Proposed Phonorecords V Settlement Emerges, Prompts Pushback

Washington, D.C.’s James Madison Memorial Building, which houses the U.S. Copyright Office. Photo Credit: UpstateNYer

Let the Phonorecords V showdown begin: The major labels, the NMPA, and others have reached a settlement covering stateside mechanical rates for physical formats and permanent downloads across 2028 and 2032. But the proposal, which would leave the existing Phono IV rates in place except for an annual inflation adjustment, is already eliciting criticism. 

The majors and the National Music Publishers’ Association (NMPA), along with the Nashville Songwriters Association International (NSAI), the Music Artists Coalition, and the American Association of Independent Music (A2IM), just recently informed the Copyright Royalty Board of their settlement — and DMN was granted first-look access.

And according to their letter, reviewed exclusively by Digital Music News this morning, the agreement is straightforward enough: The current Phono IV rates, also extending to ringtones, “should not be amended except for continuing inflation adjustments to the rates for physical phonorecords and permanent downloads.”

Beyond having the final rate-setting say, the Copyright Royalty Judges arrive at those annual adjustments by calculating based on Consumer Price Index movements. For 2026, the physical and permanent download rate is “13.1 cents [per work] or 2.52 cents per minute of playing time or fraction thereof, whichever amount is larger.”

In other words, though the yearly inflation bump would drive modest physical- and download-rate growth through 2032 as outlined, it wouldn’t deliver a material compositional royalties boost.

Enter the aforementioned opposition: The Songwriters Guild of America, Jeff Price’s Word Collections (not “World” Collections), Eminem publisher Eight Mile Style, and copyright-reform activist George Johnson declined to join the proposed settlement.

Instead, they’re preparing to file an objection containing a demand for a 15.65-cent Phono V rate, Johnson told DMN. Of course, we’ll promptly break down their arguments, which are expected to arrive later in July.

(Update: Johnson subsequently told DMN that ‘we didn’t deny the settlement. We were never sent a settlement to deny.’) 

But a few things stand out at this early stage of the game. First, many will recall that the CRB in 2022 rejected a proposed mechanical-rate freeze for physical and downloads – describing the “vertical integration linking music publishers and record labels” as “a warning flag” when doing so.

Put differently, even with the proposed settlement letter emphasizing a desire to “avoid costly and uncertain litigation,” label-publisher links aren’t a secret, and a CRB denial wouldn’t be without precedent.

(Elsewhere in the document, the signatory entities in more words framed the proposed settlement as an obstacle-free road to the final Phono V rule. The majors won’t “seek to take any discovery from each other or from” publisher and songwriter participants, all the settling parties will agree before jointly responding to objections, and so on.)

Also in 2022, the majors and the NMPA sought a statutory rate settlement while acknowledging reaching “an agreement in principle concerning a separate memorandum of understanding addressing certain related issues.”

As the disclosure elicited justified pushback (and factored into the CRB’s dismissal), the carefully worded newer settlement is said to cover “the entire understanding of the Parties concerning the subject matter hereof” and to supersede “all prior and contemporaneous agreements and undertakings of the Parties with respect to the subject matter hereof.”

Next, that the Music Artists Coalition and the A2IM are backing the proposed settlement is worth keeping in mind. Last time around, the latter entity vocally opposed the rejected settlement and that which the CRB ultimately approved in its Phono IV determination.

And finally, regardless of how Phono V unfolds from here, quick negotiations aren’t necessarily a good thing. In fact, subsequent direct deals or not, it’d be difficult to describe the Phono IV settlement, which on the streaming side enabled a bundling craze that caused mechanicals to plummet, as anything other than a disaster.

Are the debacle’s effects still being felt? Did the brazen effort to shortchange songwriters and publishers embolden Meta (which Eight Mile is suing) to allegedly propose a lowball license offer to Wixen, for instance? Perhaps. For now, all eyes are on the Phono V deliberations, which we’ll continue tracking in detail.