Photo Credit: Thibault Penin
Ahead of what could prove a dragged-out rate-setting clash, DSPs including Spotify, Apple Music, Amazon Music, and Qobuz have responded to the newly submitted Phonorecords V mechanical rate proposal.
We exclusively broke down that proposal yesterday, when the Songwriters Guild of America, Word Collections, and several others formally called for a flat mechanical rate of $0.003 per on-demand stream during 2028 with annual inflation adjustments to follow.
The proposal, which would make for a dramatically simpler system in part by preventing royalty-reducing “bundling” shenanigans, didn’t arrive out of left field. As many know, Spotify reclassified the vast majority of its stateside subscriptions as bundles, thereby reaping massive mechanicals savings.
Against this backdrop, Spotify’s subsequent direct deals aside, the possibility of another years-long rate-setting showdown has been looming large for some time. Back in 2024, for instance, National Music Publishers’ Association (NMPA) head David Israelite indicated that Spotify “should go ahead and block your calendar for that trial,” with the DSP having “lost the ability to enter into good-faith negotiations with us.”
And it was only earlier this year that the NMPA pointed to almost $500 million in axed mechanicals as a result of Spotify’s bundling craze. Throw in noticeable (albeit less aggressive) bundling reclassifications at Amazon Music and Apple Music, and the stage may well be set for a Phono V showdown.
While that’s still true, leading DSPs opted to strike a civil tone in a statement released via their trade body, the Digital Media Association (DIMA).
Publishing revenue has risen substantially in recent years, and notwithstanding their differences, the involved parties should huddle together and reach an agreement as opposed to locking horns for years to come, DIMA president and CEO Graham Davies appeared to relay in more words.
“Yesterday, the parties to the Phonorecords V proceeding submitted their written testimony and rate proposals to the Copyright Royalty Board,” Davies stated. “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,” he finished.
Beneath the surface, the remarks’ emphasis on publishing’s growth, not how the revenue stacks up against that of recorded music, is telling.
So is the conspicuous absence of any comments whatsoever concerning the substance of the Phono V proposal, which, to put it mildly, would represent a significant shift from the current model.
Though DIMA itself opted against weighing in on the actual proposal text, DSPs themselves submitted all manner of written statements to the CRB. Also brewing is a sub-dispute over the NMPA’s aggressive attempt to subpoena pertinent documents from the Mechanical Licensing Collective v. Spotify legal battle.
Put differently, depending on one’s perspective, the rate-setting proceeding might have already transformed into an all-out showdown, and it’ll be worth closely tracking the approaching weeks’ and months’ Phono V submissions.