Bernie Taupin, who’s backed a new proposal for “a simple mechanical royalty rate of $0.0030 for each play of an interactive stream or limited download in 2028.” Photo Credit: Shawn Miller

Is it time to put overly complex (and easily exploitable) mechanical rate formulas in the rearview? Organizations including the Songwriters Guild of America (SGA) believe so, and they’re now backing a Phonorecords V proposal that would swap convoluted calculations for a flat per-stream rate as well as annual inflation adjustments.

Said proposal was shared with DMN and hit the appropriate Copyright Royalty Board (CRB) docket moments ago. As many know from our exclusive coverage, Phono V’s Subpart B rate-setting proceeding, covering physical formats, permanent downloads, and ringtones, is in full swing.

But the Subpart C rate-setting process, pertaining to statutory mechanical rates for on-demand streaming in the U.S. across the same five-year stretch (2028-2032), is just beginning to ramp up. Furthermore, the stage has long been set for a potentially contentious showdown.

In unilaterally reclassifying the vast majority of its subscriptions as audiobook-music “bundles,” Spotify took advantage of the aforesaid easy-to-exploit Phono IV terms. DMN Pro broke down the resulting rate-calculation consequences in detail; the short version is that the bundling blowout fueled a material mechanicals decrease and a Mechanical Licensing Collective lawsuit.

And while Spotify scored a victory in said suit, the ongoing action is factoring into the Phono V proceedings as well. Last month, the National Music Publishers’ Association (NMPA) and the Nashville Songwriters Association International (NSAI) entreated the CRB to issue a subpoena covering documents from the case. Unsurprisingly, Spotify and others pushed back against the request.

Back to the flat-rate Subpart C proposal, then, among those supporting the framework are Rock Hall of Famer (and Music Artists Coalition member) Bernie Taupin; the respective heads of the aforementioned SGA as well as the Society of Composers and Lyricists (SCL) and Music Creators North America (MCNA); Eminem publisher Eight Mile Style’s owner, Joel Martin; Word Collections and TuneCore founder Jeff Price; and copyright active George Johnson.

With distinct written testimonies attributable to each of the professionals (save a joint filing from Rick Carnes, Ashley Irwin, and Eddie Schwartz, who lead the SGA, the SCL, and the MCNA, respectively), the detailed statements cover a number of bases and unique angles.

But in general, the witnesses are adamant that the time is right to shelve multifaceted mechanical-rate calculations for a per-stream rate of $0.0030 across the board in 2028, followed by annual inflation adjustments through the remainder of the half-decade stretch.

Per the “Rocket Man” and “We Built This City” writer Taupin, the straightforward approach would afford songwriters “inflation protection” and prevent similar royalty-reducing bundling shenanigans down the line.

“When songs are streamed, songwriters deserve clarity on how that stream shows up on their royalty statements,” the Songwriters Hall of Fame inductee continued. “Multi-step calculations, prongs, subscription tiers – all of this obfuscates what our songs earn. Surely, a simpler and transparent system with a meaningful per-play rate that adjusts for inflation each year is not only possible but fair.”

Meanwhile, Carnes, Irwin, and Schwartz criticized the current “system governing the setting of royalty rates for the digital streaming of music” as “broken” – with the present formulas having allegedly enabled “multinational corporate entities to pay U.S. creators micro-cents on the dollar for the streamed use of our musical works while those same distributors make billions.”

“Without per stream minimum royalties not subject to reductions,” they concluded, “and with separation of performance royalties from streamed mechanical licensing, we fear being the final generation of American professional music authors able to sustain ourselves by the royalties we earn. And that would not just be unfair. It would be an American economic and cultural calamity.”

Similarly, Eight Mile’s Martin emphasized that “[f]or nearly twenty years, streaming mechanical royalties have been calculated according to a complex formula that accommodates the business objectives of some of the largest companies in the world.

“The formula does not reflect the true value of songs that built and sustain the streaming platforms,” he proceeded.

Price, for his part, underscored similar points while also calling out the push to effectively reduce (or at least freeze) mechanicals “in an industry that’s generating more revenue off of music than at any point in history.” Additionally, the TuneCore founder drew attention to the majors’ overlapping label-publisher ownership and the resulting potential for conflicts of interest.

“A mechanical royalty is income to a publisher but an expense to a record company. When both sit underneath the same corporate parent, those economic interests conflict,” he wrote.

“Without a song there is no music,” Price proceeded. “Yet songwriters are still before a federal tribunal arguing over fractions of pennies and whether the mechanical royalty should merely retain its value against inflation while record labels and technology companies are hitting historic revenue highs and stock market caps. That is the disconnect I want the Judges to consider.”

Finally, Johnson called for the mandatory implementation of a permanent-download purchase option on DSPs to help offset the phonorecords sales decline stemming from their widespread adoption.

“Precisely because interactive streaming has already taken the sales market, the one effective way to promote phonorecord sales is to offer the sale on the same service that displaced it,” he penned.

Two closing notes: This is, of course, an overview of the in-depth testimonies; Price and Johnson in particular covered several other worthwhile angles, which will factor into our forthcoming coverage as the proceeding continues.

Second, we needn’t wait to learn how the on-demand services feel about the proposal. In a statement that was emailed to DMN, the Digital Media Association (DIMA), which reps the likes of Spotify, Apple Music, and Amazon Music, went ahead and recapped the Phono V action and reiterated stateside publishing revenue’s growth since 2022.

Here the full statement that DIMA emailed DMN about the newly submitted Phono V proposals and comments:

 “Yesterday, the parties to the Phonorecords V proceeding submitted their written testimony and rate proposals to the Copyright Royalty Board. In this proceeding, which takes place every five years, the CRB will determine the mechanical royalty rates paid by music streaming services in the United States for the years 2028-2032.

In the last proceeding, which concluded in 2022, publishers and DSPs reached a settlement, securing rates for 2023-2027 and laying the groundwork for future growth. According to the NMPA, U.S. music publishing revenues have grown more than 30% since 2022, from $5.6 billion to $7.3 billion, outpacing the growth of recorded music, and music streaming has continued to innovate and thrive.

DIMA joins its member companies in looking forward to a timely resolution of this proceeding, and to continue building on the success of streaming for rights owners, music creators, and DSPs alike.”