This Article Originally Published October 2000
by Jeffrey & Todd Brabec
Effective as of January 1, 1998, the compulsory mechanical royalty rate under Section 115 of the U.S. Copyright Act was raised to 7.1 per composition and 1.35 per minute (the latter durational royalty being sometimes referred to as the "long song" rate) from the 1997-98 rate of 6.95 per composition and 1.3 per minute. The rate increase was the result of negotiations between the National Music Publishers' Association, Inc. (NMPA), the Songwriters' Guild of America, Inc. (SGA) and the Recording Industry Association of America, Inc. (RIAA). These organizations jointly submitted a proposed "physical phonorecord" royalty rate schedule to the Copyright Office which was adopted by the Librarian of Congress and published in the Federal Register.
This new statutory mechanical rate was applicable to all physical audio recordings which were made and distributed after January 1, 1998 regardless of the date of the mechanical license covering the distribution of such recordings or the date that the particular recording was initially released, unless the music publisher, songwriter and record company agreed to contrary provisions in the mechanical license or controlled composition clause of the recording artist agreement. Additionally, the compulsory mechanical rate was not only established for the two year period 1998-1999, but the agreement between the music publishers, songwriters and record companies also specified what the mechanical royalty would be for the 8 year period from 2000 through 2007.
For example, if an album is first released in the United States in 2000 and a composition on that album is licensed at a statutory rate, the publisher and writer of the composition would receive a combined 7.55for each album that was made and distributed during 2000 and 2001. If the album continued to sell through the years 2002 and 2003, the mechanical payments for the composition would be increased to 8 for each album manufactured and distributed in 2002 and 2003. Since many albums continue to sell for years, the same procedures would apply for albums manufactured and distributed in 2004 and 2005 (e.g., an 8.5 royalty for each album sold) and in 2006 and 2007 (e.g., a 9.1 royalty for each album sold).
Another way to look at how the increases operate is to chart the sales of an album containing 1 composition licensed at a statutory rate over a six year period. In our example, the album is released in late 2000 and sells 4,950,000 copies between 2000 and 2005.
The above examples apply when the songwriter or music publisher issues a so called "floating" statutory rate license which makes sure that the mechanical rate for the recording increases as the statutory rate increases. The example does not, however, apply to instances where the songwriter and publisher have agreed to a fixed per penny rate for all recordings manufactured and distributed regardless of when the recordings might be sold. The primary circumstance where this limitation occurs is when the songwriter is a recording artist and agrees to the demands of his or her record company that the mechanical rate be "fixed" at a certain date (e.g., the date that the album is recorded or released) with no change in the future despite U.S. Copyright Office approved increases in the statutory mechanical royalty rate. This type of restriction also occurs when the songwriter is a record producer and writes compositions for the album being produced.