There are moments in the history of every industry when a major change occurs that truly refocuses the landscape of that industry. For music licensing, that moment in history came earlier this year when the Music Modernization Act (H.R.5447) was unanimously passed in Congress. With the current political landscape in the United States standing firm in a very divided two-party system, this was especially surprising. It was one of the first times in quite some time where both democrats and republicans came together in complete agreeance about something. Republican congressman U.S. Rep. Doug Collins (R-Ga.) was even quoted as saying “Who would have thought that a Congressman from rural Georgia would find agreement with a liberal democrat from Brooklyn?” in reference to his colleague NY Rep. Hakeem Jeffries.
So what type of act brings congress together? What does the Music Modernization Act truly change about the world of music licensing? Well, quite a lot actually. Let’s break it down:
How the Music Modernization Act (H.R.5447) changes Music Licensing
The Music Modernization Act, in the broadest sense, sets out to protect songwriters and the fruits of their labors in the new landscape of the digital age. Now that individuals and professionals can acquire music so easily (not necessarily legally, but certainly easily) the creators of music have long been experiencing a lag time in proper compensation, if they receive compensation at all.
Thankfully, Congress has agreed, “No More.” This allowed the act to move on to the Senate, where is now waits to hopefully be passed. There are some amendments that have been added to the bill, and now the clock is ticking for the Senate to act. They must make a decision before this congressional term ends. This is the current state of the Music Modernization Act as of July 2018.
While we wait for more traction, it’s a good idea to take a look at the four main moving parts of the act: Section 115 Reform, Willing Buyer/Willing Seller Standard, the “Wheel” Approach and Section 114(i) Repeal.
Section 115 Reform
This part of the bill is very important in regard to how a songwriter or creator will be compensated, while also making sure this actually happens in a timely manner. One of the most important parts to note when it comes to Section 115 Reform, is the database of songwriter info that will be made available in a public form. This database will make it impossible for digital publishers to not know the rightful owner of a piece of music. It makes it simpler for songwriters and digital publishers to connect so everyone is compensated fairly and appropriately.
In addition, this reform also sets forth a Mechanical Licensing Collective (MLC) fund which will be funded by digital services in exchange for them being allowed to “be granted blanket mechanical licenses for interactive streaming or digital downloads of musical works.”
Willing Buyer/Willing Seller Standard
So, an added aspect of Section 115 prior to this act is that anyone is allowed to seek a compulsory license in an effort to reproduce a song. This was previously regulated by the Copyright Regulatory Board (CRB) but this has long been considered to be a flawed system. The Music Modernization Act, and specifically the Willing Buyer/Willing Seller Standard, aims to fix this by requiring “the court to consider free-market conditions when determining rates.”
The “Wheel” Approach
Another issue with current music licensing standards is the fact that all digital services are assigned a single judge. Whenever an issue arises, they will go before the same judge, never getting a different outside opinion and presumably, allowing judge bias to possibly build over the years. The “Wheel” Approach aims to create a rotating pool of district court judges that can hear cases that come primarily from BMI and ASCAP, and also other licensees, instead of assigning single judges for all time.This rotating wheel of judges will come out of the Southern District of New York
Section 114(i) Repeal
Currently, when it comes to overseeing consent decrees, federal judges are “are barred from considering sound recording royalty rates as a relevant benchmark when setting performance royalty rates for songwriters and composers.” This unfortunately stacks the cards against songwriters getting fair treatment. The Music Modernization Act aims to repeal this from the current landscape and allow songwriters to present other relevant details in regard to the current state of the music industry. This will allow for proceedings to move forward with more relevant and current facts.
Key Players in the Music Modernization Act
It is also important to note some of the key players in the molding of the Music Modernization Act. Without the following individuals, the act may not have even gotten as far as it has. Here is the rundown of the key players, who they are, and how they have impacted the Music Modernization Act:
NSAI President Steve Bogard
NSAI (or Nashville Songwriters Association International) President Steve Bogard has been working toward positive change with the Music Modernization Act since 2016. He was quoted as saying: “Senator Lamar Alexander reached out to me during the Christmas break in 2016. He told me he wanted to do something ‘substantial’ for songwriters. He gets my personal thanks along with all Senate and House sponsors of this legislation.” Clearly, his involvement was bolstered by other like-minded individuals rallying around him and that was greatly appreciated by all.
BMI President & CEO Mike O’Neill
BMI is an open supporter of the Music Modernization Act, and their president stands strongly behind the act. The CEO issued a statement on their website in which he praised the bill, and took particular aim at the moving parts of the Music Modernization Act: “While we believe there is still more to do to protect the value of the performance right, we are gratified that the Music Modernization Act contains two important provisions that create a more level playing field when determining the fair market value of our songwriters’ music; a wheel assignment for rate court judges and the repeal of 114(i).”
NMPA President & CEO David Israelite
NMPA (or National Music Publishers’ Association) President & CEO David Israelite is a major player in the music publishing scene. Having his approval when it comes to any new legislation can be very beneficial. He has long been in favor of the Music Modernization Act. He published a press release on the NMPA website in April 2018 stating: “The House Judiciary Committee’s approval of the Music Modernization Act (MMA) is a critical step towards finally fixing the system to pay songwriters what they deserve… There is unprecedented consensus and momentum behind this bill, and we look forward to seeing it soon pass the full House.”
Digital Media Association (DiMA) CEO Chris Harrison
Digital Media Association (DiMA) CEO Chris Harrison was a huge reason why the Music Modernization Act has made it as far as it has. He even spoke in front of Congress and you can view his testimony in its entirety here. In support of the Music Modernization Act, he is quoted as saying ““We support the Music Modernization Act because it would create a blanket license, which is critical to a modern licensing system and a great step forward. We look forward to continuing to work with the sponsors and the Judiciary Committee to enact legislation that creates a music licensing system that benefits everyone."
Closing the AM/FM Royalty Loophole
When it comes to AM/FM radio, the general assumption is that it is completely dead. While definitely not as popular as it once was now that there has been the introduction of digital streaming, AM/FM radio is far from dead. One way that the industry has been continuing to function is due to the loophole that allows them to not pay artists for the music they play during their broadcasts. This allows them to bring in 14.5 million a year in advertising revenue, none of which is paid to songwriters whose work is featured on AM/FM broadcasts.
The Fair Play Fair Pay Act of 2017 (H.R.1836) will close this loophole and make it necessary for all outlets, including AM/FM radio to be responsible for paying royalties for any music shared on their broadcasts.
Protecting Pre-1972 Sound Recordings & The Classics Act
Pre-1972 sound recordings unfortunately are subject to lesser protection than post-1972 sound recordings. This is due to the fact that federal copyright law came into effect for sound recordings on February 25th, 1972. Any sound recordings made prior to this point in time are often protected by various state laws, but lack federal protection.
This often means that large streaming services will use pre-1972 recordings and not compensate the artist. Pre-1972 recordings amount to approximately 15% of what digital streaming services use in their programming, meaning they receive 15% of their programming at no cost, but still receive advertising revenue. These legacy artists have brought lawsuits against big digital players like SiriusXM. One of the results of this was in introduction of the Classics Act.
The Classics Act will close the loophole and require digital streaming services to pay for recordings they play regardless of whether they are pre- or post-1972. This act is a part of the larger Music Modernization Act and has widespread support.
Overall, the Music Modernization Act has widespread support and far-reaching initiatives for change to the digital streaming landscape. This is an important act to keep an eye on as it continues its journey through the federal government.