in July 2020, most of the streamers had been paying royalties under the high escalating rates from the initial Phonorecords III determination. But with the remand, in the fall of 2020, most services reverted to paying music publishing royalties using Phonorecords II rates from 2013-2017 while the appeal was sorted out. As an example, looking at just 2020 rates, that meant digital services abandoned the royalty structure that paid 13.3% of service revenue or 24.1% of total content cost and switched back to using the prior headline rate of 10.5% of service revenue and 21% of total content cost.
(This article uses rates and math associated with what’s known as the stand-alone portable streaming model — i.e., a single paid subscription — because it’s the dominant model that produces the most revenue in the U.S. marketplace. The rate formula has different percentages and parameters for other models like bundled, ad-supported, family or student tiers.)
Under the CRB judges’ final determination published in the Federal Register, the Phonorecords III royalty calculation keeps the escalating rate structures for on-demand streaming for the percentage of revenue prong in the formula but abandons an escalating rate structure for the cost-of-content prong. So, in the case of a single paid subscriber, that prong will apply 21% of total content costs to build an all-in pool to cover both mechanical and performance royalties, instead of the previously used — from the initial 2018-2022 determination announced in 2019 — annual escalating rates that in 2022 would have culminated at 26.1% of total content costs. That means in months where the total content cost became the all-in prong, the streaming service most likely overpaid publishers under the new rate structure.
In addition to eliminating an escalating rate structure for that prong, the CRB judges reapplied a ceiling for the total content bucket limiting what digital services would have to pay publishers. The initial 2018-2022 determination took out the ceiling mechanism, which would have meant that every time labels negotiated a higher rate, the music publishers and songwriters would also automatically benefit by a higher rate. Now, services reviewing their previous payments will need to measure the total cost of content bucket against the 80-cents-per-subscriber ceiling. Whichever of those two buckets is lower is then measured against the headline bucket and, this time, whichever is larger is chosen as the all-in bucket.
Reinstating the ceiling and jettisoning the escalating rate structure for the total content all-in pool could mean publishers were actually overpaid tens of millions of dollars for the 2018-2020 years, Billboard estimates based on Mechanical Licensing Collective and Harry Fox Agency royalty calculations data obtained from publishing sources. That amount, however, will be more than offset by the hundreds of millions of dollars in additional payouts that digital services will have to make for 2021 and 2022.
Billboard doesn’t have all the data necessary to calculate mechanical revenue on a month-by-month basis for each digital service, but looking at overall payments and reports to the Mechanical Licensing Collective can provide a simplified ballpark estimate on how much is owed to publishers and songwriters over the Phonorecords III five-year period.
First, let’s look at the first three years when it’s likely that services overpaid publishers and songwriters because they used the since-abandoned initial determination’s escalating percentages for the total content pool when calculating royalties. With Spotify, for example, according to data obtained by Billboard for the streamer’s Premium Individual tier, the headline rate royalty bucket won out most of the time for two of those years — 2019 and 2020 — to become the all-in bucket. Since the headline bucket rates are the same before and after the remand, it’s likely there were relatively minimal overpayments during that period. In 2018, however, Spotify’s total cost of content bucket appears to have won out all year — and that was at a higher rate of 22%, not the remanded 21%, and without a ceiling. So, in that year alone, Spotify likely overpaid by as much as $10 million on that tier alone, Billboard estimates, and is due to receive that money back from publishers and songwriters.
Based on that, and not knowing what kind of label licensing deals all digital services have, Billboard calculates — and some industry financial sources agree — that as much as $50 million in over-payments might have been paid by the digital services to publishers and songwriters overall during the 2018 through October 2020 period.
For that period, any overpayments will mostly be sorted out directly between the digital services and the publishers because the Mechanical Licensing Collective — created following the Music Modernization Act was signed in 2018 — hadn’t begun operating yet. Though, the organization will need to be involved in in recalibrating royalty payments that came from unmatched and unpaid royalties, which digital services turned over for those years at the MLC’s inception.
For 2021 and 2022, however, once the MLC began operating, the organization will be responsible for managing any royalty adjustments, once the new data and additional funding is received from the digital services.
