Trickle Down Streaming Mechanicals Will Be Up For Discussion

You may have noticed that a cost of living adjustment for statutory royalties was front and center in the recent (and still ongoing) physical mechanicals rate setting. Unfortunately, the idea of a COLA seems to have disappeared in the streaming mechanicals proceeding. Note that it’s different music users on the physical mechanicals than on streaming. The physical mechanicals are paid by record companies and streaming mechanicals are paid by some of the biggest corporations in history, namely Amazon, Apple and Google and other public companies like Spotify and Pandora/SiriusXM. All these companies have market capitalizations greater than the gross national product of some countries.

You may have also noticed that after years of frozen subscription rates, Apple is the first of the streaming subscription services to raise rates by $1 on several of its services including Apple Music. Tim Ingham is asking if Spotify will follow (you know, one of those price fixing agreements inferred from conduct). Who knows, but what’s interesting about this is the effect it will have on streaming mechanical rates, or more pointedly the effect that the cartel would like you to think it will have.

The calculation for streaming mechanicals is absurdly complicated. About the only thing that is certain is that the negotiation of that rate every five years and appeals occasionally guarantees employment for lots of lawyers and lobbyists. The rates are so bizarre that the Copyright Royalty Judges seem to have lost trust in the process and have issued two separate orders instructing the participants in the streaming mechanical proceedings to either disclose or “certify” that they have come clean with the Judges as to any side deals that may have artificially lowered the rates–the second order makes for interesting reading.

One thing that is clear, however, is that any argument that a COLA is not necessary with streaming mechanicals because the rate is theoretically based on increases or decreases in revenue is a particularly insulting form of trickle down gaslighting.

It must be said that the record company group of music users that pays the physical mechanical rate voluntarily agreed a COLA on their rates that is currently pending approval by the Judges. There really is no excuse for the streaming services to rely on the discredited trickle down theory to pawn off their Rube Goldberg royalty structure on songwriters.

One thought on “Trickle Down Streaming Mechanicals Will Be Up For Discussion

  1. The US has a long history of protecting property rights and honoring the idea of liberty of contract. Yet musicians have been singled out as individuals not entitled to these basic rights. I understand the need to have court set rates for streams, but they should be transparent and music producers should have the right to opt out of a payment they do not agree with. The idea that royalties are based on a percentage of revenue is absurd since it is not transparent. Streaming services do not pay any costs of content production and have no incentive to create a business model that actually pays for production costs. What if stores were allowed to sell goods at any cost they wanted, and then force vendors supply goods to them at some court set percentage of sales price whether they wanted to or not? This business model is not a free market but extortion. Lastly, a market rate can never exist for music streams when Section 512C allows YouTube to supply that same song for free. The lowest price sets the going rate for any good, and so that means that streaming services are trying to compete with $0.


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