Hipgnosis Songs Fund Limited (LSE:SONG) has welcomed the rejection of an appeal that would have stopped higher royalties being paid to songwriters and publishers by streaming service providers.
The US Copyright Royalty Board refused to allow an appeal by various streaming services against a determination that will see an increase in mechanical streaming royalty rates known as CRB III.
Merck Mercuriadis, Hipgnosis Songs CEO and founder, said: "The CRB has delivered a strong message not only to the digital service providers like Spotify but also to the recorded music companies about the importance of the songwriter in our industry.
"Congratulations to all of the incredible songwriters that have entrusted us with their incomparable songs as well as to each and every songwriter that goes to work each day to write great songs and make the world a better place. This is a victory for all of you."
Hipgnosis, which buys artists' back catalogues, added that the increase is incremental over the period covered by CRB III (1 January 2018 until 31 December 2022) and will culminate in a 44% uplift in the "all-in" (mechanical and performance) statutory minimum rates for streaming paid in the US.
This will mean a rise from 10.5% of streaming revenues prior to 2018 to 15.1% in 2022.
"Using the success of Hipgnosis to change where the songwriter sits in the economic equation has been a massive priority for us from day one,” Mercuriadis added.
“For too long the songwriter - who delivers the most important component to the success of a record company, digital service provider, music merchandiser, live promoter etc., is the lowest paid person in the equation.”
Hipgnosis added that since the launch of the streamers' appeal in 2020, the majority of the increased revenue due to the owner of song copyrights has been withheld and revenues have been paid off the previous or CRB II rate of 10.5% in most cases.
Hipgnosis said it will now receive US streaming revenues based on the royalty rates set out in CRB III, adding that it has not accounted for any withheld revenue since 2020.
CRB IV, which will determine songwriter payments for 2023-27, is currently underway.
Liberum adds: “The increase to 15.1% represents a meaningful revenue uplift for songwriters, publishers and rights holders (such as Hipgnosis and Round Hill).
“Both funds had been receiving the 10.5% rate from the streaming platforms and the unpaid income will come through as a retrospective settlement payment.
“Future earnings will also rise in line with the increased streaming royalty rate. It was reported last week that the streaming services had asked for more time to pay the potential increase in royalties.
Streaming accounted for 36% of SONG's revenue in its latest half-year and 20% of RHM's revenue in its last full year with the US likely to have been the major contributor.
Assuming US streaming revenue accounts for approximately 50% of the overall streaming revenues, we estimate the increased royalty rate would add 1 cent per share pa to SONG's revenues plus any NAV uplift.
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