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SONGWRITERS V. STREAMING SERVICES: A ROYAL(TY) NIGHTMARE

SONGWRITERS V. STREAMING SERVICES: A ROYAL(TY) NIGHTMARE

Madeline Dunn

What do morning commutes, road trips, writing papers, and exercising all have in common? Stress and apprehension, perhaps? But much more probable, music.

Music is at the essence of everyday life. It is at our fingertips, and is accessible for each and every part of our day. However, it has not always been this way.[1] In the past ten years, music has undergone prolific changes—not merely in terms of genre, but in terms of consumption.[2] Long gone are the days of over-zealous children begging their parents to go to Target to secure the newest Taylor Swift album. Now, children beg their parents for a credit card so they can purchase Spotify premium, have access to over 50 million songs,[3] and never step foot in a store to purchase music again. In 2018, Americans streamed over 900 billion songs,[4] while only purchasing 32 million CDs.[5] As it pertains to the music industry, record labels have also noticed this recent trend; from 2004–2015, “revenues from physical sales declined from $15.3 billion to $2 billion, while digital revenues increased from $230 million to about $4.8 billion.”[6] Put another way, digital downloads during this same span of time increased from 1.5% of industry revenues to 40%.[7] This shift is attributable to recent technological advancements where higher-bandwidth internet connections and digital data compression allow for rapid transmission of recorded music files across the internet—completely transforming how the United States consumes music.[8]

While many individuals rely on services like Apple Music or Spotify to get them through the ups-and-downs of their daily lives, they may fail to recognize the time, efforts, and costs that go behind writing, producing, publishing, performing, and, ultimately, uploading songs. Furthermore, they may also fail to consider who in fact is creating songs and who is actually profiting from said songs. While streaming services have become our best friends—they have become songwriters’ worst enemies. This is because songwriters are paid little-to-nothing each and every time a song is streamed.[9] This can be traced back to federal regulation of copyright and licensing.[10]

Every five years, the U.S. Copyright Royalty Board (CRB), a panel of three federal judges, meets, negotiates, and sets new royalty rates for publishing rights as they pertain to digital streaming services.[11] Parties in these proceedings often include digital music corporations,[12] like Spotify, who present testimony and attempt to negotiate the terms within both 17 U.S.C. § 115 and 17 U.S.C. § 803(b)(1)(A)(i)(V), the statutes in place for licensing and music royalties.[13] In its most recent proceeding (in 2018), the CRB raised the percent-of-revenue, all-in royalty rate for 2018–2022, which ultimately requires music corporations to set aside more of its revenue to pay music publishers, who then in turn pay songwriters.[14] While this may sound like a positive feat for songwriters, because Spotify (and several others) appealed the decision,[15] it may in fact become more complex. Furthermore, because the CRB’s regulations only apply to music publishers, and not songwriters directly[16] (i.e., the CRB does not set regulations for how much songwriters get paid, but instead how much publishers get paid), the new rate is still very low.

With this in mind, Section I of this note will first explain how songwriters get their music published and will break down the various forms of royalties that songwriters get paid; Section II will discuss the legislative role in compensating musicians, while specifically focusing on the U.S. Copyright Royalty Board’s (CRB) most recent decision; Section III.A of this Note will argue that statutory language must be changed within 17 U.S.C. § 115 to encourage record labels, publishers, and performing rights organizations (PROs) to pay songwriters at higher rates; and finally in III.B, this Note will argue that the CRB should consider changing its preexisting formula (for calculating royalties) so that songwriters (the last ones to get paid along the chain of record labels and/or publishers),[17] are properly compensated for their art.

 

[1] See Mark Savage, Is This the End of Owning Music, BBC News, (Jan. 3, 2019), https://www.bbc.com/news/entertainment-arts-46735093 (discussing the change in music patterns).

[2] Id.

[3]For the Record: Company Info, Spotify, https://newsroom.spotify.com/company-info/ (last visited Oct. 18, 2019).

[4] Peter Thompson, 81 Essential Streaming Statistics for 2019, G2 Learning Hub, (May 23, 2019), https://learn.g2.com/streaming-statistics.

[5] Id.

[6] Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords III) No. 16-CRB-003-PR, 1919, I.A., (2018-2022).

[7] Id.

[8] Id.

[9] See How Much Do Songwriters Make from Mechanical Royalties, Royalty Exchange, (Apr. 3, 2019), https://www.royaltyexchange.com/blog/how-much-do-songwriters-make-from-mechanical-royalties#sthash.chO9hAlR.dpbs (highlighting that after mechanical royalties are distributed to music distributors, and/or publishers, songwriters can expect to average anywhere from $0.006 to $0.0084 from a given song.)

[10] See supra note 6 (discussing the CRB’s background about statutes and regulations as they pertain to mechanical royalties).

[11] Id.

[12] Id. at I.B.

[13] 17 U.S.C. § 115; 17 U.S.C. § 803(b)(1)(A)(i)(V).

[14] See case cited supra note 6 at Final Determination (“the all-in rate for performances and mechanical reproductions shall be the greater of the percent of service revenue and Total Content Cost (TCC) rates . . . .”).

[15] Jem Aswad & Chris William, Spotify, Google, Pandora, Amazon Go to U.S. Appeals Court to Overturn Royalty Increase, Variety, https://variety.com/2019/music/news/spotify-google-and-pandora-go-to-u-s-appeals-court-to-overturn-royalty-increase-exclusive-1203157697/ (last visited Oct. 14, 2019).

[16] See case cited supra note 6 at I.C. (“the Judges have no role in setting the performance right license rates. Further, performance right licensees pay the performance royalties to music publishers and songwriters. Services pay mechanical royalties primarily to music publishers.”).

[17] See supra note 9 (noting songwriters do not make the total amount of revenue from the stream directly, unless they are an independent artist. They first have to wait until sales are distributed among the record label or publisher.).

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