Can you feel the love tonight? Spotify and fellow music streamers strike agreement with publishers for 15.35% go-forward royalty rate in the US.

Credit: QuiteSimplyStock/Shutterstock

Remember the ugly dust-up between music publishers and the likes of Spotify and Amazon Music in the US over mechanical royalty rates?

That historic music biz battle began in 2018, when the NMPA (National Music Publishers’ Association) secured a vital ruling from the Copyright Royalty Board (CRB) in the United States.

Said ruling increased the headline percentage of US revenue that on-demand streamers had to pay to songwriters and publishers in the region – from 10.5% to 15.1% – for the five years between 2018 and 2022.

Spotify and a handful of fellow music streaming platforms then appealed, people on all sides said mean things about each other for a few years, until, eventually, last month the CRB officially stuck, once and for all, with the 15.1% rate.

The legal tussle for 2018 to 2022 (known as ‘Phonorecords III’) was done. But another, no less fierce legal tussle, was just starting to bloom.

‘Phonorecords IV’ – which sets the on-demand streaming mechanical rates in the US for the five years between 2023 and 2027 – was set to get underway later this year.

During the ‘pre-battle’ period of ‘Phonorecords IV’ last year, the NMPA set out its stall for the publishers, suggesting to the CRB that the headline US streaming mechanical rate for 2023-2027 should be as high as 20%.

Major streamers, unsurprisingly, lowballed in comparison: Spotify, Amazon, and Pandora all suggested that the rate should be knocked back down to 10.5%.

The stage was set for another (costly) legal battle royale!  But… we’re not getting one.

Because today (August 31), the NMPA and the trade org for digital music services in the US (DiMA), plus the Nashville Songwriters Association International (NSAI), have put out a surprising joint announcement: Rather than figuratively rip each other’s heads off via legal representation over the next few months, they’ve instead come to a quiet and civilized agreement.

All three parties are submitting a joint proposal to the CRB which suggests that the new 2023-2027 on-demand streaming mechanical rate in the US should be set at 15.35%.

That’s slightly higher than it is right now (15.1%), but lower than the 20% some on the publishing side were initially pushing for.

In a joint announcement today, the music publishers and digital services said: “[This 15.35%] agreement will provide higher royalty rates for songwriters and music publishers, promote sustainability, innovation, and continued investment for the entire industry, and usher in a new era of collaboration between all parties.”

The CRB could still reject this proposal if notable opposition to its suggestions arises.

But with the music publishing industry, plus the digital music industry, finally agreeing on something upfront, the involved parties in the proposal are hopeful that the CRB will give it the green light.

Noting that the suggested 15.35% rate would be “phased in over the five-year term” as part of the proposal, an NMPA/DiMA/NSAI press release issued today further explains: “The deal also includes a number of changes to other components of the rate, including increases to the per-subscriber minimums and the ‘Total Content Costs (TCC)’ calculations which reflect the rates that services pay to record labels.

“As streaming services continue to innovate to deliver songwriters’ works to growing numbers of paying fans, the agreement also modernizes the treatment of “bundles” of products or services that include music streaming and updates how services can offer incentives to attract new subscribers into the music ecosystem.”

DiMA President and CEO Garrett Levin said, “This agreement represents the commitment of the streaming services to bringing the best music experiences to fans and growing the streaming ecosystem to the benefit of all stakeholders, including the creative foundation of songwriting.

“For streaming services, this moment presents an opportunity to pursue new collaborations with publishers and songwriters in the context of economic certainty that will support continued innovation. Perhaps more than anything, this agreement demonstrates the potential for industry progress when parties come to the table for good faith discussions.”

NMPA President & CEO David Israelite said, “This historic settlement is the result of songwriters making their voices heard. Instead of going to trial and continuing years of conflict, we instead move forward in collaboration with the highest rates ever, guaranteed. We thank the digital services for coming to the table and treating creators as business partners. Critically, since this is a percentage rate, we know that as streaming continues to grow exponentially, we will see unprecedented value of songs.”

NSAI Executive Director Bart Herbison said, “This collaborative process will lead to increased songwriter compensation from digital streaming companies and locks in our historic 43.8% increase from the previous CRB proceeding.

“Along with the upward rate momentum there are also new structures to help ensure minimum payments.”Music Business Worldwide