When streaming services came out with subscriptions or free music for their listeners, it wasn’t surprising that songwriters and artists were concerned about their royalties. Over the last 15 years, thanks to the emergence of streaming services, songwriters have seen their earnings and rankings decimated by 75-90 percent.
There are PROs like ASCAP, which are designed to protect the royalties offered to songwriters and artists, as well as licensing services like Tunedge, which focuses on providing proper attribution and licensing to those who use music in commercial settings. But even with protective copyrighting services, songwriters, artists, and publishers still feel threatened by streaming services.
According to new legislation from the Copyright Royalty Board (CRB), things are looking up, especially for songwriters. After a massive dispute, the songwriters came out on top, and streaming services will now be required to pay more for the music they play.
Songwriters and Publishers Win Record-Breaking Revenues
After both songwriters and publishers felt like they were losing money due to subscription streaming services, they took their complaints to court. They primarily targeted major streaming services like Pandora Media Inc., Alphabet (Google) Inc., Amazon.com Inc., Apple, and Spotify.
After a long battle, the CRB mandated that streaming services are now required to pay both songwriters and publishers 15.1 percent of their revenue. Before this ruling, the royalty was only 10.5 percent.
“This has been the most exciting 24 hours, certainly in my 13 years working in this industry,” National Music Publishers Association President and CEO David Israelite said in the announcement. “We are thrilled the CRB raised rates for songwriters by 43.8 percent—the biggest rate increase granted in CRB history.”
The CRB’s decision was largely influenced by upcoming federal legislation known as the Music Modernization Act, which overhauled the digital mechanical licensing process, demanding higher royalty rates for publishers and songwriters.
Before this legislation, artists and record labels were left to create their own deals with streaming services, and oftentimes, they were limited by a content cost cap or a low percentage.
Now, the CRB has removed the content cap, a restriction that limited the revenue streaming companies were required to pay for licensing. The formula for calculating royalties paid by streaming companies was also changed. Now, songwriters who also publish their music will be paid the full 15.1 percent of the total revenue while independent songwriters will be paid 26 percent of the revenue given to artists and record labels.
Penalties for Late Payments
The CRB also instigated a late fee—the first of its kind—which means that streaming companies must pay their royalty rates on time or face an 18 percent interest fee annually. According to Israelite, the legislation could protect streaming services from potential late fees, and they’re more likely to be interested in that.
It’s likely that the CRB’s support of songwriters and publishers will instigate greater support in streaming services for the Music Modernization Act, which offers them a blanket license and takes a lot of the complexity out of payouts. It would mean higher royalties paid by streaming services, but it would eliminate the late fee penalty.
For songwriters, the late fee is a huge win.
“For 15 years we’ve been pushing a boulder up the hill, and just when it felt like were making momentum, it would roll back down on our heads,” said Bart Herbison, executive director of the Nashville Songwriters Association International (NSAI). “I would say today feels like a real victory for American songwriters and I can’t say enough about the job that Steve, and Lee and Liz did in preparing their testimony and convincing the CRB that the contributions of songwriters are crucial to the success of the streaming companies.”
What Does This Mean for Streaming Services?
Most streaming services declined immediate comment or gave vague one-liners following the legislation. It has you wondering if they’re concerned about the higher financial responsibility to come.
It’s hard to imagine that a five percent increase in royalties will make a huge difference for major corporations like Spotify and Amazon, but looks can be deceiving. Spotify, for example, lost more than half a billion dollars in 2016, and although they’ve increased their user base, it won’t be easy for them to take another loss.
That being said, it may take a while for the effects to show. Drexel University professor Robert Weitzner told Mashable, “It doesn’t mean that the rate Spotify pays would increase [immediately].” That’s because Spotify and other streaming services might pay royalties of more than 15 percent already.
However, they might not be able to stave off an increase forever. “In the long run, they are going to try and raise their prices as the services get better and they contextualize their offering,” explained Weitzner.
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