The Next Battle Over Songwriter Streaming Royalties Has Begun. Don’t Expect a Quick Fight
Billboard ·
The Copyright Royalty Board proceedings are underway once again, and the stakes are high for songwriters. Here’s how it works.
There’s an important type of royalty owed to songwriters in the United States that operates differently than any other, and the music industry’s latest battle over it began on Monday (Oct. 5). Don’t expect the fight to be a short one.
The royalty, called a “mechanical,” is owed to musicmakers when their songs are reproduced into a different medium. The term dates back to the days before recorded music existed, when songs were reproduced onto a cylindrical roll for a player piano to deliver music on demand.
Though the music industry is now long past the point where using the term “mechanicals” makes sense, it nevertheless stuck. Today, a mechanical royalty can refer to the mechanical reproduction of a song onto a physical object like vinyl records, cassettes and CDs, or the digital reproduction of a song on streaming services or digital stores like iTunes.
The United States is the only country in the world that regulates this royalty type in this way, much to the chagrin of just about everyone involved — from music publishers to songwriters to streaming services and more. Everywhere else, these rates are determined by free market negotiations between the company paying the royalty and the company or person receiving it. The National Music Publishers’ Association (NMPA), the trade body for U.S. music publishers and a major player in these proceedings, has long argued for the abolishment of this practice — even going so far as to send a letter to Judiciary Committee leadership in both the U.S. House of Representatives and the Senate in 2024 asking for an overhaul of the system.
Every five years, this royalty is reconsidered, and the next go-round begins now. The stakes of this little-understood review, which sits before a trio of judges known as the “copyright royalty board” (CRB), are high. Whatever they determine will set the U.S. mechanical rates for sales and streaming from 2028-2032.
This new five-year period has been given the name “Phonorecords V,” or “Phono V,” which refers to the fact that this is the fifth five-year period the CRB has gone through. The sales and streaming parts of Phono V are separated into two distinct processes. The sales side of Phono V has been in progress for months, but the streaming side — which is currently the most popular way to listen to music by far, and thus the most important aspect of the CRB today — begins on Monday.
Below, Billboard breaks down the latest Copyright Royalty Board battle and what readers should watch out for.
What’s at stake?
In the U.S., mechanical royalties make up around half of the money paid to music publishers and songwriters for streams of their on-demand audio content. The other half is what’s called a “performance royalty,” which is determined through its own complex process.
Given that the rates are only reconsidered every five years, the CRB proceedings are important to get right, and the music and streaming industries spend a great deal of money and resources to ensure they make the best case for their positions. At midnight, all the participants — including each streaming service, the music publishers and some songwriter representatives — will submit documents detailing what they’d ideally like the rate to be. This is called, in CRB parlance, filing a “direct case.”
Streaming services tend to ask the CRB for rates that stay the same or are even more favorable to them (meaning a lower rate paid to songwriters and publishers), and publishers and songwriters tend to ask for the rates to be raised.
How do the “direct cases” work?
The direct cases are mandatory for anyone who wants to take part in Phono V, and all of the direct cases filed will be made public in the coming days. Several stakeholders tell Billboard they are expected to be published online in one to three business days, approximately, and some portions could be redacted.
From there, the judges will review these documents, and eventually, in the first half of 2027, a formal trial will begin to sort through the material and find the appropriate rate. In the past, more than half of CRB proceedings — considering both sales and streaming — have not actually gone to trial. Instead, the stakeholders came together and created a proposed settlement everyone agreed on. This time, however, it doesn’t seem like a settlement will be reached due to the NMPA and songwriters’ distrust of Spotify, which they feel has harmed them several times in past proceedings.
A resolution is due by the end of 2027, with the rate set to be in effect from Jan. 1, 2028, through the end of 2032. There is precedent, however, for the resolution taking much longer. For the streaming side of Phonorecords III (a.k.a. the rates for 2018-2022), getting a final answer on what the rate should be for that period took years — so long, in fact, that the period ended by the time it was finalized, and streaming services had to go back in time to amend their royalty payments for the five-year period and issue nearly $400 million in payment corrections.
Who are the major players?
On the music industry side, the NMPA represents the interests of most major and indie publishers, and it tends to be the most vocal about the proceedings.
The Nashville Songwriters Association International (NSAI) represents the point of view of songwriters and largely tends to agree with what the NMPA says.
