Is Universal Music stepping up to solve unfrozen mechanicals crisis?

Universal is rumored to plan to try and solve the unfrozen mechanical problem.

A guest post by CHRIS CASTLE of Music Tech notPolicy.

I have it on good authority from someone close to the talks not authorized to speak on the record that Universal is taking the lead on solving the now un-frozen mechanicals crisis. This obviously needs to be confirmed and may not be final, but I think it’s well worth posting about.

Recall that the crisis pertains to the so-called “Subpart B” mechanical royalties paid by record companies for permanent downloads, vinyl and compact discs. The mechanical rate has been frozen at 9.1¢ since 2008 and the Copyright Royalty Judges recently rejected a settlement among the NMPA, NSAI, Sony, Universal and Warner to extend the freeze in the Phonorecords IVproceeding. Having rejected the proposed settlement, the next step could be knock down, drop dead, drag out litigation that would, in my view, be totally unnecessary. Or the next step could be the labels and publishers submitting a new proposed settlement and asking for the Judges’ approval. 

Also recall that the Judges hinted at a potential deal they would like to see in their rejection of the proposed settlement that would essentially uplift the current 9.1¢ rate by an inflation factor since the rate was set in 2008, bringing the minimum statutory rate for all “Subpart B” configurations to 12¢ that would be further uplifted by an annual cost of living adjustment based on the Consumer Price Index (CPI-U in this case).

We’ve written about this topic so much that you’re probably sick of hearing about it–but if this source turns out to be correct, it’s a real step in the right direction by Universal taking a leadership role that will no doubt be controversial.

As I understand it, Universal may propose a minimum statutory rate of 10¢ for permanent downloads and 12¢ for both vinyl and CD configurations. All three rates would be adjusted annually by the Consumer Price Index (in a similar way that the Judges just indexed the webcasting royalty in Webcasting V applicable to sound recordings). This rate would apply to allsongs–not just to George Johnson–as one would expect.

There’s no way to know at this point today whether all the participants in the Phonorecords IV proceeding will accept these terms, including George Johnson who has held out for a much higher minimum statutory rate. Some may scratch their head over why the download rate is less, but my suspicion is that it’s because Apple and Amazon have been inflexible on increasing the wholesale price and I could understand why a label would give themselves some headroom on downloads going into what will surely be highly inflationary times but at the same time agreeing a cost of living adjustment. (When the dust settles, it may be worth a discussion in the artist rights community about whether to campaign against Apple and Amazon.)

I do think it’s commendable if Universal is taking the first step toward bringing fairness to a process that has been unfair for many years. We’ll see what happens, but it looks like it could be light at the end of the tunnel. Watch this space.