In Hindsight: The Music Modernization Act
By Emilia Walasik & the MBJ Editorial Staff
Introduction
On October 11, 2018, the Music Modernization Act (MMA) was officially signed into law. Musicians, songwriters, and industry leaders fought hard alongside lawmakers for this legislation, which promises to make several necessary adjustments to copyright law. Among other things, the MMA was designed to resolve issues that affect songwriters and producers in particular; but despite these steps forward, there are still concerns that need to be addressed.
Before the signing of the MMA into law, three music legislative acts were considered by U.S. lawmakers: the Allocation for Music Producers (AMP) Act, the Compensating Legacy Artists for their Songs, Service and Important Contributions (CLASSICS) Act, and the Fair Play Fair Pay Act. These pieces of legislation aimed to solve the various loopholes of the current copyright system.
When recordings are played on either online radio services (e.g. Pandora) or satellite radio, through the AMP Act, producers’ and sound engineers’ receiving of compensation is simplified through direct payments from SoundExchange. The second piece of legislation passed was the CLASSIC Act. This act’s purpose was to fix a significant loophole that was left in the last major copyright law revision that took place in 1972. The 1972 copyright law failed to establish a federal copyright for sound recordings which were created before that year. Federal copyright allows digital radio services to play sound recordings at a specific royalty rate, which is established by the government through what is referred to as a “rate court”. Those sound recordings were overseen by particular state copyright laws if even any would be effective. This became a loophole and major issue when digital music services started playing a bigger role in the widespread consumption of music. Before the CLASSICS Act, digital radio services would need to individually attain permission and negotiate royalty rates with right holders of the sound recordings made before 1972, outside of the government rate court. In many cases, digital music services have been unable to find rights holders for songs written before 1972 and, as a result, have continued to play sound recordings without compensating the rights holders.
The third proposed act was the Fair Play Fair Pay Act, which was designed to close another loophole – this time relating to digital and AM/FM radio services. Both of these types of services are obligated to pay performance rights royalties for broadcasting a musical composition. However, AM/FM radio stations do not have to pay performance rights royalties on sound recordings, while digital radio providers do. The Fair Play Fair Pay would require AM/FM radio stations to pay performance royalties on sound recordings as well.
The Music Modernization Act
The fourth act, which was introduced in December 2017, is the Music Modernization Act. The MMA aims to address the needs and concerns of songwriters, music publishers, interactive music services (e.g. Spotify, Apple Music) in regards to the licensing of mechanical rights, particularly where they relate to reproduction and distribution. One objective of the MMA is to alter the process by which interactive music services obtain reproduction and distribution licenses for both sound recordings and the underlying musical works. By default, these services are obligated to negotiate deals with record labels to receive sound recording licenses. Additionally, there is a blanket license covering all the works within a publisher’s catalogue; thus, if they are unable to agree with themselves, the interactive platform must file Notices of Intent (NOIs) for each track/song they want to use. The Notice of Intent process is both problematic and outdated to facilitate licensing in the current era of digital music; thus, the MMA aims to reform extremely impractical process. The MMA also aims to address the difficulties that are encountered by streaming service providers like Spotify or Tidal when locating rights holders. When such companies are unable to locate rightsholders, they disburse payments to songwriters and music publishers according to their calculations of which artists’ songs have been played the most on their platform; however, the data that services such as Spotify, Apple Music, and Google Play receive are obtained from record labels and independent aggregators. This data often fails to include the information related to independent writers and artists, and thus is neither entirely accurate or representative of what consumers listen to.
The Mechanical Licensing Collective
One of the main goals of the MMA is to create a Mechanical Licensing Collective (MLC). In theory, the MLC would be a copyright licensing body that would construct and manage a centralized database of music compositions, and the persons who own the related copyrights. It would then collect mechanical royalties from streaming services and distribute them to the copyright owners to which they are due. For copyright holders to receive royalty payments, they would then need to submit claims to their songs through the MLC database. The proposed governing body of the Mechanical Licensing Collective will be comprised of prominent music publishing and songwriting representatives, among a variety of industry professionals, to ensure that all the major and relevant interest groups are represented. The MLC will also be run as a not-for-profit organization, as delegated by the Copyright Office; in this regard, it will follow a similar model to that set forth by SoundExchange.
The MMA will also impact how royalty rates are established. Before the MMA, the Copyright Office would hold legal proceedings every five years, in what is referred to as “rate court”. During these proceedings, a panel of judges would hear testimonies from both sides of the negotiating table and set a royalty rate based on economic principles. The MMA is set to circumvent this method so that the process of determining rates and royalties will develop into a willing buyer, willing seller format. Industry professionals believe that this development will likely lead to a higher royalty rate. In its final revision, the MMA incorporates both the AMP Act and the CLASSICS Act.
Remaining Concerns
While the MMA will solve many issues, several significant concerns remain. One major concern regards the single agency model Mechanical Licensing Collective. Some industry professionals are uncertain about how effective the MLC will be, given the terms and structure in which it has been designed. Additionally, many wonder about the fate of the Harry Fox Agency, which currently fills this role on behalf of a massive contingency of the publishing industry. Currently, only a handful of agencies process mechanical licenses, a compulsory license needed for the reproduction of a composition. One could claim that these agencies, in some ways, compete with one another to provide the best and most accurate services possible to their clients. Some believe there is a risk that, without the incentives inherently present in a competitive marketplace, a single non-profit agency will not be as efficient as a collection of private agencies at fulfilling its crucial role. If these concerns turn out to be correct in their predictions, what initially may seem like a more thorough and precise system may end up being one with further loopholes and errors.
