The music industry’s latest battle over songwriter streaming royalties in the U.S. is currently underway, and streaming services, publishers and songwriters are now weighing in on what they think the royalty rate should be. The process, determined through the oversight of a government-sanctioned court called the Copyright Royalty Board (CRB), sets one of the royalty types (called “mechanicals”) songwriters earn on streaming services for a five-year period.
Mechanicals make up roughly half of the money songwriters earn from streaming services. Given that the U.S. is one of the biggest, most lucrative markets in the world, the rates that get set in America are hugely important to the well-being of songwriters and music publishers locally and even in far-flung areas of the world.
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To start the process, streaming services, songwriters and publisher groups submitted their proposals for what they think the most appropriate rate would be in what’s called a “direct case.” On Oct. 5, the direct cases were submitted, and eventually, a few days later, the proposals were made available to the public as the CRB judges looked them over. Eventually, in spring 2027, the CRB will start a trial in order to determine the fairest rate possible based on what they’ve learned.
This proceeding, called Phonorecords V or “Phono V” (the five-year period of 2028-2032), is shaping up to be a particularly contentious one. Phono IV, the previous proceeding which dictated the rates from 2023-2027, was settled by the streaming services, publishers and songwriters in a peaceful, voluntary agreement before the CRB could even begin a trial on the matter. After the settlement was approved by the court, it seemed like a new period of relative peace between the players.
Then, overnight, Spotify and Amazon used the rules set in the Phono IV settlement to cut mechanical royalty payments to songwriters by about half. Spotify (and later Amazon) reclassified its popular Premium and Unlimited plans as a “bundle,” a special type of subscription which, according to the CRB, allows for a lower royalty rate to be paid for music. This discount on music royalties was designed so that the streaming service could feasibly pay for both the music rights and other rights required for the product in the bundle.
Prior to Spotify’s move, it was uncommon for a streaming service’s most popular offering to be a discounted bundle; typically, bundles were specialty offers to get new customers in the door with a good deal. The National Music Publishers Association (NMPA), the trade organization representing U.S. publishers, launched a multi-pronged campaign against Spotify over the issue, and the organization estimated in June that Spotify and Amazon’s moves have cost songwriters and music publishers about $500 million combined in lost royalty value since the changes took effect in Spring 2024.
To learn more about how the Copyright Royalty Board works, and what’s at stake for Phono V, read Billboard’s full explainer here. Below, Billboard summarizes each of the direct cases submitted by streaming services, publishers and songwriters.
To begin, here’s a breakdown of how the CRB rate formula works:
Step 1: Calculate the set percentage (the “headline rate”) of the streaming service’s revenue
Step 2: Figure out which is the bigger number — the result of step 1 or the lesser of the following two options:
- The amount the streaming services owe to labels (the “total content cost” or “TCC”)
- A minimum cost per subscriber (the “per subscriber minimum”)
Step 3: After the bigger number in step 2 is determined, figure out which is greater: the results of step 1 or step 2. Whatever is bigger ends up becoming what is called the “all-in” pool, or the total amount of royalties paid to publishers and songwriters by U.S. streaming services. That includes both the mechanicals and the performance royalties, the two types owed to songwriters and publishers. If you want to find out the amount of that all-in pool that’s specifically paid out for mechanical royalties, subtract the performance income.
Step 4: Determine which is bigger — the result of step 3 (just the mechanical pool, not the all-in pool) or the number that results from multiplying the streaming service’s total subscribers by a set figure. For reference, this number is currently set at 60 cents.
National Music Publishers’ Association (NMPA) and Nashville Songwriters Association International (NSAI)
The NMPA and NSAI tend to present a united front, and this time is no different as the two filed a joint statement. Their argument? Services should not receive rates from the CRB that are below what a free market negotiation would provide, and bundles need better regulation. The duo points to Spotify’s move to offer audiobooks in its premium tiers, thereby shifting its most popular plan from a standalone music service to a “bundled service,” a separate category with a lower U.S. mechanical royalty payout. They also flagged that Amazon did the same thing a few months later with its Audible audiobook service, which ultimately resulted in “sharply reduced” revenue for music there as well. “A maneuver that appears to lower one service’s royalty… will not stay with one service for long,” they warned. “The terms set in this proceeding must protect against the services’ continuing attempts to avoid royalty obligations over the next five years.”
Instead, the copyright owners propose a revised system that would be worked out as follows:
Step 1: Find the greater of the following options — 20% of revenue (the headline rate), 40% of total content cost (TCC), $2.40 per subscriber and $0.004 per play.