In 2021, U.S. digital services reported $9.76 billion in estimated service revenue to the MLC, while the all-in publishing revenue totaled $1.31 billion — or 13.38% of service revenue — according to Billboard estimates based on MLC data obtained by Billboard. Taking a simplified across-the-board approach applying that year’s 14.1% headline rate against the total revenue of $9.76 billion would deliver nearly $1.39 billion in mechanical royalties — a $80 million bonus to publishers and songwriters.
For 2022, the payouts will likely be even greater. That year, digital services reported $10.78 billion in service revenue to the MLC and paid out a total of $1.45 billion in mechanical and performance royalties — or 13.5% of total revenue. Applying the 15.1% headline rate for that year produces about $1.63 billion in all-in publishing revenue — making for an extra $175.1 million in mechanical royalties.
Combined, 2021 and 2022 could yield an additional $255 million in mechanical royalties, by Billboard‘s best estimates. Depending on how much services can claw back from overpayments made during 2018 through October 2020, Billboard estimates publishers and songwriters will receive a windfall of $200 million to $250 million.
Once those payments are settled, it will be up to publishers to figure out payments to their songwriters under the new rate structure.
Beyond the windfall expected due to adjustments for over payments in 2018-2020 and the much larger underpayments in 2021-2022, Billboard estimates that the MLC holds an additional $350 million or so in unmatched or unclaimed royalties. In March of this year, the MLC reported to Billboard that it had paid out over $200 million of the $427 million pool in mechanical royalties it was handed from the years prior to when it began operating on Jan. 1, 2021. Sources say that since then, the prior 2021 unclaimed and unmatched pool has been further reduced with a total of almost $300 million now paid out. That leaves around $130 million in unclaimed royalties.
But what about 2021 and 2022? Since the MLC began, it has been matching about 90% of royalties from recordings to songs. In addition to the remaining 10% of songs that are not yet matched to recordings, there are songs building up the unpaid royalties pool because their credit claims do not add up to 100%. If a portion of a song’s credits are not claimed, that portion of the song’s royalties goes into the unclaimed and unmatched pool. Consequently, the overall payout rate the MLC is making nowadays comes out to about 84% of mechanical royalties received from digital services, according to sources, which is a considerable improvement compared to the 68–72% digital services matched and paid prior to the MLC’s launch.
In 2021, digital services paid the MLC about $675 million in mechanical royalties, Billboard estimates, and in 2022, they paid about $740 million. If 16% of the royalties for those two years are unmatched or unclaimed, that would make for another $225 million. And when 2018-2020 is added in, the MLC has a little more than $355 million in unmatched or unclaimed royalties still to be doled out to publishers and songwriters.
In addition to the publishing royalties still held by the MLC, Billboard estimates the finalized CRB rate determination will result in $50 million in overpayments to publishers for the 2018-2020 period and about $250 million in underpayments for 2021-2022. Within those totals, some of those adjustments will impact the $350 million or so unmatched and unclaimed royalties still held by the MLC.
While the Radio Music Licensing Committee awaits an appeals court decision in its so-far unsuccessful attempt to combine rate court proceedings with ASCAP and BMI under a single judge, the trade group has filed federal petitions to begin the processes separately in the Southern District of New York.
Usually, such rate proceedings petitions are initiated after negotiations between the performance rights organizations and the RMLC prove fruitless. Under these petitions, the PROs will each make the case for what rate it thinks their songwriters and publishers are entitled to receive when their songs are played on the radio. This time out, for the period of 2022-2026, the RMLC is seeking to maintain the same rates it had under the prior agreement which covered 2017-2021.
In July 2022, the RMLC tried to get ASCAP and BMI combined into a single rate proceeding, thus showing its hand that it felt rate negotiations had failed. For decades, each PRO had its own separate rate proceeding, but about seven or eight years ago, the RMLC began a new rate court strategy of trying to assign market share to the four U.S. PROs — ASCAP, BMI, SESAC and Global Music Rights — in attempt to keep the rates in parity with market share, irrespective of each PRO’s song catalog. In filing its petition to consolidate the rate proceedings to the Southern District of New York, which oversees both rate proceedings and the ASCAP and BMI consent decrees, the RMLC said the act was justified by the Music Modernization Act of 2018 that changed how the the Southern District assigns the rate court proceeding.
