A Win for Songwriters – Mechanical Royalties Rise

On January 29, 2018, the Copyright Royalty Board announced the new royalty rates and terms for the use of musical works in the making and distributing of phonorecords. The Initial Determination of Royalty Rates and Terms issued by the Copyright Royalty Judges determined that from 2018 through 2002, licensees shall pay mechanical royalties, pursuant to Section 115 of the U.S. Copyright Act, whichever is the greater amount of:

2018 – 11.4% of revenue or 22% of total content cots
2019 – 12.3% of revenue or 23.1% of total content cost
2020 – 13.3% of revenue or 24.1% of total content cost
2021 – 14.2% of revenue or 25.2: of total content cost
2022 – 15.1% of revenue or 26.2% of total content cost

Once confidential information has been redacted from the Initial Determination, the Copyright Royalty Judges will disseminate and post a public version along with the final regulations. The same is scheduled to occur once the Register of Copyright completes a statutory review and the Librarian of Congress approves the Final Determination. Additional details are available at https://www.crb.gov/.

The new rates account for a significant increase of mechanical royalties paid to U.S. songwriters over the next five years. In fact, it is the largest rate increase in Copyright Royalty Board history! In addition, the Total Content Cost (“TCC”) cap has been removed with the TCC being increased so as to provide balance between the record labels and publishers. According to the National Music Publishers Association (“NMPA”) these changes “will give publishers the benefit of a true percentage of what labels are able to negotiate in the free market, resulting in significantly higher royalty rates for songwriters.” Moreover, the Copyright Royalty Board granted a late fee that will force digital music services to timely pay songwriters or be subject to penalty for failing to do so. In a market currently driven by interactive streaming, the new mechanical royalty rate scenario is likely the best it has ever been for songwriters. The decision to increase rates derives years of advocacy and is a huge win for music creators.

By: Michelle M. Wahl, Esq.

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Michelle is a Partner at Swanson, Martin & Bell, LLP and is licensed in Illinois and Indiana state and federal courts. With a Masters of Law in Intellectual Property, Michelle is the Vice Chair of the firm’s Entertainment and Media Practice Group and a member of the firm’s Intellectual Property Litigation and Transactional Services Practice Group. Her copyright and trademark practice focuses on intellectual property prosecution and related transactions, including performing trademark availability searches and providing advisory opinions, as well as preparing and filing trademark applications with the United States Patent and Trademark Office, and copyright registrations with the United States Copyright Office. Michelle also assists with the oversight of the firm’s extensive trademark docket and conducts required monitoring and maintenance of clients’ trademark portfolios, as well as provides clients with corporate counseling and innovative corporate solutions to address their respective needs.

Michelle further provides comprehensive representation in the drafting, negotiating and executing of various entertainment-related contracts and licenses, including but not limited to band member agreements, artist management agreements, session player agreements, performance agreements, sound engineer agreements, recording and personal services agreements, publishing agreements and licensing agreements. As a former artist manager, she has implemented many facets of national and regional tours, assembled benefit and charity concerts, communicated with various industry personnel, facilitated radio and internet publicity campaigns, arranged radio, print and internet interviews, and assisted in the development of press kits and websites promoting local talent. Michelle has also guest lectured on entertainment and intellectual property-related topics at The John Marshall Law School, DePaul University College of Law, Chicago-Kent College of Law and Azusa Pacific University (CA), as well as served as a panelist on various other entertainment-related continuing legal education courses. Michelle is an author and editor of the Litigation and Industry Updates Column of the ABA’s Entertainment & Sports Lawyers Journal and has also had numerous articles published by the Chicago Music Guide.

In addition, Michelle serves as Chair of Swanson Martin & Bell, LLP’s Community Service/Pro Bono Committee and proudly volunteers her time as President of the Associate Board and as a pro bono attorney to Lawyers for the Creative Arts, a non-profit organization that provides free legal services to eligible clients in all areas of the arts. She also currently serves as Events Chair for the Chicago Chapter of Women in Music, a non-for-profit organization dedicated to fostering equality in the music industry through the support and advancement of women. She recently served as Chair of the Young Lawyers Division for the Illinois Association of Defense Trial Counsel, where she was recognized as the Rising Star recipient and received a Meritorious Service Award and President’s Commendation.

DISCLAIMER: The information contained in these articles constitutes general information and guidance and shall not be construed as legal advice applicable to or provided for any particular person or entity, and shall not be deemed to create an attorney-client relationship between Ms. Wahl and anyone who elects to read and/or rely, to any extent, on the material provided herein. In that respect, Ms. Wahl hereby expressly and specifically disclaims any such legal relationship, but encourages any person or entity seeking a legal advocate pertaining to the issues addressed and discussed herein to contact her directly for further information. Ms. Wahl may be reached at Swanson, Martin & Bell, LLP (330 N. Wabash, Suite 3300, Chicago, IL 60611 or via telephone at her direct line: (312) 222-8585 or e-mail at: mwahl@smbtrials.com.