Evidence Mounts for Inflation Indexing for Songwriters

No one needs to be told that inflation is on the rise. We all see the evidence everywhere we go: gasoline prices, groceries, rent, health care, you name it. Inflation may not have increased prices to the point that large numbers of consumers are substituting away from particular goods because they can’t afford to buy, but it’s getting there.

This is important for songwriters who are paid on a statutory rate set by the government’s Copyright Royalty Board that tries to approximate what a willing songwriter would charge a willing music user in five year tranches. It is this five year bet that causes heartburn–one solution that the CRB recently applied to webcasting is to index their government royalty to inflation so that the royalty actually retains its value and increases as inflation increases, called “indexing”.

For whatever reason, the rates for physical configurations and downloads has not contain inflation indexing since it was put in place in 2006 and still does not in the current proposed settlement. Songwriters across the board are resisting this and demanding indexing as part of the “frozen mechanicals” debate as part of the current Copyright Royalty Board rate setting proceeding (styled as “Phonorecords IV“).

Unfortunately for all of us, a statistic released today suggests that inflation continues apace. The Personal Consumption Expenditures Price Index prepared by the U.S. Bureau of Economic Analysis continued its upward trend indicating that consumers are spending more which suggests inflation is the reason not an increase in wealth. As Trading Economics summarizes:

Personal spending in the US increased 0.6% mom in September, following an upwardly revised 1% rise in August and above market forecasts of 0.5%. Spending on health care, food services and accommodations, foods and beverages, pharmaceutical products and gasoline offset lower sales of motor vehicles. Personal income on the other hand fell 1%, the first decline in 4 months and much more than expectations of a 0.2% drop.

Even if you don’t go as far as Twitter CEO Jack Dorsey’s assessment that “hyperinflation” is coming soon, it’s pretty easy to see that if the Copyright Royalty Judges fail to add indexing to the mechanical rate (frozen or not) as they had so many times in the past, songwriters will find their government royalty eaten away by inflation. (“Hyperinflation” is a rise in prices of 50% a month.)

It’s also becoming clear that inflationary pressures will continue well into 2022 and 2023–the rate set in Phonorecords IV is theoretically to begin in 2022.

Indexing is crucial.

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