By Gary Symons
TLL Editor in Chief
Musicians and music streamers have come to what some call an historic new agreement on higher royalty rates.
The National Music Publishers’ Association (NMPA), the Nashville Songwriters Association International (NSAI), and the Digital Media Association (DiMA) announced they’ve agreed to a settlement for certain mechanical streaming rates in the U.S. for the years 2023–2027.
“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,” said NMPA President & CEO David Israelite. “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.”
The groups representing musicians and songwriters say the 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 new headline royalty rate will be set at 15.35%, which will be phased in over the five-year term. This new rate comes as the Mechanical Licensing Collective is fully operational, delivering commission-free royalty payments as a result of the passage and implementation of the Music Modernization Act (MMA).
The increase sets the new royalty rate at 15.35%, which is a very small increase of only 0.25% over the former rate of 15.1%. However, the groups representing musicians say the most important aspect is that this agreement locks in that rate, and avoids a long and costly legal battle.
The rate of 15.1% was only set after streamers like Spotify, Amazon Music and YouTube waged a legal battle with music publishers over royalty rates for the 2018–2022 period.
As a result, the CRB—a three-judge panel—determined that digital streamers should pay song owners 15.1 percent of their revenue for royalties.
The streamers fought back and initially won an appeal with the D.C. Circuit Court of Appeals, but the CRB ultimately upheld its decision to set the royalty rate for the 2018–2022 period at 15.1 percent.
That set the stage for this phase of talks, which covered the period from 2023–2027. The NMPA previously signaled it would advocate for a 20 percent royalty rate, but it now appears the music publishers and streamers agreed on a smaller increase because it was seen as more important to lock in the rate, and avoid a legal battle that could go either way.
“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,” explained NSAI Executive Director Bart Herbison. “Along with the upward rate momentum there are also new structures to help ensure minimum payments.”
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 says the agreement, supported by DiMA member companies, Amazon, Apple, Google, Pandora, and Spotify, as well as NSAI’s Board of Directors, and the NMPA Board which is comprised of leading independent and major music publishers, ensures that all parties will benefit from the growth of the industry and will be motivated to work together to maximize that growth.
“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,” Levin says. “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.”