In previous posts, I’ve commented that while recording artists get the glamour, it is songwriting and the ownership of songs that generate greater revenue within the music industry.
Songwriters have multiple music licensing opportunities and can often live on royalties from hit songs for decades. One of the songwriter’s primary sources of revenue – the mechanical royalty – is facing a challenge. Last month, the Copyright Royalty Board began a proceeding to determine the new mechanical royalty rates for songs.
What’s at Stake?
The current mechanical license rate is 9.1 cents. A record label pays mechanical license fees for each copy of a song it distributes. Cover artists who re-record and distribute previously released songs also pay mechanical license fees. For a brief introduction to mechanical licenses and how songs generate revenue, see my article Music Publishing: How Your Songwriting Generates Income
The music industry wants big changes to the mechanical license rate. The problem is different groups want the rate to go in different directions. Songwriters and music publishers want the mechanical rate increased to 12.5 cents for physical recordings and 15 cents for digital downloads. The record labels have proposed a decrease to 6 cents for physical recordings and 5 or 5.5 cents for digital downloads.
And Then There’s Streaming
There is also much disagreement concerning the impact of streaming or internet radio. Record labels and music publishers want interactive streaming to generate mechanical licensing revenue. Webcasters argue that interactive streaming should be subject only to payment of a public performance license and not a mechanical license since streaming is like radio and does not result in the listener obtaining a permanent copy of the song. Music publishers say interactive streams should generate both public performance royalties and mechanical license royalties.
Evidently, the current CRB proceeding will not resolve the issue as the CRB has denied a formal request by the Digital Media Association to have the Copyright Office look into the matter.
Next Steps in the Proceeding
The parties present their direct cases over a period of four weeks starting on January 28, 2008. Afterwards, they break to prepare rebuttal arguments which begin in May. A decision from the Copyright Royalty Board on new mechanical license rates is expected in October 2008. A list of the parties and witnesses involved
as well as copies of the documents filed during the Copyright Royalty Board proceeding are available online.
