Previously we reported on the Music Modernization Act, a bill proposed to ensure digital music services pay fair royalties to the copyright holders, and where it stands during its process to be become an enacted bill. As we are aware from the timeless SchoolHouse Rock classic “I’m Just A Bill”, in order to enact a bill it takes time and votes from different levels of Congress. The bill passed the House unanimously April 25, with a revised and amended version coming out of the Senate Judiciary Committee June 28. If the bill passes a Senate vote, it goes back to the House for a final sign off.
The bill seemed to be moving full steam ahead with no objections from any party until lobbyists discovered how much control private entities would lose to the newly formed MLC, Mechanical Licensing Collective. These offered amendments from the private sector have put the bill in danger of not passing. Technically, this copyright bill has until the end of the year to pass but legislators are targeting Oct 12 as the deadline. This date is before Congress adjourns for the midterm elections because after Congress goes on vacation, nothing new will be passed.
First the MMA received push back from The Blackstone Group, owners of SESAC and The Harry Fox Agency. They proposed an amendment that would allow the current mechanical licensing organizations to stay in control of mechanical royalties collection and administration. The Blackstone Group questioned why a government-commissioned mechanical licensing body was necessary, when these organizations already exist. After negotiations, the reps for the MMA clarified the restriction on what licenses can be administered by the MLC, which include sync, lyric and performance licenses. This allowed groups like SESAC and Harry Fox to maintain their clientele and continue business as usual, thus still allowing the MLC to collect data and administer mechanical royalties.
After putting out that fire, the MMA is now seeing restraints from another organization. SiriusXM is fighting a portion of the bill’s CLASSICS Act provision which calls for digital and satellite radio to pay royalties for playing pre-1972 master recordings, while terrestrial radio would be exempt.
The SiriusXm CEO has criticized the bill for expanding the royalty requirements for satellite radio without also expanding the requirements for terrestrial radio. Traditional radio doesn’t pay for the broadcast of any sound recordings and this bill does nothing to change that. During a period in which SiriusXM paid 2.2 billion for the use of post 1972 works, terrestrial radio paid nothing. The future of radio is digital and it would be wise for the drafters of the MMA to carve out language to fairly compensate artists in both the digital and terrestrial areas. At this point, neither side has figured out a solution and they only have a couple months left to do so.
Moving forward, the Music Modernization Act has only three paths to move through the Senate: 1. by speedy unanimous verbal consent, which would require all 100 senators to vote yes; 2. the more difficult floor process, which includes time for hearings and would require support of at least 60 Senators (46 Senators have signed on as co-sponsors); or 3. by attaching the MMA as a rider to another piece of legislation that is sure to pass.
Please continue to follow along the MMA’s progress (or lack thereof) here at L4M, @l4m, tkhlaw.com, @TrogliaKaplan or email us for more info.
Wait a second…What just happened? Did the United States government actually try to address a problem that has effected millions of Americans for years by introducing a Bill before Congress? Did those blowhards in Washington D.C. stop fighting and tweeting and actually do the job that they were sent there to do?
Here is a draft of H.R. 4706, The Music Modernization Act of 2017.
For years now the streaming revolution has completely disrupted the way consumers listen to music, the way musicians release music and the way rights holders (musicians, publishers, labels etc.) get paid. With the recent onslaught of litigation against giants like Spotify and Apple Music, lobbyists in D.C. seem to have been effective in getting our legislative branch to try to address an over decade old issue.
With the goal of ensuring that streaming platforms (a) don’t get sued, (b) mechanical royalty rates are set as independently as possible and (c) theoretically, getting money to the right people in a faster way, the MMA sets up several new processes for the music industry.
In typical Washingtonian fashion, the Bill introduces yet another bureaucratic body to oversee and administer digital licenses and pay all copyright owners (so long as your works are registered correctly). While, in theory, this sounds like an intelligent move, there are numerous questions about the efficiency of yet another “agency” involved in paying monies to the correct rights holders. We think it is definitely a move in the right direction by centralizing all digital blanket licenses and the decision makers for mechanical royalty rates (without a commission or overhead cost put on the backs of rights holders), but the move begs the question of how effective other government led regulatory bodies have been in the past (Government Shutdown ring a bell?). Lobbyists have touted this move as a departure from the tenured “judges” that rule over the PRO’s (ASCAP and BMI) and allows for a more impartial method in determining amounts paid for performance royalties to songwriters.
Since the inception of streaming services, platforms have avoided paying mechanicals because after filing the required Notice of Intent (or NOI) there is no further requirement to determine the actual right holder of a particular song. So if your information isn’t found or hasn’t been registered, Spotify, Apple, Amazon etc. haven’t had to pay you for streaming your license. The MMA attempts to do away with this giant loop hole. The new oversight/governing body will attempt to collect all data (by working with Content ID/Google and other data aggregators) and theoretically make sure that every song is registered so that every right holder is paid (some minuscule amount) for every stream.
The Bill then sets up a more “free-market” system for determining what mechanical royalty is actually paid to the rights holders (now that they will all be contained within this database). The rights holders and the platforms will have the ability to negotiate and set rates rather than relying strictly on government set rates.
The Bill was introduced to the House Judiciary Committee before the end of 2017 and there it sits. We will be watching carefully, along with millions of musicians and industry folks, to see how it progresses, what changes are made and how much pork is added to it.