The United States Copyright Royalty Board (CRB) has directed major record labels and music publishing groups to answer objections and a set of 10 specific questions about their proposed Phonorecords V settlement, which would set mechanical rates for physical formats, permanent downloads, ringtones and bundles from 2028 through 2032.
Chief Copyright Royalty Judge Trevor Jefferson issued the order requiring the settling parties, including the American Association of Independent Music (A2IM), the Music Artists Coalition, the National Music Publishers’ Association (NMPA) and the Nashville Songwriters Association International (NSAI), to respond to objections and standalone questions. Those parties moved in late June to finalize the proposed settlement.
The terms have drawn objections 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). The objections include criticism of a proposed reversion to a 12-cent reset rate, down from the current 13.1 cents, and a ringtone-rate freeze.
Objections prompt CRB request#
The CRB cited the SCL’s conflict-of-interest concerns, the SGA’s and Word Collections’ arguments on the rate reset and inflation data, and Eight Mile Style’s criticism of the ringtone-rate freeze. The settling parties have until October 2 to formally address the objections and submit answers to 10 standalone questions.
The first question, referencing the Consumer Price Index for All Urban Consumers (CPI-U), asks:
“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?”
Other questions from one or more judges ask the settling parties to clarify why the 12-cent rate is “still being applied”; whether cost-of-living adjustment factors account for Consumer Price Index for All Urban Consumers (CPI-U) shifts during the highly inflationary 2021-22 period; what the base rate would be if those shifts were included; 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.”
If ownership overlap exists among participants, the order says they 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.”
The ninth question asks in part:
“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 final question addresses the objectors’ participation in settlement talks. Word Collections and the SGA previously said their contact with the settling parties was “extremely limited,” despite having “attempted to convey on numerous occasions” their willingness to engage in constructive Phonorecords V discussions.
Proceeding split and stayed#
The CRB also bifurcated the current Phonorecords V proceeding from its streaming counterpart and stayed the process for physical, download and ringtone rates “until further notice.”
Rick Carnes, president of the Songwriters Guild of America, said the organization welcomed the order and reiterated its goal of 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.”
