Answers/Glossary/Statutory rate
Glossary · Royalties
Statutory rate
A statutory rate is a royalty rate set by law rather than by negotiation. In United States music, it usually means the mechanical royalty rate under Section 115, which the Copyright Royalty Board sets for physical copies, downloads and interactive streaming.
A statutory rate exists because Section 115 of the US Copyright Act makes the mechanical licence compulsory. If the law forces a songwriter to grant a licence, the law also has to say what the licensee pays — otherwise the compulsion would be a licence to pay nothing. The rate is set by the Copyright Royalty Board, a three-judge panel inside the Library of Congress, in multi-year proceedings known as the Phonorecords dockets.
There are two very different shapes of statutory rate, and confusing them causes most of the trouble.
For physical copies and permanent downloads, the rate is a penny rate: a fixed number of cents per copy made and distributed, with a higher per-minute alternative for long works. That rate sat at 9.1 cents per copy for songs of five minutes or less from 2006 until the Copyright Royalty Board's Phonorecords IV proceeding replaced it with a rate that steps up over time and adjusts for inflation. Check the current figure at copyright.gov or the Copyright Royalty Board before you quote one.
For interactive streaming, there is no penny rate at all. The statutory formula produces a pool of money calculated from the service's revenue and its payments to record labels, with floors tied to subscriber counts. That pool is then divided among rights holders by usage share. This is why nobody can tell you the statutory mechanical rate per Spotify stream — the statute does not define one.
The common error is quoting the physical penny rate as though it applied to streams. It does not.
Artist, not attorney — if money turns on the exact number, go to the primary source.
Related terms
- Section 115Section 115 of the United States Copyright Act creates the compulsory mechanical licence for musical compositions.
- Compulsory licenseA compulsory license is a licence the law grants automatically, on set terms, without the copyright owner's consent.
- Mechanical royaltyA mechanical royalty is the money owed for reproducing a musical composition — copying the song itself, not the recording of it.
- Royalty poolA royalty pool is the total sum of money a streaming service sets aside for rights holders in a given market and month, before it…
Definitions on this site describe the United States system. I am an artist who has been through this, not a lawyer.
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