The step to combine the rate proceedings into one was seen by some music industry executives as a further attempt to pursue that rate strategy. Having a single judge, instead of bifurcated rate court proceedings, could benefit the RMLC because it would likely pit BMI and ASCAP against each other, vying for a higher rate than the other with both PROs arguing over market share.
But in May this year, Southern District Court Judge Stanton ruled against the RMLC’s consolidation petition so the radio trade group subsequently appealed that decision. The Second District Appeals Court has yet to issue a ruling on the RMLC motion, but in the meantime, the RMLC is getting the ball rolling with the rate court by filing amended petitions on BMI on Aug. 10 and on ASCAP on Tuesday.
Despite filing petitions for the two rate court proceedings, the RMLC petition for the ASCAP rate court proceeding says that if the Second Circuit Appeals Court ultimately agrees with the RMLC position to combine the two rate court proceedings into one, “it reserves all rights at the appropriate time” to pursue a unitary action against ASCAP and BMI.
The ASCAP rate proceeding covers the current five-year term which began on Jan. 1, 2022. In the prior term (2017-2021), RMLC said it paid a combined 3.51% of net revenue as a royalty pool for the two PROs, with ASCAP getting 1.73% of that based on market share claims it made at the time — which the RMLC now says was “a representation that turned out to be false.” Meanwhile, BMI received 1.78% of radio stations’ net revenue.
Nevertheless, in May 2022, according to the petition, the RMLC asked ASCAP and BMI if they would be willing to roll forward the combined 3.51% of net revenue royalty pool, provided that ASCAP and BMI would agree on a mechanism for assessing each of their market shares.
Although the rate level would be the same, the RMLC implies it is actually an increase because the combined ASCAP and BMI share of total performances on RMLC stations likely has diminished since when the prior agreements began, the RMLC argues in its petition.
Meanwhile, it looks like BMI is requesting a rate increase from 1.78% to 2.95%, according to what the RMLC states in the BMI petition; while the RMLC ASCAP petition doesn’t disclose the rate ASCAP is seeking.
The RMLC didn’t immediately respond to a request for comment.
“The RMLC would rather continue to waste time and money on expensive litigation than simply paying songwriters a fair royalty for the use of their music,” ASCAP CEO Elizabeth Matthews said in a statement. “It’s not that complicated. Simply treat music creators who support your successful and profitable businesses with dignity and respect and everyone wins.”
While the PROs and the RMLC wait for the rate court proceedings to make a determination, all parties have agreed to an interim rate that allows radio to continue to play music without copyright infringement.
GEMA, the German collective management organization (CMO), announced Monday (July 24) that it has acquired a majority stake in the SoundAware Group, a Dutch company that provides music recognition services to collecting societies (including those in the Netherlands and Belgium) as well as market research and media companies. SoundAware will continue to operate independently from […]
In 2022, SoundExchange reported that collections fell slightly to $1.017 billion from 2021’s $1.06 billion — a decrease of about $43 million, or 4.1%. Likewise, distributions fell 3.4% to $959 million from 2021’s $993 million.
However, those collection decreases mainly appear to be due to either revenue or content payout declines from digital services in direct licensing arrangements with labels as well as from foreign collection societies.
Of the $1.017 billion in total collections, $813 million was derived from statutory royalties, while $204 million was paid to SoundExchange via direct licensing deals between labels and services and from foreign collection societies. That’s a drop from the prior year when statutory royalty payments to SoundExchange were $824 million and direct licensing payments were $236 million. So while the statutory royalties fell slightly by $11 million — a decline of 1.3% — the bulk of the decline, or $32 million, was due to a 13.6% fall in direct licensing payments and from foreign societies.
Overall, SoundExchange president/CEO Michael Huppe declared 2022 a “tremendous year” for SoundExchange, in a note leading the organization’s annual report.
“Living up to our mission to foster an equitable music industry where all creators can thrive, the company collected $1.017 billion digital royalties from more than 3,600 digital streaming platforms and distributed them to more than 600,000 creators and rights holders,” Huppe wrote in the note. “In doing so, the company crossed the $[10] billion threshold for distributing royalty payments since its inception in 2003.”
