Sometimes, just standing still can be considered progress. Sometimes not losing is winning. After last week’s debacle in the stock market, would you have felt pretty good if you wound up even? In times like these, damage control is not a bad strategy.
That said we could join with the National Music Publishers Association and its member publishers, as well as songwriters around the country in celebrating what the NMPA calls “an important milestone for the music industry”. Admittedly, it’s not quite the victory that some might have been hoping for. But when the Copyright Tribunal voted on Thursday to leave the mechanical royalty rate at 9.1 cents, and to apply that rate to permanent digital downloads, the creative community heaved a sigh of relief. It may not be the 15 cents the NMPA was asking for (which nobody thought we’d get), but it’s not a rate reduction either, which is what organizations like Digital Media Association (DMA) who represent clients like Apple, Amazon, and Pandora) had been advocating. With the ground shifting relentlessly beneath our feet, we’re perfectly happy just standing still.
Actually, music publishers and songwriters did better than standing still. While the general mechanical rate remains the same, that rate has now clearly been extended to all services that offer music to download. The gray area is gone. Everyone pays, and best of all, they pay retroactive to 2001.
On the ring tone side of things, we may have done better. Here we got a big raise. Instead of the 9-10 cents that is more or less the standard today (although in fact, there are no standards), ring tones are now to be licensed at 24 cents. Given that on many pop songs, the ring tones are outselling the album, this is a huge bonanza for writers and publishers.
A quick review might be in order:
“Mechanical” royalties are payments made by the record label or whoever is selling the music, to the songwriters and publishers of the song. Mechanicals are paid on any “mechanical reproduction” of the sound recording– that means CDs, ring tones, digital downloads, and any other product we can manage to sell.
Services that offer streaming or subscription services are not covered by this specific ruling, as those are not considered “mechanical” reproductions. However, it does appear that the RIAA and the NMPA are also close to an agreement with the DMA on those issues– with everyone agreeing on a royalty rate tied to a percentage of revenue generated by the service.
Here’s what it all comes down to:
Money. A major windfall of money to be distributed by Harry Fox Agency (which quickly announced that they were “ready to implement” the new rates (I’ll just bet they are), and to pay out the royalties that they’ve been collecting since 2001. That means a big bundle of money going out to publishers over the next 12-18 months, who will then pass it on to songwriters. As bad as our business has been over the past 3 years, the truth is that some of the gloom and doom was an illusion. Music was still being sold and listened to– we just weren’t being paid for it. Now we will be, and that’s going to make everyone on the creative side feel much more optimistic about the future of the music industry.
On the other side, this will clearly increase pressure on record labels, who were hoping for some relief on the mechanical royalties that they have been paying– as well as those royalties that they often have NOT been paying, like ring tone income. Record companies have never been very happy about paying the folks who write or publish the songs, and now they get to do even more of it. The bright side for the record companies is that they will now have a new income stream to help their bottom line, once they begin to see some of the “streaming and subscription” money now on its way.
The big danger in this decision is the threat it will pose to many digital services. I-Tunes has already threatened that it may require a significant price increase for the single song download. But I-Tunes is the strongest player on the team. Many digital services, as well as ring tone companies, subscription services, and streaming sites are barely surviving at present. Few of them are solidly profitable. Faced with having to pay royalties on the music that they’re using, many may not be able to survive.
While I have no great love of companies that want to use music as a fundamental part of their platform but don’t want to pay the people that make the songs, we do have to acknowledge that the music industry needs these innovative companies who are desperately trying to figure out how to sell music in our new digital age. We need at least some of these companies to thrive, and we need new people to continue to try fresh, exciting music-based ideas. Overall, 9.1 cents seems fair. 15 cents would have likely closed down many of these fledgling companies, in some cases before we ever found out whether their business model was effective.
Someone said that in a democracy, the best solution is usually the one that leaves all parties feeling less than satisfied. Publishers and songwriters didn’t exactly hit the jackpot with this ruling, but we did take a step to fairness. That’s probably the best we could expect– and probably the best thing for the overall industry. A quick shout out of congratulations to the NMPA’s man of the hour, David Israelite, who was the music publishers’ primary spokesman and negotiator on this issue, and by all accounts, did an amazing job. It’s a curious phenomenon that in most cases, the lobbyists who are constantly courting lawmakers are generally one hundred times smarter and shrewder than the bumbling politicians with whom they’re dealing. Don’t know why that is. But David Israelite is as sharp and savvy a representative as the music industry has ever had. If only he were running a record company…
Really enjoyed hearing your comments about last week’s blog on “product placement” in songs. There was some very insightful stuff that came from the wide variety of people that watch this space each week. Thanks so much for weighing in, and for supporting the blog!! Keep the feedback going…
