Music Creators Demands Phonorecords IV Settlement Transparency
via Digital Music News:
In late August, the National Music Publishers’ Association (NMPA) announced a settlement for the Phonorecords IV proceeding. Now, however, Music Creators North America (MCNA) is officially demanding the public disclosure of the compromise’s details as well as those of “related agreements.”
Songwriters Guild of America president and MCNA officer Rick Carnes and Society of Composers & Lyricists president and MCNA co-chair Ashley Irwin just recently issued the call for transparency in a letter to the Copyright Royalty Board (CRB). A copy of the approximately 750-word-long message was shared with Digital Music News.
As its name suggests, the three-judge CRB is responsible for (among other things) setting royalty rates, and the mentioned Phonorecords IV pact involves a headline rate of 15.35 percent on streaming services for songwriters and publishers for the 2023 to 2027 period.
The initially noted National Music Publishers’ Association, the Nashville Songwriters Association International (NSAI), and the Digital Media Association (which represents major streaming services including Spotify) jointly announced the rather quickly finalized deal, which would raise the royalty rate slightly from the Phonorecords III proceeding.
For further reference, the Phonorecords III rate signified a 43.8 percent hike and was issued back in 2018, at which point leading streaming platforms (sans Apple Music) promptly began working to keep the existing framework in place. The point is significant with regard to both the relative speed with which the Phonorecords IV agreement was announced and the (modest) mechanical rate increase at hand.
Lastly, in terms of pertinent background details pertaining to the multifaceted subject, it was only in March of 2022 that the CRB rejected a proposed mechanical-rate freeze (at 9.1 cents per song) for physical releases and downloads. In submitting the proposal, the National Music Publishers’ Association and the major labels likewise indicated that they had reached “an agreement in principle concerning a separate memorandum of understanding addressing certain related issues.”
Songwriters organizations and others pushed back against the development and the perceived conflict of interest, for the Big Three labels also own massive publishing companies, execs from which sit on the NMPA board. (A second settlement, unveiled in May, would up the mechanical rate for physical and downloads to 12 cents.)
In rejecting the first proposal, the CRB described as “a warning flag” the “vertical integration linking music publishers and record labels,” besides making clear that “the contracting parties cannot hide changed application of a statutory rate scheme behind a ‘private contract’ when that contract has implications for non-contracting parties.”
Shifting to the situation surrounding the MCNA letter, songwriter George Johnson, a longtime opponent of abysmal mechanical rates, moved “to compel disclosure of those groups’ unpublished, privately negotiated, proposed streaming rate deal,” per the MCNA’s description.
The NMPA and the other parties behind the settlement, in requesting that the disclosure motion be denied as moot, expressed the belief “that a practice of requiring the public filing of settlement agreements as a matter of course would have a negative impact on settlement discussions in future proceedings” – albeit while attaching a non-public (and therefore unavailable to millions of songwriters) copy of the pact.
In response, Johnson called for “the full un-redacted Settlement agreement [to] be made PUBLIC” or, alternatively, requested that the CRB “make available a redacted version of the proposed Settlement suitable for public consumption.
“Furthermore, in addition to the a.) 3 sentences redacted from the Joint Response, b.) a sealed Settlement makes it impossible for this Participant to simply know the facts I need to respond to, and that is another good reason why this Settlement should be made PUBLIC, and in full, in the name of transparency, especially for a public, government forced, compulsory license on artists,” wrote Johnson.
“Finally, GEO’s [George Johnson’s] motion is clearly not moot since this new ‘under seal’ submission by the Parties is evidence in and of itself that there was an additional agreement and possible additional terms, different than the proposed Settlement submitted by the Parties on August 31, 2022,” he wrote.
The evening of Monday, October 3rd, then saw Google and the NMPA file a “joint notice of lodging,” maintaining that they would construe an order to disclose related agreements to “include certain letter agreements executed between Google, on the one hand, and certain music publishers and the NMPA, on the other hand, on or around the execution date of the settlement agreement.
“The letter agreements are not part of the settlement agreement or understanding of the settling participants concerning the subject matter of the settlement agreement, and do not supersede any part of the settlement agreement with respect to the settling participants’ proposed Phonorecords IV rates and terms,” Google and the NMPA claimed.
“Because the letter agreements are subject to confidentiality restrictions and have each only been disclosed to their individual signatories,” Google and the NMPA continued, “each such music publisher having an extant direct license agreement with Google, Google and NMPA are lodging the letter agreements directly with the Copyright Royalty Judges, who may then make a determination as to whether the letter agreements are relevant and what, if anything, should be disclosed notwithstanding the confidentiality restrictions in each of the letter agreements.”
Bearing in mind these points, Music Creators North America’s aforesaid letter relays off the bat the organization’s “extreme dismay” with the joint response that the NMPA, the NSAI, and streaming services offered when asked to disclose the whole Phonorecords IV settlement agreement.