The streaming services all have slightly different interests and file their direct cases individually, rather than through a trade organization. That means Spotify, Apple, Amazon, Google (YouTube) and more will likely submit.
There might also be submissions from other parties like vocal independent songwriter George Johnson , the Songwriters Guild of America (SGA) and Music Artists Coalition (MAC). Sometimes these folks’ opinions do not completely align with those of the NMPA and NSAI.
Still, given that these direct cases have not yet been made public, it is unclear who will actually submit and who will bow out of the streaming side of Phono V.
What’s different this time?
Streaming services have evolved since the last round. With Spotify adding audiobooks, Amazon Music making its Unlimited service a bundle with Audible, and Apple Music having a dual offering via Apple One, the streaming services’ top offerings are often no longer what’s called “standalone portable subscriptions.” Basically, there’s more to them now than there used to be. That makes this the first CRB proceeding where the priority fight has shifted from one about the rate for standalone services to one about the rate for bundled offerings.
Also, while Phono IV settled quickly, with all parties agreeing on a proposal together in harmony, a lot has happened since then. This time around, the parties — especially NMPA and Spotify (more on that later) — aren’t expected to hold similar positions, and Phono V will likely go through the full trial process to figure out the appropriate rate.
How do these royalty rates work?
The process isn’t as simple as someone saying, “I want the rate to be [insert monetary amount here].” Rather, it’s a complex, multi-step formula.
Here’s how the 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:
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.
Ta-da! Now you have your U.S. mechanical royalty rate for a given streaming service.
For a further breakdown on how to calculate bundling’s impact on mechanical revenue, see here .
What is “bundlegate”?
In 2022, as part of Phono IV, the NMPA, NSAI and the streaming services came together to peacefully settle the rate — including proposals for the TCC, headline rate, per-subscriber minimum and more — before the judges could even start the trial. Because the proceeding before that (Phono III) was widely considered to be a major expense and pain for everyone involved, the thought was that it would be nice to figure out the rate before heading back into another trial. Eventually, this settlement was approved by the CRB , and it became the rate for U.S. streaming mechanicals starting in 2023.
At the end of the day, everyone got a little bit of what they wanted — publishers and songwriters got a raise in the “headline rate,” and streaming services got favorable language around “bundles.”
Then, something happened that the NMPA didn’t see coming. In Spring 2024, Spotify used the new language around bundles to justify cutting its royalty rate to songwriters by nearly half for premium user streams. The streaming service said that by adding audiobooks to its service, Spotify’s popular Premium, Duo and Family plans were actually no longer standalone music subscriptions but “bundles.” And under the Phono IV settlement everyone agreed to, anything that fit the definition of a bundle wasn’t mandated to pay the full streaming rate to songwriters and publishers. For its part, the music industry said it received no heads-up that this change was coming.
So why did Spotify do this? Because bundles contain multiple offerings, the service has to pay not just for music but also whatever else is bundled in. That’s why the rules say bundles are only required to pay songwriters and publishers about half of what a full-on music subscription would. In this case, Spotify also had to allocate some of that royalty money to book publishers.
Spotify’s perspective was that it was just using the terms everyone agreed to under the Phono IV settlement. The NMPA called this move a “loophole” that damaged the livelihoods of songwriters and publishers.
Frankly, the music industry did not envision that the most popular paid music offering in America, Spotify Premium, would ever be revamped overnight to move categories from standalone to bundle. Historically, bundles were special bonus offerings to get people into the streaming services — not the classification of the service’s most popular core product.
Shortly after Spotify made its bundle move, Amazon followed suit with a bundle of its own. Although the NMPA was initially “optimistic” about the Amazon move , the organization spoke out against it later.
How significant was the Spotify change? According to a Billboard estimate at the time, songwriters and publishers were projected to earn an estimated $150 million less in U.S. mechanical royalties from Premium, Duo and Family plans for the first 12 months the bundle royalty rate was in effect, compared to what they would have earned if those subscriptions were never bundled.
The NMPA reported its own calculation of the effect at its annual meeting this summer, two years after the shift, stating that since bundling started, songwriters and publishers have missed out on $500 million and counting from Amazon and Spotify.
For a full timeline of bundlegate, see here .
What’s the timeline?
Direct cases will be made public this week. The trial should begin in Q1 or Q2 of 2027, and all of this should be wrapped up by the end of 2027.