Phono 4 rates and terms for interactive streaming and digital downloads are effective and applicable beginning on January 1, 2023.
Members will receive mechanical royalties under Phono 4 rates beginning in the April 2023 distribution (for January 2023 usage).
On December 30, 2022, the Copyright Royalty Board (CRB) published the final determination of the mechanical royalty rates for interactive streaming for the Phono 4 period. The full text of the rates and terms covering interactive streaming is available here.
On December 16, 2022, the CRB published the final determination of the mechanical royalty rates for permanent digital downloads for the Phono 4 period. The full text of the rates and terms covering permanent digital downloads is available here.
Together, these two final determinations set forth the royalty rates payable to The MLC for the Phono 4 rate period (January 1, 2023 through December 31, 2027).
Phono 4 rates and terms for interactive streaming and digital downloads are effective and applicable starting on January 1, 2023.
Blanket Licensees must submit reports and payments pursuant to the rates and terms to The MLC beginning with January 2023 usage.
A schedule of key dates and applicable deadlines is available here.
As an example, the deadlines by which DSPs must report their January 2023 usage are as follows:
February 15, 2023 for DSPs that want to receive an invoice and response file prior to payment (also known as the “early path”), or
March 17, 2023 for DSPs that will not receive an invoice prior to the deadline for payment (also known as the “regular path”).
The deadline by which DSPs must provide payment related to their January 2023 usage report is March 17, 2023.
Subsequent monthly deadlines follow a similar cadence. Usage reports are due either 15 days (“early path”) or 45 days (“regular path”) after the end of the month, and payment is always due 45 days after the end of a month.
DSPs must report each consumer Offering separately from any other consumer Offering. 37 C.F.R. 385.21(b) provides that:
“If a Service Provider makes available different Offerings, royalties must be calculated separately with respect to each Offering taking into consideration Service Provider Revenue, TCC, subscribers, Plays, expenses, and Performance Royalties associated with each Offering. A Service Provider shall not be required to subject the same portion of Service Provider Revenue, TCC, subscribers, Plays, expenses, or Performance Royalties to the calculation of royalties for more than one Offering in an Accounting Period.”
This includes family plan Offerings and student plan Offerings, which must each be reported separately from any other Offerings. Under 37 C.F.R. 385.2:
“Family Plan means a discounted Subscription Offering to be shared by up to six members of the same family or household for a single subscription price.
…
Student Plan means a discounted Subscription Offering available on a limited basis to students.”
This also includes bundled Offerings, which must each be reported separately from any other Offering (including any other bundled offerings). Provisions defining different bundled Offerings can be found in 37 C.F.R. 385.2 and 37 C.F.R. 385.21(d).
Consumer Offerings are described in The MLC usage reporting documentation (whether for DDEX or SURF reporting) as “Service Configurations.” Reporting Offerings separately means identifying the Offerings as distinct Service Configurations in header/summary reports and then submitting separate Service Configuration detail files for each respective Offering.
Please visit The MLC’s service configuration form here to make changes.
Please note this hypothetical is an example for illustrative purposes and does not describe the full extent or all examples of the requirement that all Offerings be reported separately.
Hypothetical Scenario for Phono 4 Reporting
A DSP makes available the following consumer Offerings under the Blanket License with the following hypothetical subscribers for January 2023 usage:
| Offering | Subscribers | |
| 1. | Individual Standalone Portable Subscription Plan | 100 |
| 2. | Family Plan | 100 Family Plans (300 total End Users) |
| 3. | Student Plan | 100 |
| 4. | Bundled Subscription Offering with Product A | 50 |
| 5. | Bundled Subscription Offering with Products B and C | 50 |
Reporting Requirements:
The DSP must identify each of these five Offerings as a separate Service Configuration in header/summary files, and must provide five separate usage files (one for each of the five Service Configurations) that reflect the usage associated with each Offering.
DSPs are not required to subject the same portion of Service Provider Revenue, TCC, Subscribers, Plays or Performance Royalties to the calculation of royalties for more than one of the five Offerings in an Accounting (i.e., monthly) Period.
Specific Reporting Requirements For Student and Family Plan Subscribers:
In reporting Family Plans, DSPs should continue to follow the instructions in The MLC documentation and report only the number of paying Family Plan accounts without adjustment to account for the treatment of Family Plans and without including total associated End User counts. Thus, in this example, the DSP would report 100 subscribers for its Family Plan Service Configuration.
In reporting Student Plans, DSPs should continue to follow the instructions in The MLC documentation and report the number of Student Plan End Users without adjustment. Thus, in this example, the DSP would report 100 subscribers for its Student Plan Service Configuration.
(Note that if a DSP is reporting on the “regular path” such that it is not receiving an invoice from The MLC prior to payment of royalties, then the DSP will have to follow 37 C.F.R. 385.21(e) to adjust these Family Plan and Student Plan subscriber counts for the purposes of computing per-subscriber rates and royalty floors. If a DSP is reporting on the “early path,” then The MLC will perform those adjustments and calculations.)
Improper Reporting Will Be Rejected By The MLC – An example of what NOT to do:
A DSP should not combine any of its five Offerings or their associated usage data in reporting to The MLC. As 37 C.F.R. 385.21(b) provides:
“If a Service Provider makes available different Offerings, royalties must be calculated separately with respect to each Offering taking into consideration Service Provider Revenue, TCC, subscribers, Plays, expenses, and Performance Royalties associated with each Offering…”
A DSP should not report a single Service Configuration that combines usage from its Standalone Individual Plan, Family Plan, and/or Student Plan. This is true whether or not a DSP intended to adjust subscriber counts prior to reporting for the purposes of computing per-subscriber rates and royalty floors.
Thus, a DSP should not report a single standalone portable Service Configuration that combines usage from Standalone Individual, Family, and Student Plans with either:
100 (Individual Subscribers)
+ 175 (100 Family Subscribers * 1.75 [previously 1.5 under Phono II])
+ 50 (100 Student Subscribers * .5)
Please see 37 C.F.R. 385.21(e) to compute applicable per-subscriber rates and royalty floors.
A DSP should not report a single Service Configuration that combines usage from its Bundled Subscription Offering with Product A and its Bundled Subscription Offering with Products B & C. Thus, a DSP should not report a single Bundled Subscription Offering with 100 subscribers and other combined usage details.
Please contact The MLC’s DSP Relations team (DSP.Relations@themlc.com) if you have questions about technical requirements for usage reporting or royalty payments or other applicable interactions with The MLC.
Please consult with legal counsel if you have questions about obligations under the new rates and terms.