Copyright Board Freezes Mechanical Royalty Rate

Posted on October 6, 2008

WASHINGTON – October 2, 2008 - The U.S. Copyright Royalty Board (CRB) announced today that mechanical royalty rates for physical products (such as CDs) and permanent downloads (such as iTunes) will not go up but remain at the current 9.1 cents.  Each will be subject to an overtime rate for recordings over 5:00 minutes.

The ruling is great news for churches and Christian ministries that might have faced paying 5 to 6 cents more per song per recording unit if the CRB had decided to increase the rate. At one time, publisher and songwriter groups were advocating that the CRB raise the rate to 15 cents, which represented a 66% increase. The mechanical royalty rate is calculated to determine fees that are due for reproducing songs on CD recordings, audio digital downloads and burning rehearsal CDs.

The decision was apparently largely influenced by Apple's recent claim that it would shut iTunes down if the rate increase occurred, according to attorney Brock Shinen. This is long anticipated, major news for all parties involved in the business of making music, because the rate has been in an ambiguous state for about two years. Reports of the decision abound online.

The CRB judges also established for the first time a rate of 24 cents for each ringtone subject to the Section 115 mechanical license. Furthermore, music publishers will have the right to seek a 1.5 percent late fee, calculated monthly.

David Israelite, President and CEO of the National Music Publishers’ Association, which represented songwriters and music publishers before the Board, hailed the decision as a positive development for all songwriters and music publishers.

“We are happy that the judges recognize the importance of songwriters and music publishers to the music industry,” said Israelite. “Coupled with the historic agreement announced two weeks ago, this decision represents an important milestone for the music industry. These events will bring clarity and order to an environment that for the past decade has been hampered by litigation and uncertainty on all sides.  In the end, songwriters and music publishers will have incentive to create and market music, and music fans will reap the rewards.”

The announcement is the culmination of a trial that began in January, and marks the first time the CRB has established mechanical royalty rates for songs distributed digitally.

The Board also adopted the terms of an historic industry settlement on rates for two other types of services – interactive streaming (such as some Napster services) and limited downloads (such as Rhapsody To Go). Details of that agreement between NMPA, the Nashville Songwriters Association International (NSAI), the Songwriters Guild of America (SGA), the Recording Industry Association of America (RIAA) and the Digital Media Association (DIMA) were announced last week.

The music publishers and songwriters were represented in the trial by the NMPA, along with NSAI and SGA.

"Publishers may cry foul (they wanted more). Songwriters may cry foul (they wanted more). David Israelite, NMPA's CEO claims this as a victory for songwriters (I guess he was scared the CRJs might eliminate mechanical royalties or something)," explains Mr. Shinen. "Apple is (for now) content, but the most direct benefit of this ruling is for the consuming public...it will help keep music costs down.

"As music lovers, you may want to remember next time you go to iTunes to buy music, to be thankful the price didn't just go up," Mr. Shinen comments.

Rick Carnes, President of SGA, said, "The CRB has confirmed the proposal of rates for interactive streaming and limited downloads formulated cooperatively by songwriters, music publishers, the recording industry and the digital media groups, which will clarify the licensing of this growing area of digital commerce and provide needed royalty payments to songwriters. The Songwriters Guild of America is gratified that the CRB has adopted these rates, which will assist music creators in their quest to make a living from their profession.

“Today, the CRB also faithfully implemented U.S. copyright law by giving songwriters the ability to earn a fair return on their works," adds Mr. Carnes. "As so many songwriters testified during this process, our community has been struggling to keep our profession alive, and the CRB's decision could not have come at a more important time.”

“Today’s announcement is the culmination of months and months of tireless work by staff and outside counsel on behalf of music publishers and songwriters, and I want to acknowledge and thank them for their commitment,” Mr. Israelite said.