As a percentage of revenue, SoundExchange claims a 6.6% operating administration rate or a 7.2% consolidated administration rate. Either way, the organization claims it has “maintained one of the music industry’s lowest admin rates.
However, expenses grew a whopping 17.5% to $74 million from the prior year’s total of $63 million. While SoundExchange didn’t immediately respond to a request for comment, the cost increase could have been due to costs associated with upgrades to the organization’s technological infrastructure.
According to Huppe’s note in the annual report, SoundExchange also “unveiled a suite of next-generation solutions to make the business of music easier and fairer — including a new look, a new website that serves as a resource for creators, publishers, and digital service providers, and a mobile app to give creators easy on-the-go access to their accounts.”
Its expense structure is also undoubtedly impacted by finding and paying the correct rights holders, particularly on the indie artist side of things. According to a press release, “SoundExchange collects and distributes digital performance royalties on behalf of 650,000 music creators and growing.”
Finally, SoundExchange attributed the $10 billion in distributions to date to its “proprietary music tech solutions that turn data into accurate revenue.”
Luke Combs has driven his “Fast Car” to the top five of the Billboard Hot 100 – and Tracy Chapman is riding shotgun.
The surprise success of Combs’ cover has been a minor windfall for Chapman, the sole songwriter of the 1988 hit from her breakthrough debut album. Billboard estimates that Combs’ version has generated about $500,000 in publishing royalties globally from its March 17 debut through June 8. Chapman alone is pocketing a sizable portion of that total.
Most of the royalties have come from 154 million U.S. on-demand audio streams from services such as Spotify and Apple Music from March 17 to June 8, according to Luminate. During that period, “Fast Car” also had 6 million video streams and 28 million programmed audio streams in the United States. The track has also been purchased 86,000 times, while the album on which it appears, Combs’ Gettin’ Old, has been purchased 68,000 times in both digital and physical formats. The United States accounts for more than three quarters of the song’s global consumption — a high ratio not atypical for a country artist.
What’s more, Combs’ success with “Fast Car” has also given Chapman’s original recording a boost. Weekly consumption — measured by track sales and streaming converted into equivalent track units — increased 44% since Combs’ version was released, while average weekly radio spins improved about 11%. That’s resulted in a boost in U.S. recorded revenues of about $54,000, with $13,000 coming from publishing royalties, Billboard estimates. (Warner Music Group’s Elektra Records, not Chapman, owns the recorded music rights.) Interest in Chapman herself appears to have increased, too: U.S. Google searches for the singer almost tripled from the weeks ended March 18 to June 3, according to Google Trends.
“Fast Car,” the first single for Chapman’s eponymous debut album, has been covered by the likes of Sam Smith, Khalid, Black Pumas and English producer Jonas Blue, whose dance version reached No. 2 on The Official U.K. Singles Chart and No. 98 on the Billboard Hot 100 in 2016. But in the United States, Combs’ version became the most successful to date by reaching No. 4 on the Billboard Hot 100 (dated June 17), surpassing Chapman’s original which reached No. 6 on the Billboard Hot 100 in 1988, and helped her debut album reach triple platinum within a year of its release.
Combs’ “Fast Car” peaked at No. 1 on the Country Digital Song Sales chart (dated June 10) and No. 2 on the Country Streaming Songs chart (dated April 29). It also reached No. 6 on the Country Airplay chart (dated June 17) in just its eighth week on the tally and hit No. 2 on the Hot Country Songs chart (dated May 6), which combines radio airplay and streams. North of the U.S. border, “Fast Car” reached No. 2 on the Canadian Digital Song Sales chart (dated May 6), No. 5 on the Billboard Canadian Hot 100 chart (dated May 27) and No. 36 on the Canada All-Format Airplay chart (dated June 10).
Tracking the ownership of “Fast Car” is like a brief lesson in the history of major publishing dealmaking of the last four decades. Chapman signed a publishing deal with SBK Entertainment prior to signing with Elektra Records in 1987. SBK was acquired by EMI Music Publishing in 1989. Citi took control of EMI in 2011 after private equity firm Terra Firma defaulted on its debt from a 2007 acquisition. A consortium of investors led by Sony Music Entertainment acquired EMI Music Publishing in 2012. In 2018, Sony Corporation bought out the remaining 60% of EMI Music Publishing. But the rights to “Fast Car” reverted to Chapman a few years ago, according to a Sony Music Publishing spokesperson. As sole owner of the songwriting and publishing rights, Chapman can pocket all royalties generated from “Fast Car” and other songs in her catalog, less any fees paid to a third party for administration services.