Another concern is that through the MMA’s planned establishment of the MLC, major music publishers have appointed themselves “as the sole judge and jury about who is entitled to be paid, how they will be paid, and even if they will be paid.” Additionally, according to the current model of the Mechanical Licensing Collective, funds for unclaimed royalties will remain in the collective for three years; if the rightful owner does not claim their unpaid funds within those three years, the funds will be dispersed amongst the music publishers based on market share. No proposed policy would assist, for instance, independent or self-published songwriters whose song information has been incorrectly recorded. Many fear that there will be no real effort from the Mechanical Licensing Collective to find rightful song owners – a possibility that would be disastrous for independent and self-publishing songwriters, were it to occur.
Furthermore, the entities that benefit the most from this payment model are the major publishers at the top of the industry – those publishers with the largest market share. While the MLC’s proposed model includes representatives from nearly all facets of the industry – including publishing and songwriting representatives – there has been no promise made to appoint delegates who will be tasked with advocating on behalf of independent songwriters, producers, and publishers. Because of that lack of representation, these independent artists are at risk of missing out on the benefits which the MLC aims to produce. Independent songwriters, producers, and publishers suffer the most from poor policy and practices in the music industry; meanwhile, those at the top of the industry may be inclined to only address the issues which affect their interests. This crucial issue poses an even greater threat and a great deal of uncertainty for independent songwriters, as well as, potentially, for smaller indie labels, publishers, and producers who actively collaborate with and address the needs of songwriters.
If the potential for the underrepresentation of independents were not enough of a concern to begin with, the MMA also poses issues regarding songwriters’ ability to seek legal action for uncollected mechanical royalties in the future. Once the MMA went into effect, it closed all legal claims that were not filed before January 1st, 2018 – specifically, the legislation states that if a lawsuit against a music streaming company is not filed on or after that date, January 1, 2018, the plaintiff loses their right to be compensated for losses. As a result, important lawsuits against streaming services such as Spotify have now disappeared entirely. Secondly, any rights holder who is dissatisfied with the results of the collective would have no avenue through which to take legal action, except “through the dispute resolution scheme defined in the MMA and Copyright Office’s 5-year review of the licensing agency.” This seems to provide fewer tools for music creators who, even if faced with a truly unjust situation resulting from this new system failing, would not have the right to appeal and fight for their rights.
Since the MMA was officially signed into law, there have been few updates regarding the process through which the bill will be brought into effect. On July 5th, 2019, the U.S. Copyright Office announced that it had selected the members of the Mechanical Licensing Collective. The list of members included representatives from companies such as Apple, Spotify, Google, and Sirius XM Radio. Many worry that, without further reform, the MLC has the potential to completely wipe out any avenues for oversight or recourse on behalf of independent writers and publishers. Preparations are currently underway for the MLC’s responsibilities to commence on January 1st, 2021.
Conclusion
The Music Modernization Act, though flawed, is a step in the right direction; it has moved the music industry toward achieving amicable and long overdue solutions to major issues and loopholes in music copyright law. There remains a need for deeper and further clarity regarding the specifics of the various operations through which the goals of this legislation will be achieved. Specifically, clarity is needed regarding the Mechanical Licensing Collective and the database system that will be developed and used to match works with their rights holders. Furthermore, there is a dire need for further oversight and protection on behalf of independent writers, publishers, and producers. The truth is that only time will reveal how successful the frameworks provided by the MMA will be. For the moment at least, it seems that the most powerful entities in the music industry are likely to maintain their power, if not increase it. For now, the matter seems to have been put to rest. For the behemoths of the music industry, the MMA looks like a Godsend. For the independent writers and industry professionals, only time will tell what the true effects of the new laws will be.
Works Cited
Bransford, Traci, Amanda Rapp, and Michelle C Vinasco. “Music Modernization Act Update.” JD Supra, August 12, 2019. https://www.jdsupra.com/legalnews/music-modernization-act-update-58835/.
Evers, Al. “What’s Wrong With the Music Modernization Act.” FOSS Force, April 15, 2019. https://fossforce.com/2019/04/whats-wrong-with-the-music-modernization-act/.
Galdston, Phil, and David Wolfert, “The Music Modernization Act Misses the Mark (Guest Column)”, Variety. March 16, 2018.
Levine, Robert. “Allocation for Music Producers (AMP) Act Introduced in Senate,” Billboard. March 23, 2018.
Resnikoff, Paul. “Surprise! The ‘Music Modernization Act’ Prohibits Litigation Against Streaming Services.” Digital Music News, January 9, 2018. https://www.digitalmusicnews.com/2018/01/09/music-modernization-act-spotify/.
Rosenblatt, Bill. “The Big Push To Reform Music Copyright For The Digital Age”, Forbes. March 13, 2019.
Rosenblatt, Bill. “Improving the Music Modernization Act”, Copyright and Technology. March 13, 2019.
Miranda John. “The Music Modernization Act Will Create a New Copyright Licensing Organization Called the ‘MLC’. What Will It Look Like?”. Digital Music News. May 6, 2018.
U.S. Copyright Office, Library of Congress. “Designation of Mechanical Licensing Collective and Digital Licensee Coordinator .” July 5, 2019. https://www.copyright.gov/rulemaking/mma-designations/.
