Copyright Royalty Board Begins Mechanical Rate Hearings

Posted in News on January 30, 2008

For many years now, BMI has led the fight to protect copyright and songwriter’s livelihoods. BMI songwriters have joined us and “walked the halls” of Congress for major revisions of the copyright laws that have greatly benefited future generations songwriters, composers and music publishers.

Today we face perhaps the greatest challenge to songwriters livelihoods in more than a decade, as the Copyright Royalty Board (CRB) comes to grips with the equitable payment due to songwriters and composers for their use of their works in the digital age. This week, a major proceeding before the CRB has begun, and although it focuses on mechanical rights, not a right which BMI represents, we recognize that these royalties are an extremely important part of the total compensation that all songwriters, composers and music publishers receive, compensation that recognizes the value of your creativity and your contribution to American culture. Indeed, such compensation — combined with the performing rights payments from BMI and other PROs — is your “salary” as music professionals. Without this economic support, American creators will no longer have the economic incentive to produce the volume and quality of music that has thrilled audiences for generations both at home and abroad, and made American music one of our most important economic and cultural exports.

The National Music Publishers Association (NMPA) will represent the mechanical right interests of songwriters and music publishers in this important hearing before the CRB. We have offered them our complete and unwavering support in this fight. On the other side are the Recording Industry Association of America (RIAA), representing record labels, and the Digital Media Association (DIMA), representing the huge global corporations that are today’s digital users of music. Both have proposed sharp reductions in the royalties available to songwriters, composers and music publishers. These cutbacks, if confirmed by the CRB, would be disastrous for the future of American music and more importantly, for those who create it. It would jeopardize our position as the leading provider of the world’s most popular music and put us on the path to become a second rate participant in an increasingly global music business. BMI will do everything in its power to make sure that the CRB understands the importance — and the urgency — of the issues now before it.

Below, you will find a detailed explanation of the issues now in debate. We will make frequent updates to this web page, encompassing information from multiple sources in the songwriting and music publishing community. We invite you to check back often for the latest news on this most important public policy debate.


Del Bryant


CRB Nixes DiMA Request for Ruling on Streaming

On February 5, the Copyright Royalty Board rejected a request by DiMA (Digital Media Assn.) to have the Register of Copyrights decide whether interactive streams should fall under a compulsory license.

Rates expected to be set by the CRB include mechanical royalties for physical units (such as CDs and enhanced CD singles that include more than an audio-only version of a recorded song) as well as digital phonorecord delivery (DPD) royalties for permanent downloads, limited downloads and streams that may involve reproduction and performance rights.

The issues surrounding streaming prompted DiMA’s request that Register Marybeth Peters decide whether or not they should be part of a compulsory license. Specifically, DiMA asked whether an interactive stream is a DPD under section 115 of the Copyright Law.

The judges noted that the Copyright Act does not include a definition of “interactive” and that there is no general agreement as to its meaning. As a result, whether a transmission is interactive is a factual question to be decided by judges rather than a legal question to be decided by the Register.

This decision is a victory for publishers, many of whom believed that DiMA-member companies were, by this request, trying to renege on old contractual commitments to pay publishers a royalty for the right to reproduce compositions via streams.

Detailed background information on the CRB Mechnical Royalty Hearings appears below.

On Monday, January 28, the Copyright Royalty Board (CRB) began the hearings that will determine mechanical rates for songwriters and music publishers. In addition to setting rates for physical products, rates will be set for digital downloads, subscription services and ringtones.

The National Music Publishers’ Association (NMPA) will be representing the interests of songwriters and music publishers and will be fighting vigorously to protect those interests to ensure that musical compositions are compensated fairly.

In opposition to the NMPA, the Recording Industry Association of America (RIAA) and the Digital Music Association (DiMA) have proposed significant reductions in mechanical royalty rates that would be disastrous for songwriters and music publishers.

NMPA President & CEO David Israelite has informed us that the NMPA is proposing an increase to 12.5 cents per song from the current rate of 9.1 cents for physical phonorecords. The RIAA, however, has proposed slashing the rate to approximately 6 cents a song, a cut of more than one-third the current rate.

For permanent digital downloads, the NMPA is proposing a rate of 15 cents per track, as the costs involved are much less than for physical products, while the RIAA has proposed the rate of approximately 5 - 5.5 cents per track, and DiMA is proposing even less.

For interactive streaming services, the NMPA is proposing a rate of the greatest of 12.5% of revenue, 27.5% of content costs, or a micro-penny calculation based on usage. The RIAA actually proposed that songwriters and music publishers should get the equivalent of .58% of revenue — less than 1%. And DiMA is taking the position that songwriters’ and music publishers’ mechanical rights should be zero, because DiMA does not believe they have any such rights.

Rick Carnes, President of the Songwriters Guild of America and the first witness called in the CRB mechanical royalty rate hearings, stated, “Our opponents have to recognize that this rate setting is not a matter of gamesmanship for songwriters, but rather one of survival. As I stated in my testimony, in response to a question from those seeking to cut the mechanical royalty rate in half and to denigrate the importance and contribution of professional songwriters to the music industry, “Yes, songs are plentiful, just as rocks are plentiful. But if you want diamonds, you are going to have to pay the miners a living wage.”

Charles J. Sanders, Counsel to SGA, added: “The independent songwriter community, through its own strong voice, is united in its efforts to lead the fight for fair compensation for creators and copyright owners in the current mechanical royalty rate hearings. Songwriters stand shoulder to shoulder with their music publisher partners in this struggle, and will brook no attempts — whether instigated by foes or professed but conflicted allies — to unduly influence or disrupt our efforts to guarantee equity over extinction for music creators.”

Another early witness, Steve Bogard, President of the Board of Directors of the Nashville Songwriters Association International (NSAI), said, “I will always be grateful for the opportunity, early on in the case, to look those three learned judges in the eye at close range and explain to them that for songwriters, the words ‘contribution’ and ‘investment’ are not just about money. Those words are about giving our lives to an art and a craft we love, enduring economic hardships for ourselves and our families, and pouring our hearts, souls and lives into words and music. Whether it’s ‘Blue Suede Shoes’ booming from a Ferrari in Monte Carlo or ‘Somewhere Over the Rainbow’ floating from a Café on St. Mark’s square, the American popular song is the soul of the world’s music. As I said to those three judges, if we do not prevail in this case, like math, science and manufacturing, writing great songs will just be one more thing at which America used to be the world’s best.”

The initial hearing will last four weeks, with the three permanent Copyright Royalty Judges hearing arguments Mondays through Thursdays from 9:30 a.m. - 4:30 p.m. each day. At the conclusion of the initial hearing, there will be more discovery, followed by a rebuttal hearing in May, and a final decision expected on October 2.


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