“Fast Car” is a rarity in an age of sampling, interpolations and Taylor Swift’s re-recordings. Outside of holiday music, cover songs rarely appear in the top 10 of the Hot 100 singles chart. In fact, the last time a cover entered the top 10 of the Hot 100 was Anna Kendrick’s version of “Cups,” a folk song written in 1931 and recorded by Hendricks for the movie Pitch Perfect that reached No. 6 in 2013. Prior to “Cups,” two cover versions from the TV show Glee appeared in the top 10: “Don’t Stop Believin’” (originally by Journey) in 2009 and “Teenage Dream” (originally by Katy Perry) in 2010. Chapman earns some royalties when “Fast Car” is sampled or used in an interpolation – Chris Brown‘s 2017 song “Runaway,” for example — but she keeps 100% of the songwriting and publishing royalties of cover songs.
During the National Music Publishers’ Association (NMPA) annual meeting on Wednesday (June 14), the trade organization said it calculated total U.S. publishing revenue at $5.6 billion in 2022, up from $4.7 billion in 2021 — a more than 19% increase year over year.
During his presentation at the meeting, held at Alice Tully Hall at Lincoln Center in New York, NMPA president/CEO David Israelite further noted that $5.6 billion figure does not include monies likely owed to publishers after the Copyright Royalty Board’s recent ruling upholding a rate increase for streaming services, rising gradually from 11.4% to 15.1% of service revenue for the 2018-2022 period. Once that increase is retroactively applied later this year, publishers’ should see a substantial additional payday.
Based on revenues earned in January and February 2023, compared to the same two months from 2022, Israelite said publishing earnings are up 27% so far this year. That’s due to a number of factors, including an increased royalty rate from streaming services that’s now set at 15.1% of revenue in 2023 and will increase gradually to 15.35% in 2027. Streaming services raising their subscription prices have also contributed to higher revenues, as well as growing diversity in publishers’ revenue streams.
Since 2014, when U.S. publishers earned $2.2 billion, annual revenues have grown more than 160% overall, according to the NMPA.
Breaking down revenue categories, performance royalties made up 48% of revenue — dropping below 50% for the first time. That fall in percentage, however, was “because the growth in other categories has been so significant, specifically with regard to synchronization,” Israelite said. Synch revenues made up 26.07% of earnings, mechanical 20.27% and other 5.37%.
Elsewhere during the event, NMPA executive vp/general counsel Danielle Aguirre announced that the organization had also distributed $66 million to its members from legal recoveries and settlements last year. “This is equal to a 456% average return on your dues,” she said, adding that the amount collected brings the NMPA’s all-time legal recovery number to $1.2 billion.
In a blockbuster announcement, Aguirre also revealed that NMPA members were suing Twitter over allegations of widespread copyright infringement, with dozens of music publishers seeking hundreds of millions in damages for infringing over 1,700 songs. If the claims are proven, the social media giant could be forced to pay as much as $255 million in damages.
Apart from Israelite’s state of the union address, which provided publishers with key analysis on the successes and pitfalls of the previous year, the meeting also doled out awards to several individuals. Among them, the organization honored RIAA chairman/CEO Mitch Glazier with the NMPA Industry Legacy Award, Senator Dick Durbin of Illinois with the NMPA President’s Award for his leadership in passing the Music Modernization Act and the CASE Act, Brandi Carlile with the Songwriter Icon Award and Ashley Gorley with the first-ever NMPA Non-Performing Songwriter Icon Award.
Coming out to perform in honor of Carlile was Allison Russell, who performed Carlile’s “This Time Tomorrow”; and Brandy Clark, who performed Carlile’s “You and Me on the Rock.” Coming out for Gorley was special guest Luke Bryan, who performed two Gorley-penned hits: “What Make You Country” and “Play It Again.”
This story is developing.