“We are deeply concerned by these recent efforts to shield secret dealings by parties whose interests are potentially in conflict with those of music creators… Our concerns in this regard are immeasurably heightened by the filing last evening of a Joint Notice of Lodging by NMPA and Google containing admissions that potentially ‘related agreements’ were executed among Google and certain of the music publisher endorsers of the proposed streaming settlement,” the MCNA’s message reads.
“In order to satisfy the Congressional mandate that affected parties be given opportunity to comment upon private agreements negotiated by participants to the proceedings prior to their adoption or rejection by the CRB, we respectfully urge the CRB to timely publish an un-redacted copy of the agreement under consideration in its entirety, including any and all related or potentially related agreements,” the text states towards its end.
More as this develops.
The Music Creators North America organisation has called on the US Copyright Royalty Board to make public the agreement reached between the music publishers and the streaming services regarding the rates to be paid by the latter for the streaming of songs in the years ahead. MCNA says that all songwriters need access to an “un-redacted copy of the agreement under consideration in its entirety, including any and all related or potentially related agreements”.
In the US, what royalties are paid by streaming services to music publishers and songwriters is set by a panel of judges known as the Copyright Royalty Board. That’s because there is a compulsory licence covering the mechanical copying of songs under US copyright law. As a result, every few years the CRB decides what percentage of streaming revenues should be allocated to the song rights under that compulsory licence.
There has been much disagreement in recent years over what the basic revenue share allocation should be, as well as over other technicalities contained within the compulsory licence. As the CRB started to consider what rates it should set for the next five years, the music publishers proposed an increase from the current 15.1% to something closer to 20%, while some of the streaming services were proposing something more like 10.5%.
However, in August a deal was done between the publishers – repped by the National Music Publishers Association – and the streaming services, meaning a full costly and time-consuming royalty rate battle before the CRB was avoided.
Under that deal, there will be a very slight increase in the song royalty over the next five years, up to 15.35%. That will keep the US in line with the streaming monies allocated to the song rights elsewhere in the world – actually, in the main it’s slightly more – plus the publishers got some of those technicalities reformed in their favour.
The deal was broadly welcomed across the music publisher and songwriter communities, not least because it meant that the music publishing sector wouldn’t have to spend a whole load of time and money fighting the streaming services in front of the CRB.
However, since the deal was announced, and as formalities at the CRB in relation to the deal have started to go through the motions, some issues have been raised by some songwriters in relation to some aspects of the deal, in particular around transparency.
Among those raising concerns is George Johnson, the songwriter who has been the most proactive individual in recent CRB proceedings, with organisations like the MCNA backing him up.
In a submission to the CRB yesterday, the MCNA writes: “We would like to express our extreme dismay over the joint response dated 26 Sep 2022 filed by the National Music Publishers Association, the Nashville Songwriters Association International and various digital music distributors in opposition to participant George Johnson’s recent motion to compel disclosure of those groups’ unpublished, privately negotiated, proposed streaming rate deal”.
“We are deeply concerned by these recent efforts to shield secret dealings by parties whose interests are potentially in conflict with those of music creators”, it goes on, “and firmly believe that filing a proposal urging the CRB to engage in an action that would be in flagrant violation of the mandatory disclosure, transparency and comment provisions set forth in the US Copyright Act represents a pursuit of highly questionable motivation that should not be permitted to influence CRB policy”.
Noting a filing earlier this week by the NMPA and Google, the letter adds: “Our concerns in this regard are immeasurably heightened by the filing last evening of a joint notice of lodging by NMPA and Google containing admissions that potentially ‘related agreements’ were executed among Google and certain of the music publisher endorsers of the proposed streaming settlement ‘on or around the execution date of the settlement agreement’ which they regard as superfluous and ‘substantively unrelated’ to the proposed agreement for which CRB approval and adoption is being sought”.
The letter then highlights that US copyright law says that those affected by any CRB amendments to royalty rates must be given the opportunity to submit comments on those amendments.
“In order to satisfy the Congressional mandate that affected parties be given opportunity to comment upon private agreements negotiated by participants to the proceedings prior to their adoption or rejection by the CRB”, it continues, “we respectfully urge the CRB to timely publish an un-redacted copy of the agreement under consideration in its entirety, including any and all related or potentially related agreements the existence of some of which are already acknowledged by NMPA and Google”.
That is required, it says, “so that the independent music creator community and all interested and affected parties are afforded the requisite time and complete information necessary to adequately review and evaluate the proposal in whole. That opportunity is a sine qua non [essential condition] to formulating complete and cogent comments for CRB consideration, as mandated by statute”.
It remains to be seen if the big old deal between the publishers and the services – and details of any side deals – are indeed made fully public and, if so, whether there will be any elements of those documents that cause some or all of the songwriting community to change their opinion on the widely welcomed settlement.
Read the full letter below:10.04.22-MCNA_CRB-Letter-FINAL