Determination of Royalty Rates and Terms for Making and Distributing Phonorecords

Phonorecords III

October 10, 2023

By Julie C. Hancock

In a significant victory for songwriters and composers, the Copyright Royalty Board (CRB) finally determined royalty rates for the compulsory license to use musical works in making and distributing phonorecords. Phonorecords refer to any sound recording on physical formats like CDs or digital media like MP3s that you can play, copy, or share using a device. 

This decision ensures that songwriters will finally receive back pay for royalties owed to them from 2018 to 2022. Earlier this year, the CRB confirmed a mechanical royalty rate increase from 10.5% to 15.1% for the Phonorecords III period. Still, the CRB officially completed the process with the recent publication of the determination.

Songwriters can anticipate receiving their owed royalties by February 2024. Digital streaming services should expect to pay as much as $200 million back royalties to songwriters and publishers for Phonorecords III. The Mechanical Licensing Collective will handle royalties incurred in 2021 and 2022, while digital platforms will be responsible for proper payments from 2018 to 2020, possibly through third-party vendors.

Notably, the U.S. Copyright Office, Congress, and industry stakeholders like the Recording Academy will oversee and ensure these payments' proper and timely distribution. This decision comes after a prolonged legal process involving key appeals from streaming services seeking limitations on royalties based on total content cost (TCC) and reintroducing a rate ceiling into the formula. Although the full document remains confidential, an appendix detailing the regulations is available to the public.

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