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Songwriters And Publishers Are In For A $400 Million Payout After Streaming Royalty Decision

As reported by Music Business Worldwide, in a significant development for the music industry, songwriters and music publishers are poised to receive a substantial increase in their royalty earnings for the 2021-2022 period, totaling nearly $400 million. This windfall is the result of a final ruling on streaming royalty rates, which was long-awaited and follows a protracted battle between creators and streaming platforms over equitable compensation.

The source of this financial boost is the Copyright Royalty Board’s Phonorecord III determination, which was made in August 2023. This decision led to the establishment of higher royalty rates for music streamed during the 2021-2022 period.

This ruling indicates that major streaming platforms like Spotify, Amazon Music, YouTube, and Pandora underpaid songwriters and publishers by a staggering $419.2 million. This is according to information provided by the Mechanical Licensing Collective (MLC), which underscores the extent of underpayments during the 2021-2022 period.

The total amount includes $281 million in mechanical royalties and $137.8 million in performance royalties. The discrepancy arose due to the final royalty rates being higher than the interim rates that were in use during a four-year dispute between publishers and streamers.

The MLC was established as a result of the Music Modernization Act of 2018. It is the only entity authorized to collect and distribute mechanical royalties due for the reproduction and distribution of musical works.

The MLC anticipates that the total payout will increase by an additional $10-$15 million as more reports from streaming services come in.

NMPA President & CEO David Israelite, said, “We are extremely pleased that songwriters and music publishers finally will receive the over $400 million they are owed in mechanical and performance royalties from the 2021-2022 period.”

“Our appellate win upholding the rate increase we achieved in 2018 will finally net music creators and copyright owners the windfall they should have received years ago. The fact that the majority of this adjustment will be distributed by the MLC in a completely transparent and expedient way is another massive benefit of the Music Modernization Act (MMA) and while we would have preferred it be paid sooner, this is a welcome and critical lift now.”

However, while the news of underpayments has dominated the headlines, it should be noted that streaming services were found to have overpaid publishers for mechanical royalties during the previous "historical unmatched period" (2018-2020) by approximately $28.8 million. This reduces the total bonus owed to creators to around $390.4 million.

As of Friday, February 23, the MLC reported that it has received adjustment reports from 14 of the 21 streaming companies that provided cumulative account statements to the MLC for unmatched usage from the portion of the Phono III rate period before the blanket license went into effect (i.e., before 2021).

According to the breakdown, Amazon Music overpaid publishers by $7.4 million for mechanical royalties, while Apple Music overpaid by $17.4 million. YouTube Music overpaid by $2.8 million, and Spotify overpaid by $3.7 million.

The MLC clarified that while some parts of the final rates are similar to the original rates, other parts are different.

“Due to those differences some DSPs reported adjustments that reduced the amount of historical unmatched royalties previously transferred to The MLC,” it said.

These developments come at a time of significant changes at the MLC. The organization is currently undergoing its first-ever re-designation process, which involves a five-year review of its operations and those of the Digital Licensee Coordinator (DLC) by the US Copyright Office.

In addition, the MLC has recently announced plans to conduct audits of streaming services to ensure the accuracy of reported and paid royalties. In January, it issued notices of intent to conduct audits of streaming platforms that began operating under the compulsory blanket license administered by the MLC starting in 2021.

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