Music publishing executives greeted the August 31st announcement from the National Music Publishers’ Association (NMPA), Nashville Songwriters Association International (NSAI), and Digital Media Association (DiMA) with triumph and optimism. The release detailed the terms of the most recent settlement before the Copyright Royalty Board (CRB) in a proceeding known as “Phonorecords IV.” Namely, the executives lauded the increase in the royalty rate that music streaming services must pay to songwriters and publishers from 2023 to 2027, which the settlement set at 15.35% of streaming revenue. Although many in the music industry have celebrated the raised royalty rate, songwriters remain undercompensated, especially relative to the large rate payable to record labels and the owners of master recordings.
To better comprehend the significance and impact of the settlement, one must understand the difference between the two copyrights that every song possesses, as well as the history of the Phonorecords proceedings.
Each song that someone plays on a streaming service such as Spotify or Apple Music has two separate and distinct copyrights. One copyright is for the “musical composition” and the other for the “sound recording.” The composition consists of the underlying musical aspects of a song regardless of who may be performing or recording that song, such as the lyrics and melodies. Think of the composition as the sheet music. The sound recording, also called the “master recording” or simply the “master,” consists of a specific recorded performance of a composition. For example, Taylor Swift made headlines when she announced her plan to rerecord previously released albums in her catalog, which involves making a new master recording of a composition she had already previously recorded. Swift utilized the same composition; however, she recorded a different performance the second time around (creating a copyright in the new master). The royalty rate that the CRB sets in the Phonorecords proceedings dictates how much the streaming services pay songwriters and music publishers to license the composition rights of the songs.
The well-received rate increase of Phonorecords IV marks another win for songwriters that comes almost two months after the CRB upheld the rate escalation decided in Phonorecords III, the prior proceeding that set the rate for 2018-2022. Phonorecords III, which began in 2016, saw years of conflict and pushback from the streaming services regarding an increase in the royalty rate from the 10.5% set in Phonorecords II to the recently upheld 15.1%.
Although the Phonorecords III proceeding was characterized by extensive litigation, NMPA president and CEO David Israelite stated that he expects the Phonorecord IV settlement to “usher in a new era of collaboration between” the streaming services and music publishers, rather than the parties “going to trial and continuing years of conflict.” Music publishing executives such as Sony Music Publishing CEO Jon Platt and Universal Music Publishing Group CEO Jody Gerson publicly lauded the increase, with Gerson echoing Israelite’s appreciation for the collaborative nature of the Phonorecords IV proceeding. Warner Chappell Music, another major music publishing company, also praised the increase as “an important and historic moment in the ongoing fight for fair songwriter compensation.”
Although hopeful for the future, Warner Chappell also included in its statement that there is still “more work to be done to ensure [songwriters are] paid what [they] deserve.” While the rate increase is certainly great for songwriters, it is only the beginning of trying to secure fair compensation. The overall share of streaming service revenue payable to record labels (for use of the master recordings) was about 4.8x and 3.6x the share payable to publishers for the Phonorecords II period (2013-2017) and Phonorecords III period (2018-2022), respectively.
The increase may be a triumph for the songwriter community, but it is far from fair compensation. Streaming services should value composition rights at least as much as they value master rights. The equal market value of composition and master rights is evidenced in the process for licensing songs for television, commercials, and film. In order to utilize a certain song in audiovisual content, the potential user must procure a synchronization license from the owner of the composition (songwriter or publisher) and a master license from the owner of the master (record label). The fees charged for both licenses are most often the same, indicating that the market values both copyrights equally. Songwriters also usually do not partake in other revenue-generating activities that most artists do, such as performing, touring, merchandise sales, and sponsorship deals. If the market for utilizing songs in audiovisual content values the two copyrights equally, and artists already have greater capacity to generate revenue, it does not make sense that the rate set for licensing compositions for streaming is any less than the rate for licensing master recordings.
The unprecedented Phonorecords IV settlement and increase in royalty rate represent big wins for songwriters and music publishers. However, owners of musical compositions still have more work to do before they are truly compensated fairly. Nonetheless, music publishing executives appear as hopeful as ever that they can achieve such fairness moving forward.