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Songwriters Struggle to Be Heard in Royalty Rate-Setting Process

July 14, 2022, 9:15 AM

Rick Carnes, a songwriter and president of the Songwriters Guild of America, realized in 2016 that he would take home just $16,000 in royalties if he wrote a song that sold 1 million records—an amount that would qualify him for food stamps.

Carnes, who has written songs recorded by artists including Garth Brooks and Dean Martin, said he would ask people at workshops, “How many of you would be willing to settle on getting paid a cut on a million-selling album once a year, every year for the rest of your life?” Every hand in the room would go up.

“And then I said, ‘Now, how many of you would be willing to live on food stamps and government subsidies for the rest of your life?’ Every hand went down,” he said. “Don’t kid yourself that these are mutually exclusive groups.”

Carnes, alongside others, is fighting for a higher increase in mechanical royalty rates that would boost the amounts songwriters make from physical phonorecords—CDs and vinyl records—as well as permanent digital downloads. He says a proposed increase of more than 30% isn’t enough to keep songwriters out of poverty.

Attorneys point to the Copyright Royalty Board’s costs and procedures as excluding songwriters from pulling their weight and extracting more from the ongoing rate-setting proceeding.

Under the most recent proposal, made in May, royalties for mechanical licenses would increase for the first time in 16 years, to 12 cents per track from 9.1 cents, with annual adjustments for inflation. The proposed 2.9-cent increase would be the first since 2006. It would take effect Jan. 1, 2023, and run through Dec. 31, 2027.

Songwriter George Johnson, the only individual songwriter participant in the proceeding, opposed the 12-cent proposal and is hoping that the CRB will as well. He said the agreement is unfair to songwriters such as himself, who are struggling to profit from their work.

“Everyone’s making money off the backs of songwriters, except for songwriters.”

The Copyright Royalty Board didn’t respond to a request for comment.

The 12-Cent Proposal

Under federal law, the three judges on the CRB set mechanical royalty rates every five years through an adversarial process pitting the various parts of the music industry against each other. While the filing fee to participate is $150, legal costs, expert witness fees, discovery, and other costs can mount quickly.

Johnson’s opposition to the CRB’s original proposal, which would have maintained the 9.1-cent rate, prompted the board to reject it, a move many attorneys considered surprising.

The rejection led to the compromise 12-cent proposal by the National Music Publishers’ Association Inc., Nashville Songwriters Association International, and record company participants.

Johnson’s continued opposition is unlikely to stop the CRB from adopting the 12-cent rate, though, according to attorneys who have participated in or been following the proceedings.

“I think it’s significant that he objected, but if everyone else is in agreement, I don’t think it would stop them from adopting it if they believe the increase to 12 cents makes the settlement reasonable,” said Jacqueline Charlesworth, founder and principal at Charlesworth Law and former general counsel and associate register of copyrights of the US Copyright Office.

Though Johnson is the only songwriter participating in and opposing the settlement, others agree with his stance that the rate should be higher. The high cost of participation in CRB proceedings, however, serves as a barrier.

“The real problem here, in my opinion, is that songwriters can’t afford to participate meaningfully on their own in these proceedings,” said Charlesworth, who said that the cost can work out to millions of dollars for each participant. “It’s an access-to-justice problem.”

“If inclusiveness and getting the broadest possible exposure to ideas and suggestions is the idea of governmental oversight before decisions are made, it makes utterly no sense to set the bar so high financially,” said Charles Sanders, an adjunct professor at NYU’s Steinhardt School of Culture, Education, and Human Development who serves as outside counsel for the Songwriters Guild of America.

In the absence of opposition by multiple participants, the odds of the CRB adopting the new proposal are even greater.

“I think there’s almost a 100% chance they’re going to adopt something along these lines,” said attorney Chris Castle, founder of Christian Castle Attorneys, who added that the board is biased towards accepting voluntary, negotiated settlements.

“Justice overpriced is justice denied,” said Carnes. “And that’s exactly what we’re dealing with because we’ve been priced out of this. And because we’ve been priced out of this, we’ll never be able to make enough money to get back in.”

Focus on Streaming Services

Though some are dissatisfied with the settlement, David Israelite, president of NMPA, believes it is reasonable.

“We initially were prepared to settle for less than that,” he said, adding that it was a strategic decision, in the face of opposition from record labels, to accept a smaller increase on the physical royalties to ensure a bigger win on streaming rates. If “we were fighting over physical product rates, that would divert us from the attention on the streaming rates, which we believe today, are nine times more important.”

Israelite said that the strategy to not fight a “two-front” war was a successful one. The CRB July 1 restored an increase to streaming royalties, incrementally pushing the rate for the years 2018 through 2022 to 15.1% of streaming revenue, from the past rate of 10.5%. A proceeding to set streaming rates for 2023-2027 is set to begin later this year.

Israelite called that decision a victory for songwriters and music publishers. “Streaming revenue is the most important source of revenue we have by far,” he said.

Nevertheless, attorneys and many songwriters are satisfied with the 12-cent proposal and optimistic about future rate-setting proceedings before the CRB.

Castle said the proceeding demonstrates two things. “One is the industry can come together and reach an agreement,” he said.

“The other thing it shows is that in the future, we need to have more people involved in these negotiations.”

To contact the reporter on this story: Riddhi Setty in Washington at rsetty@bloombergindustry.com

To contact the editors responsible for this story: Adam M. Taylor at ataylor@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com