A look at the Music Modernization Act

Music creatives of all types, along with the entire digital music ecosystem, celebrated the signing of the Hatch-Goodlatte Music Modernization Act into law on October 11, 2018.

The Music Modernization Act (MMA), which passed both Houses of Congress unanimously, is a new law that brings music copyrights into the digital age, modifying the already outdated copyright laws that were conceived in the 1990s before Napster, iTunes, and Spotify came along to upset the old music industry order. The MMA also provides a path forward to building a fairer compensation system for songwriters, producers, and rights holders.

Speaking before the bill’s passage, Ross Golan (BMI’s 2016 Pop Songwriter of the Year) explained to Forbes, “We all realize the current environment is really bad for songwriters. This is the first time in music history that you’ve had all genres and all company affiliations on the same side. It’s genuinely a unanimous desire to move our industry forward. This is the end of us [songwriters] being in the past.”

As the new rules and practices established by the MMA come into force over the next two years, songwriters, recording artists, and producers will find a more transparent, easy-to-navigate environment to track and collect royalties for their music’s use in a variety of digital media.

The Music Licensing Collective

The Music Modernization Act is essentially a collection of different acts crafted over the past five years. It is a compromise act, meaning that historic adversaries such as ASCAP and BMI, record labels and music publishers, and streaming services and indie publishers, have all agreed the time has come to find a solution to the Gordian knot that digital music rights presented in the 21st century.

The first and perhaps most critical component of the MMA is the Music Licensing Collective (MLC), a new body that will be formed to govern and develop a comprehensive, publicly searchable database that lists all pertinent ownership information for every song protected by copyright law. This would include all writers, co-writers, publishers, alternate versions, etc. This database is where compositions and recordings will be matched up so the correct payments may be made by the MLC to songwriters and publishers.

If the Music Modernization Act only created the MLC, it would rightly be viewed as a watershed moment in music copyright history, perhaps akin to the Copyright Act of 1909, which created the first mechanical royalty. Past attempts to create some type of global registry system have failed, but this time, it appears that all parties in the music rights industry — from record labels to publishers, Performing Rights Organizations, trade associations, and third-party administrators — have all signed on to help build the MLC’s capacity.

Of course, this won’t happen overnight; it will require time, resources, more compromises, and continued overview from the movers and shakers who helped create the MMA. And get ready for some debate about the details on the best way for the MLC to be managed from the various constituents in the mix. But it’s clear that everyone benefits with such a system versus the broken approach we are currently living with. In addition to the massive and ongoing database management that the MLC is charged with, they will also oversee the new digital blanket licenses and administer the collection, payments, and reporting of digital music royalties to songwriters and rights holders.

The MLC will be governed by a board made up of 14 music publishers, four of whom must be self-published songwriters who control all of their own musical works to ensure that the DIY musician has a stake at the table.

Funding the MLC

Funding to achieve this ambitious goal will be provided by the digital music services, who gained tremendously with the bill’s passage. The bill overhauls today’s labyrinthine digital mechanical licensing process. Under the Music Modernization Act, services such as Spotify, Apple Music, Tidal, etc., (referred to as Digital Service Providers or DSPs) will be able to secure blanket licenses for all the music on their services and pay the prevailing rates for usage. In exchange for funding the creation of the MLC, DSPs will be insulated from lawsuits from music rights holders, as long as they abide by the specific terms laid out for digital music use in the MMA.

It’s hard to say whether the creation of the MLC’s music ownership database or the protection from lawsuits is the bigger win for DSPs. Spotify’s VP of Business Affairs, Hector Gutierrez applauded the fact that the MMA, “Will create a more transparent and streamlined approach to music licensing and payment to artists.” At various points in the recent past, Spotify had been sued by music rights holders since the company had not been able to ascertain to whom it should pay past-due streaming royalties due to the lack of ownership information available for a significant portion of the 35-plus million songs in the Spotify catalog. As part of a legal settlement, Spotify paid out $112 million to publishers in May 2018 for songs that had been streamed but for which Spotify could not identify who to pay. In fact, a different lawsuit filed late in 2017 by Wixen Music Publishing against Spotify alleging lack of payment is still pending in US Court. With the MMA’s passage, all royalty beefs originating after January 1, 2018 will be handled under the new law.

