MOU 2 NMPA Late Fee Program
Frequently Asked Questions
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|1.||What is the NMPA Late Fee Program about?|
The Copyright Royalty Board (“CRB”) is empowered under U.S. copyright law to set compulsory mechanical royalty rates to be paid by music users to music publishers and foreign societies for the right to distribute and/or transmit physical and digital phonorecords, ringtones, interactive streams, and limited digital downloads. In the 2008 CRB proceeding, the National Music Publishers’ Association (“NMPA”) requested, and the CRB ruled for the first time, that music copyright owners are entitled to collect a late fee of 1.5% per month (18% annually) for late payments of royalties from record companies and other music users (“Late Fees”).
In response to the ruling, NMPA, The Harry Fox Agency, Inc. (“HFA”), and the Recording Industry Association of America (“RIAA”) entered into a Memorandum of Understanding on November 10, 2009 (the “MOU”). In April 2012, the parties agreed to extend similar arrangements through at least 2017 (“MOU 2”). MOU 2 creates a comprehensive program (“Late Fee Program” or “Program”) whereby Record Companies and music publishers, including non-U.S. mechanical collecting societies (“Foreign Societies”) (music publishers and Foreign Societies referred to together as “Publishers”), will work together to improve mechanical licensing practices and encourage prompt dispute resolution. In exchange for waivers of certain late fees, Record Companies must comply with the provisions of MOU 2, including paying participating music publishers and foreign societies their market share of accrued pending and unmatched royalties.
|2.||What time period does MOU 2 include?|
Distribution of the initial installments of pending and unmatched royalties accrued for products released on or before December 31, 2012 (“Groups I, II and III”) has ended. Registration for distributions of Group IV pending and unmatched Royalties under MOU 2 will commence in summer 2016.
The Late Fee Program under MOU 2 applies to pending and unmatched royalties accrued by Record Companies for the distribution of CDs, full downloads, ringtones and certain other physical and digital distribution distributed in the United States. There are for distribution phases for these pending and unmatched royalties:
- Group III, Phase A – pending and unmatched royalties accrued for product released in the years 2009 and 2010
- Group III, Phase B – pending and unmatched royalties accrued for product released in the years 2011 and 2012
- Group IV, Phase A – pending and unmatched royalties accrued for product released in the years 2013 and 2014
- Group IV, Phase B – pending and unmatched royalties accrued for product released in the years 2015 through 2017
|3.||Who is eligible to participate in Group III and Group IV of the NMPA Late Fee Program?|
Registration for Group III has ended. Group IV is open to music publishers and foreign societies with musical compositions initially distributed by one or more Record Companies in the United States during the years 2013 through 2017.
|4.||I participated in Group I and/or Group II of the NMPA Late Fee Program. Will I need to opt in again to participate in Group IV?|
Yes, publishers and foreign societies that opted into Group I and Group II of the Late Fee Program but did not opt into Group III, Phase A or Phase B, will have to opt in again to participate in Group IV by completing and submitting an MOU 2 Opt-In Form and Catalog Registration Form.
|5.||I participated in Group III, Phase A/B of the NMPA Late Fee Program. Will I need to opt in again to participate in Group IV?|
No, publishers and foreign societies that opted into Group III, Phase A or B of the Late Fee Program are also opted into the subsequent phases of the Late Fee Program.
However, Participating Publishers will be asked to review the information submitted during Group III to verify that this is accurate.
|6.||I did not participate in Group I and/or Group II of the NMPA Late Fee Program. What do I need to do to become a Group III and Group IV Participating Publisher?|
Registration for Group III has ended. Publishers who did not participate in Group I or Group II may participate in Group IV by completing and submitting an MOU 2 Opt-In Form and Catalog Registration Form. A Participating Music Publisher (but not a foreign society) must be a member of the NMPA on or before the date of submission of the MOU 2 Opt-In Form.
|7.||I do not want to join the NMPA. Could I still submit an MOU 2 Opt-In Form?|
|8.||How do I become a member of the NMPA?|
To participate in the MOU 2 Late Fee Program, each publisher (but not a foreign society) must be a member of the NMPA. If the music publisher is not a member of the NMPA, it may join at any time as long as it is before the filing of the MOU 2 Opt-In Form with the Program Administrator. The music publisher may join by contacting NMPA as indicated on the NMPA website at www.NMPA.org.
