The Songwriter Equity Act, introduced in the Senate and House in March, would allow writers, composers, and publishers to negotiate their compensation based on a song’s “fair market value” rather than the standard, federally mandated rate of 9.1 cents per copy sold, according to Music Week. The bill — which is supported by the National Music Publishers’ Association as well as the three major US performance rights organizations (ASCAP, BMI, and SESAC) — defines fair market value as “the rate a willing buyer would pay a willing seller.”
The act would also allow songwriters to argue for higher royalties in federal court based on evidence such as the level of compensation being paid to the performing artists that record the songs they write. (Those payments come out of licensing fees paid by Internet radio providers and digital music services such as Pandora for the right to stream copyrighted music online.) The US Copyright Act currently prohibits judges from considering that information when setting royalty rates for public performances of musical compositions, which are ultimately paid out to songwriters.
The proposed bill would not directly affect rates for performers or record labels, so any increases in songwriters’ compensation would likely translate into higher costs for the companies licensing the music, according to Broadcast Law Blog.
While the proposed legislation focuses specifically on compensation for songwriters, the music industry’s complex royalty system is in transition as it adjusts to the rise of digital music services and the decline of physical media and terrestrial radio. And because licensees have a finite amount of money to spend on royalties, changes to payment schemes in one industry segment could ripple out and affect business in other areas.
For more updates on the music production and distribution industry, see the First Research industry profile.