A few years later, the Copyright Royalty Board would establish a new set of ground rules for digital music payouts. A coalition of nearly all of the major players in recording, publishing, and tech agreed to update Section 115 of the Copyright Act, where five new categories were
introduced to effectively provide new markers for the CRB’s remit in adjudicating disagreements. This included rates for hybrid music platforms that provided downloads, digital music bundles, and other now forgotten ways of selling digital music. Even if the CRB couldn’t keep lockstep with each new method of digital music distribution, this ruling, building upon the previous one in 2008, gave the CRB quite a bit of latitude to operate.
Although the early 2010s were the nadir of the record industry’s revenue, the infusion of tech money and new money lines was starting to come into direct view. This
shift from physical to digital may explain the heightened awareness around the CRB and a desire, at least on the side of businesses, to avoid government regulation. SiriusXM
wanted to sidestep SoundExchange and do direct deals with rights holders that would be outside of CRB jurisdiction. In late 2014, the Future of Music Coalition
summarized the many points of struggle arising from various actors trying to stake their claims over the ever-changing terrain. The board’s shaky foundation and the growing disagreement between all of the record industry players helped set the stage for what became perhaps the most public CRB tussle.
In early 2018, the CRB
announced an increase in mechanical and performance royalties for streaming platforms in non-interactive streams (i.e. Spotify radio, Pandora, etc.), also known as
Phonorecord III. The new rates were meant to apply between 2018 and 2022, and while initially met with approval from the National Music Publisher Association (NMPA), streaming companies were less keen on the sudden hike. What’s ensued over the last few years is a rather public back-and-forth, with the likes of Spotify, Amazon, Google, and Pandora
filing lawsuits against this CRB ruling that they feel is too costly. The NMPA, though happy with some parts of it, also
filed a lawsuit over how the CRB classified different payment schemes for music consumed on family plan subscriptions. Despite the two different clusters of recorded music interests fighting the decision, the Music Artists Coalition and the Songwriters of North America both pleaded to affirm the initial 2018 decision. Even as the battle rages over this decision, the next one is already looming over the board.
The coronavirus pandemic forced the board to delay the ruling on rates for web broadcasters set to begin in 2023. As
Billboard noted, they need to think about
Phonorecord IV, the next ruling for non-interactive streams, while
Phonorecord III, discussed above, is still being discussed in the courts. The streaming platforms’ reaction to
Phonorecord III helps point to a bigger issue now facing the CRB. The board’s early decisions affected a growing yet small part of industry revenue. Disagreement might arise, but ultimately folks would accept these mandated terms. However, now that streaming represents over eighty percent of industry revenue, the idea that the government sets rates for mechanical and performance rights must rankle these tech firms that’d prefer dealing directly with labels.
(An interesting 2017 proposal by Jody Dunitz
argued against the existence of mechanical royalties, characterizing them as a bizarre settlement between major record labels, publishers, and tech companies that sought to mask many other deeper issues in the space of properly collecting royalties.)
A few years ago, David Strickler, a current CRB judge,
told the Society for Economic Research that the panel needed more resources and information to make informed decisions. This remark reflects the observations made in a
paper by Samuel Meredith in the George Washing Law Review from the same year. Meredith claimed that the CRB, in its current state, isn’t resourced to even handle potential
legislation like the Fair Play Fair Pay Act, which would require radio to pay artists, not just songwriters. The CRB will not please everyone, but as a body tasked with making rulings that can have such wide ranging effects, it must be properly staffed and equipped to take on those responsibilities. Many concerns about digital music and payouts already could sit at the feet of a neutral arbiter; we just need to provide it more support to be able carry, and perhaps one day, expand its mission.
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