The Music Modernization Act of 2017
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.
Should Performers Get Royalties?
Did you know that the U.S. is grouped with China and Ghana as one of the only countries that does not pay royalties to the performers of a song that is aired publicly (Radio/TV)? Weird, right? Well this odd and troubling (for some) fact may be changing soon. Here is my fellow L4M’er, Eric Malnar with his take on the Performance Rights Act and what changes may be on the horizon:
The Performance Rights Act (the “PRA”) was introduced in the U.S. Senate (S.379) and the House of Representatives (H.R. 848) in February of last year. So why are we talking about this now? Well, as most of you should now, L4M was recently in Austin, Texas for the 2010 SXSW festival and the PRA was the topic of an interesting and heated panel. Interestingly, all sides of the issue were represented, except of course the radio stations (these are the guys who are supposedly adversely affected by the bill). Perhaps invitations were sent but nobody from the radio world wanted to appear on the panel…who knows. It is a shame because it would have been nice to hear their perspective especially since it appears as though the Obama administration is supporting the PRA and it might actually become law.
As a musician or someone who makes money through music, should you care about the Performance Rights Act? Well, it depends on what you do. As many of you know, every time a song is played on terrestrial radio a royalty is supposed to be paid to the songwriter. However, there is no payday for the artist who appeared on the song (singer, guitar player, chime and etc). For example, if I wrote a song for a famous pop singer I would receive the royalty not the singer. This is currently the system for terrestrial radio. Think of Aretha Franklin singing RESPECT. Everyone in the world has probably heard that song, but every time it is played the royalties for public performance go to the writer (specifically his estate) Otis Redding.
Digital sources of music are governed under a different law. Under the Digital Performance Right in Sound Recordings Act of 1995 (“DPRSRA”) digital music providers are required to pay performance royalties for performance of the sound recordings. Many feel that the difference in the way royalties are paid for terrestrial radio versus digital providers is unfair. The PRA would remedy this scenario by requiring a royalty for the singer as well as the background musicians. So as you can imagine, the digital folks, like Pandora and LALA are excited about the passage of the PRA because they feel it will provide a level playing field.
Another often heard argument in favor of the PRA is the fact that other countries do not have the same terrestrial radio exception that we have here in the States. In other words, money is being collected overseas for American artists but it is not being paid because the U.S. does not have a reciprocal system.
Wow, so this all sounds too good to be true, what is the catch you ask? Well terrestrial radio stations are not happy about the PRA. They argue that this will drive up costs and either put them out of business or force them to change their format to talk radio. Thus the dilemma, is it worth receiving new rights under the PRA to the potential detriment of your opportunity (as an artist) to have your music played on terrestrial radio? Back in the day when my band was struggling to get exposure we would have done almost anything to get played on big radio. If the radio industry, which claims to be struggling, pulls music from most of its stations, another avenue for musicians to get exposed is closed.
Regardless of what happens it is important for every artist to understand his or her rights as a songwriter, performer or both. As recording contracts morph into more intricate deals (e.g. 360 Contracts) artists need to be versed on all avenues of revenue. It is no fun talking about music and money in the same sentence but at the end of the day, you need to pay the bills so you can live to play another day.
Stay tuned for updates on the PRA and more insight into some of the hot topic areas of music in film.
Waiting on Royalties? Get Comfortable.
In the old days (about 10 years ago), artists would get fat advances from labels who would cash in on the traditional sale of music. Bands with one hit song could sometimes even afford to pay back the advance and make even more money from the royalties earned via record sales throughout the world. Labels would give away small fortunes to successful bands with the security that they would make far more money than the band ever made through lopsided royalty rates.
Today; not so much. Labels have crumbled under this model (thus the 360 deal). Royalties today account for a very small percentage of the total earning potential of a successful band. Don’t take it from me, here’s what Irving Azoff said in his Business Week interview with Jon Fine: Today, ‘recorded music is down to less than 6%’ of major musical acts’ revenues. 6%! that’s it. Think about that; a big name band like Coldplay or Greenday who still sell hundreds of thousands of albums still make about 94% of their income from sources outside of royalties.
So where is the rest of that income coming from? Number one is still touring. The concert scene seems to be recession proof as thousands are still packing arenas, clubs and festivals. Europe, Asia, and Austrailia continue to pay top dollar/euro/etc. to see popular acts. Corporate partnerships and sponsorships are also huge money makers. Corporations realize the marketing value that music can bring. Partnering a popular band with a product is nothing new it is just more prevelant today. Christinia Aguilera, Gwen Stefani, Madonna, Britney, P-diddy, J-lo all have fragrances in partnership with established cosmetic companies. Even Weezer just recently announced that they are going to partner with Snuggle (the fabric softner). Redbull consistently sponsors up and coming artists across the country.
Merchandise is also still a big money maker. The web makes it easier to sell more stuff to more fans in more areas. Cheap manufacturing and easy distribution create high profit margins for everything from hats and t-shirts to ipod cases and cell phone apps.
Finally, licensing takes up another chunk of that 94%. Licensing can go hand in hand with corporate partnerships, but also expands to movie, tv and commercials.
You cannot wait for your music to sell itself. More importantly, you cannot to sustain your career through the strenght of traditional record sales. Remember, you create your own market. Just like a savy investor, you have to diversify and look for all possible money making avenues for the business that is your music.
SHAMELESS SELF-PROMOTION OF THE WEEK: LEBRON V. KOBE COMMERCIAL FEATURING THE COOL KIDS
The Cool Kids are one of the best examples of the new music business model. Their plan of primarily giving their music away for free has paid off. Great music, working hard and creating a good team have led to incredible opportunities. One of those opportunities was to have their music featured in the most recent version of the Nike commercial series featuring the puppet version of Lebron and Kobe. Check it out: