CRB Initial Ruling Would Boost 2018-22 Mechanical Royalty Rates for Interactive Streaming

The Copyright Royalty Board said the mechanical royalty rate for interactive streaming should increase gradually through 2022 to 15.1 percent of revenue or 26.2 percent of total content cost, whichever is more. The existing rate is 10.8 percent of revenue. The ruling withdrew a cap on the amount of content costs. The Copyright Office on Monday announced the initial ruling in the 2018-2022 interactive streaming royalty ratesetting proceeding. It's “the biggest rate increase granted in CRB history,” said National Music Publishers' Association President David Israelite. “Crucially, the decision also allows songwriters to benefit from deals done by record labels in the free market. The ratio of what labels are paid by the services versus what publishers are paid has significantly improved, resulting in the most favorable balance.” It's the result of 2017 litigation by the NMPA and Nashville Songwriters Association International against Amazon, Apple, Google, Pandora and Spotify. Songwriters and music publishers faced a “long and difficult process” to get here, said NSAI Executive Director Bart Herbison in a statement with NPMA. Those increases could hurt streaming services facing financial losses, blogged Wilkinson Barker broadcast attorney David Oxenford Monday: It "leaves little money for the service to pay all of its other operating costs.” Timing could disrupt the nascent Music Modernization Act (HR-4706/S-2334) (see 1801260049), which had been gaining momentum, Oxenford said. A final determination will be published after the register of copyrights completes a statutory review and the librarian of Congress approves, the CRB said. This is “another pressure point” for Pandora, said Dougherty & Co. in a Monday investor note. The new rate schedule will affect about 25 percent of Pandora’s revenue and 5.19 million out of its 73 million total active monthly listeners, said analyst Steven Frankel. Although the ad-supported business won’t be affected, Pandora faces a “stagnating listening base and a music market that has rapidly shifted to Spotify and Apple Music,” Frankel said.