The CLASSICS Act and AMP Act

The Music Modernization Act includes two earlier acts which had previously failed to gain traction. First, the CLASSICS Act (Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society) ensures that artists with pre-1972 recordings will be entitled to master recording performance royalties. Up until the passage of the MMA, streaming services could turn a blind eye toward paying those royalties to recording artists whose music make up the backbone of Sirius/XM and who remain very popular on other streaming services.

Meanwhile, the AMP Act (Allocation for Music Producers), establishes a fair and transparent method for producers and engineers to receive royalties from SoundExchange when tracks they helped to create are played on satellite or streaming services.

And while it’s clear that the major publishers, labels, and superstar artists will be pleased with the MMA’s improved rates for use of their respective songs and recordings, what about DIY and Indie artists? The Association of Independent Music Publishers (AIMP) represents a wide array of indie and solo artists who retain the publishing rights to their own catalogs. Along with various songwriters’ organizations, AIMP stands up for the little guy among the mega-publishers who often dominate the publishing landscape.

AIMP President Michael Eames, along with regional AIMP executive directors Alisa Coleman and John Ozier, issued a joint statement regarding the MMA’s passage. “This marks the first significant federal legislation since 1998’s Digital Millennium Copyright Act (DMCA) to address the needs of rights-holders in today’s online age. We can look forward to a variety of long-overdue reforms that will make it easier to negotiate for and collect fair royalty rates while also establishing once and for all that digital services must pay for the use of pre-1972 recordings. In addition, it ensures independent publishers and songwriters a seat at the table for the new mechanical licensing collective.”

What’s the bottom line when it comes to the Music Modernization Act?

For an unsigned independent artist who holds her song publishing rights, the long-term benefits should be that whenever your music gets spins on any streaming or satellite music services, you will begin to see better payouts. According to musician, writer, and copyright attorney John Miranda, “The MMA changes the royalty rate setting standard to ‘willing buyer, willing seller,’ which is likely to make the rate higher. All around, music composition copyright holders are going to see paychecks in the mail more frequently and in larger amounts, thanks to the MLC.”

However, all this good news comes with one major caveat: It’s absolutely essential that you take the necessary steps of getting your songs and your personal music publishing company registered with ASCAP, BMI, or SESAC and your master recordings registered online with SoundExchange.

For your own peace of mind, you should also register your songs with the U.S. Copyright office. The process for uploading your song composition ownership data to the MLC has yet to be determined, but by having your songs registered with the Library of Congress and your Performing Rights Organization, plus making sure your master recordings are registered with SoundExchange, you can help make sure you are not overlooked as the workings of the MLC and implementation of the Music Modernization Act begin to move forward.

Having your recordings and compositions registered becomes even more critical as the MMA is implemented since any royalties owed for music that is streamed but not registered with the MLC will be dumped into a “black box” and divided up among other writers and publishers after three years. Over the past seven years, it’s been estimated that the “black box” has accumulated nearly $900 million in unpaid royalties! Don’t let this ship sail without you on board.

Take a look at the copyright services Disc Makers offers to make sure you protect yourself.

Story Links

President Trump Signs Music Modernization Act Into Law With Kid Rock, Sam Moore As Witnesses (Billboard)
Ed Christman reports on the MMA’s signing into law in the Oval Office with a range of musicians in attendance.

The Music Modernization Act Will Create a New Copyright Licensing Organization Called the ‘MLC’. (Digital Music News)
In this Q&A, copyright and patent attorney John Miranda offers insights into how the MMA will benefit songwriters.

An Insanely Detailed Discussion of the Music Modernization Act (Digital Music News podcast)
Paul Resnikoff interviews music rights advocate and Audiam founder and CEO, Jeff Price, in this 90-minute podcast.

Keith Hatschek is a regular contributor to the Disc Makers Blog and directs the Music Management Program at University of the Pacific. He has also written two music industry books, How to Get a Job in the Music Industry, which just came out in its third edition, and The Golden Moment: Recording Secrets from the Pros His latest book, The Historical Dictionary of the American Music Industry, has just been published in fall 2018. Keith was recently featured offering a range of music industry career advice in Episode #33 of the Scharff Brothers’ Mentoring for the Modern Musician Podcast.

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