Do not send your Membership Application to the Program Administrator.
|9.||Who is eligible to join the NMPA?|
Any person, firm, corporation or partnership that meets the following requirements is eligible for NMPA membership:
- they are actively engaged in the business of publishing music, and
- have been in business for a period of at least one year, and
- are based in or have an office in the U.S.
Election to membership is by approval of the Board of Directors. Complete applications will be presented to the Board at the first meeting following receipt and processing by NMPA.
|10.||If multiple MOU 2 NMPA Late Fee Program Opt-In Forms were sent to me, did I have to return all of them?|
Multiple sources were used to generate the mailing list, and even though efforts were made to remove duplicates, some publishers may receive more than one Opt-In Form. A publisher should only submit one MOU 2 Opt-In Form per individual or entity, unless those individuals or entities have different Tax ID numbers and wish to receive separate checks in any Program distributions.
|11.||What happens after I submit an MOU 2 Opt-In Form?|
After the Opt-In Period is over, the Program Administrator will calculate the “publisher market share” of the Fund for each Participating Publisher and foreign society. Once the aggregate P&U Royalties are finalized, a distribution will be issued to each Participating Publisher of the P&U Royalties equal to their assigned publisher market share of those P&U Royalties. The Group III, Phase A distribution commenced in December 2013. The Group III, Phase B distribution commenced in March 2015.
|12.||Am I being represented by the NMPA or its counsel in this process?|
The NMPA strongly encourages all interested music publishers and foreign societies to opt in as soon as possible and to carefully review (i) MOU 2; (ii) the Overview; and (iii) the Summary of MOU 2 NMPA Late Fee Program Terms.
Each publisher should seek independent legal counsel regarding all matters relating to the MOU 2 Late Fee Program. The NMPA, the Program Administrator, HFA, or any vendor, agent or attorney representing the same, will not act as legal counsel to any publisher, and should not be relied on for legal advice.
|13.||What is the publisher market share methodology used to determine the payment amounts for Group III and Group IV of the NMPA Late Fee Program?|
In order to permit the Program Administrator to determine distribution amounts for Participating Publishers, the Participating Record Companies and HFA have provided the Program Administrator with records of payments made by the Participating Record Companies to music publishers and foreign societies between 2009 and 2011. The Participating Record Companies have engaged outside auditors to attest to the accuracy of historical payment information and the amount of their accrued P&U Royalties. The payment data was used by the Program Administrator to calculate the relative market shares of publishers who received payments from the Participating Record Companies during that period, which is used as the basis for distributing the Group III funds. The Participating Record Companies and HFA will also provide records of payments made between 2012 and 2016, which will be used as the basis for distributing the Group IV funds.
|14.||What if I do not agree with the publisher market share?|
Participating Publishers will have the right to make a claim to the Program Administrator to contest the determination of the publisher market share calculated by the Program Administrator. The Program Administrator will have sole discretion to revise the publisher market share calculation for a particular publisher or to maintain the first calculation. There will be no right of appeal after the Program Administrator adjudicates the Participating Publisher’s claim.
|15.||When can Participating Publishers expect to receive payments for Group III and Group IV?|
Participating Publishers began receiving distributions of funds from the Program Administrator for accrued P&U Royalties for Group III, Phase A Product based on a market share allocation methodology in December 2013, and distribution of funds for Group III, Phase B Product commenced in March 2015. There is no schedule for distribution of funds for accrued P&U Royalties for Group IV at this time.
Distribution of accrued royalties for Group III and Group IV Product is the net of the costs and fees identified in the Opt-In materials and the MOU 2.
|16.||When does MOU 2 expire?|
The MOU terminates on December 31, 2017, unless extended in connection with the establishment of statutory rates and terms by the CRB for the period after the current 2013-2017 proceeding. However, certain provisions relating to payments of P&U Royalties by Participating Record Companies for the sale of Group III Product and Group IV Product after that date will remain in effect past the termination date.
|17.||Does MOU 2 cover product made and distributed outside of the United States, its territories and possessions?|
No. MOU 2 only covers product made and distributed in the United States, its territories and possessions.
|18.||Is there an audit process for Participating Publishers?|
The Program Administrator will have the right to audit Participating Record Companies on behalf of Participating Publishers for the initial bulk distributions and ongoing sales of Group III Product and Group IV Product, and will be able to examine the P&U accrual rates used by the Participating Record Companies with respect to ongoing sales of digital product.
|19.||What do I give up by becoming a Participating Publisher?|
In consideration for making Group III and Group IV payments, Participating Record Companies will receive a release from Participating Publishers for claims arising from the reproduction and distribution of Group III Product and Group IV Product as to which P&U Royalties have accrued, including claims for nonpayment, late payment and infringement. The signed release will be submitted with a Participating Publisher’s MOU 2 Opt-In Form, but will not be effective with respect to any particular units of product until the Participating Publisher has received payment based on P&U Royalty accruals for those units under the MOU 2. The release will roll forward to cover additional units of product as the Participating Publisher receives additional payments based on sale of those units. Additionally, upon receiving payments under the MOU 2, Participating Publishers will release the parties to the MOU 2, Participating Record Companies, the Program Administrator and its vendors for claims relating to the implementation and administration of the MOU itself.
In consideration for receiving Group III and Group IV payments and implementation of the Default Rules and Best Practices, Participating Publishers agree not to collect certain late fees that would otherwise apply to Group III and Group IV Product pursuant to the Section 115 statutory license or another mechanical license such as a Section 115 variance mechanical license (e.g., an HFA license). While a late fee waiver will apply to P&U Royalties attributable to ongoing distributions of Group III and Group IV Product so long as a Participating Record Company continues to make its required payments of P&U Royalties, late fee waivers for product released on or after January 1, 2009 will terminate upon the expiration of MOU 2, December 31, 2017 at the earliest.
|20.||Are steps being taken to improve communications between Participating Publishers and Participating Record Companies?|
Yes. Participating Record Companies and Participating Publishers will adopt certain additional measures to improve the clearance process. Best Practices include various efforts to improve communications between Participating Publishers and Participating Record Companies, including regular meetings to review lists of unlicensed product. A Best Practices Group, composed of representatives from Participating Record Companies and Participating Publishers, will oversee implementation of the Best Practices and Default Rules.
Participating Record Companies and Participating Publishers will implement certain rules to govern future licensing and payment procedures. Among other procedures, the Default Rules require Participating Record Companies to seek claims information from writers and their representatives prior to release and pay royalties through in certain situations, including some split disputes, if they are not to be potentially subject to statutory late fees (where applicable).
|21.||How will songwriters get paid?|
By definition, the funds that are the subject of this settlement are not categorized by song title. Instead, this settlement involves an agreement by all who choose to participate to distribute these funds using a publisher share analysis conducted by the Program Administrator, The Harry Fox Agency, Inc. (using payment data provided by the Record Companies). It is anticipated that many publishers will distribute these funds to their songwriter partners using a distribution formula these publishers develop that takes into account each publisher's unique issues involving songwriters whose works it controlled during the relevant period of the settlement. The publisher share analysis used by the Program Administrator to allocate the settlement proceeds is not intended to be a formula used by any particular publisher to allocate such funds among its songwriter partners. Songwriters whose songs were not properly licensed would not be recognized in any publisher share analysis.
The Program Administrator, HFA, and NMPA will not dictate or provide guidance as to how publishers should distribute the settlement proceeds allocated to each publisher. Furthermore, the Program Administrator has not been authorized to address, nor will he respond to, questions relating to how songwriters get paid. We suggest songwriters contact their publishers directly for guidance.
November 30, 2016
Registration Deadline for Group IV, Phase A