Washington, D.C.’s James Madison Memorial Building, which houses the U.S. Copyright Office. Photo Credit: UpstateNYer

After receiving “substantive objections and comments” concerning the proposed Phonorecords V settlement, the Copyright Royalty Board (CRB) has ordered the involved parties to provide a significant amount of “additional information.”

Chief Copyright Royalty Judge Trevor Jefferson recently issued that noteworthy order, calling on the major labels, the A2IM, the Music Artists Coalition, the NMPA, and the NSAI to respond to objections and standalone questions about their Phono V agreement.

Those parties in late June moved to finalize said proposed Phono V settlement, which, if approved, would set mechanical rates for physical formats, permanent downloads, ringtones, and bundles between 2028 and 2032.

But as many already know from our exclusive coverage, the terms at hand elicited considerable pushback – including from Word Collections, the Songwriters Guild of America (SGA), activist songwriter George Johnson, Eminem publisher Eight Mile Style, and the Society of Composers & Lyricists (SCL).

And it’s this pushback, pertaining to the “demonstrably unreasonable” proposed Phono V settlement’s reversion to a 12-cent “reset rate” (down from 13.1 cents at present) and more, that prompted the CRB to request further information.

To be sure, “one or more of the Judges has decided it is necessary to obtain additional information, mainly based on” three “substantive objections and comments,” per Judge Jefferson’s order.

Here, the CRB pointed to the SCL’s concerns about a conflict of interest between the settling parties; the SGA’s and Word Collections’ above-highlighted rate-reset and inflation-data arguments; and Eight Mile’s criticism of the ringtone-rate freeze.

Now, the majors, the NMPA, the NSAI, and the other settling entities have until October 2nd to formally address these objections. Just as – or perhaps more – interestingly, the CRB ordered the same parties to submit “specific enumerated answers” to 10 standalone questions.

The first five questions seek clarification about Phono V’s base rate as well as underlying calculation details.

“Does the settlement include a mechanical base rate of 12 cents? If so, why is it reasonable for the mechanical floor rate to not track increases in the CPI-U?” the clear-cut opening query reads.

Additionally, “one or more of the Judges” asked the settling parties to clarify, if applicable, why this 12-cent rate is “still being applied”; whether the underlying cost-of-living adjustment factors for CPI shifts during the highly inflationary 2021-22 window; what the base rate would be if said shifts were incorporated into the calculations; and “why it would be economically accurate to omit the CPI-U increases for 2021 and 2022 in the settlement rates for the Phonorecords V period.”

Without jumping to conclusions based on the questions’ tone and substance, it seems safe to describe the inquiries as indicative of possibly far-reaching Phono V settlement scrutiny from the CRB.

Furthermore, the remaining five questions cover the proposed frozen ringtone rate and then, echoing Phono IV findings, the “common or overlapping ownership” among the proceeding’s publisher and label participants.

And if there is ownership overlap, the relevant participants should “describe that relationship in a manner that reflects the extent of either separateness or combination between them sufficient to demonstrate that the settlement agreement was nonetheless an arm’s-length transaction,” per the order.

“Are there documents, including negotiation documents, emails, or other materials, evidencing the corporate separateness or common ownership across the Movants that the Movants would voluntarily provide to the Judges for their review that would demonstrate the settlement reflects an arm’s-length negotiation between willing sellers (licensors) and willing buyers (licensees)?” the ninth question reads in part.

Finally, the last question centers on the settlement-talks participation (or lack thereof) of the objectors; previously, Word Collections and the SGA, despite having “attempted to convey on numerous occasions” their willingness to engage in constructive Phono V discussions, described their contact with the settling parties as “extremely limited.”

With that, all eyes are on the settling entities’ responses; as mentioned, an October 2nd reply deadline is in place.

More immediately, the CRB also bifurcated the current Phono V proceeding from its streaming counterpart and stayed the process (regarding physical, download, and ringtone rates, that is) “until further notice.”

In a statement, Songwriters Guild of America President Rick Carnes applauded the CRB’s order and reiterated his organization’s desire to achieve a deal benefiting “all parties.”

“We are simply looking for a deal negotiated at arm’s length that benefits all parties, including America’s independent music creators, who deserve transparency, clarity, and a strong voice in negotiating fair rates of remuneration for the use of their copyrighted works,” Carnes said. “We now have great hope that the CRB judges share that vision in the Phonorecords V proceeding, and have taken action to better ensure such equitable results.”