Step 2: Subtract performance royalties (subject to the mechanical pool being no less than 50% of Step 1).
If adopted, this would be a striking increase from the rates dictated in Phono IV, which includes a final headline rate of 15.35%.
Bernie Taupin, Music Artists Coalition (MAC), Songwriters Guild of America (SGA), Eight Mile Music Companies, Word Collections, George Johnson
A coalition of independent songwriters and musician rights groups gathered together to make their case for a stronger U.S. mechanical streaming rate. According to its proposal, the group asks for a “simple, straight forward” rate of $0.0030 per play of a stream, with cost-of-living adjustments made each year. The group also wants this rate to apply to premium or free (ad-supported) streams. Currently, free streams earn a lesser royalty, so this would be a seismic change if adopted. “The streaming mechanical rate formula is too complex and [songwriters] deserve transparency,” the group writes.
Spotify
The Swedish streaming service is asking for everything that happened in the Phono IV settlement (the rate for 2023-2027) to continue. The headline rate should stay at 15.35%, and the bundling definition should remain the same. “[The settlement] was the product of intensive, arm’s-length negotiations between sophisticated industry participants,” Spotify’s statement argues. “Each party retained the outside option of proceeding to a full evidentiary hearing before the Judges,” it continues, adding that the parties chose to settle in the end.
For more information on the Phono IV settlement, see here.
Apple Music
Apple argues that the Phono IV settlement should continue to be the benchmark for Phono V and that the headline rate should stay at 15.35%. According to the company, the existing framework has worked for the industry: publishers have continued to grow revenue, songwriters remain motivated to create music, services have invested in new features and consumers retain access to varied streaming options.
Amazon Music
Amazon Music is proposing the lowest rates of any streaming service. The company states that it would like to see the headline rate lowered from 15.35% (as per Phono IV) to 13.4% of revenue; while the total content cost rate should be lowered from 26.2% to 22.8% for free ad-supported services, and from 24.5% to 21.3% for bundles. It said there should be no mechanical floor for free, ad-supported tiers.
The company also wants to prevent the 1.5% monthly late fee from applying to “good faith” underpayments. Instead, it suggests interest or other remedies for those underpayments. Notably, Amazon Music has been late in paying rights holders in recent years, sources who work in music publishing tell Billboard.
Pandora
Pandora supports continuing most of the stipulations of the Phono IV settlement, including freezing the headline rate at 15.35%. “The modest changes…are simply clarifications or are narrowly tailored to address a handful of specific [points],” the direct statement reads. This includes addressing “certain unreasonable aspects” of the late fees and getting more “appropriate treatment” for a service that uses a song that is in the public domain. Specifically, Pandora wants to stop the current system for public domain songs, which reallocates the money those unprotected songs make back to other songwriters. “Instead,” Pandora argues, these songs’ royalties should “be promptly provided as a credit or refund” to the streaming service.
Late fees are another area of importance for Pandora, and a source in music publishing says the company has previously had to pay late fees for past-due payments. Currently, the rule is that Pandora (or another service) must pay a late fee of 1.5% per month for any payment owed to a songwriter that is past the due date.
Now, Pandora also wants to add an additional late fee specifically for a songwriter, or other royalty recipient, for any “overpayment” they receive from a streaming service. Essentially, Pandora wants to charge songwriters for getting paid too much by accident if they do not return that money promptly.
YouTube, owned by Google, is one of the most popular global platforms for music and music videos. The company asks for the headline rate to stick to 15.35% and wants to hold on to most of what the last settlement said. However, the company wants to clarify that YouTube Music, YouTube, and YouTube Premium are not included in these proceedings since they involve moving visuals and that there should be stronger and more favorable language around “allocation.”
“Google requests more explicit guidance in the regulations for allocation when a single service involves licensed activity and non-licensed activity,” the statement reads. The only offering YouTube has now that would be a “licensed activity,” or activities that fall within the remit of the CRB proceeding, is “static-image art tracks,” according to Google. Its other services fall outside of the scope of the CRB rate.
“The landscape of music streaming has dramatically changed in the last few years from one focused predominantly on music-only services to one that incorporates a multitude of content types into a single service, including audio books, audiovisual works (including those created by users), and podcasts,” says the direct statement. So, Google argues, some clarification around allocation could be helpful not just for Google, but other services as well.
In addition, Google asks that when a service mistakenly pays the MLC for works covered by a direct license (basically, something not handled by the CRB), Google receive credits to prevent duplicate royalty payments.
