In the current digital age, the way we create and consume content is quickly changing, so much so that the law at times has a hard time keeping up. Recent developments have helped to bring some more balance between the service providers and the artists, but there is still much work to be done. The Music Modernization Act (the “MMA”) is a big step in the right direction, but even within this Act there is room to provide more protection and fair compensation to the artist.
President Drumpf signed the MMA on October 11th, 2018. Despite there being much disapproval of the compensation of artists, this is the first reform in music licensing in 20 years. The MMA’s changes include closing the loophole with copyright protection for recordings before 1972, codifying SoundExchange’s practice of honoring “letters of direction” from artists who want to share royalties with studio producers and other creative participants who work with them, creating a process for eligible participants in recordings made before 1995 to share in digital royalties for those recordings, and requiring digital platforms to pay fair market value for music and establishing a “willing buyer, willing seller” standard. In simpler terms, the Act is intended to simplify the process by which Digital Service Providers (“DSPs”) such as Spotify and Apple Music pay mechanical royalties to songwriters and music publishers, and also require them to pay for streaming of pre-1972 sound recordings.
The complaints that led to this decision stem from the lack of a centralized database containing ownership information. Due to this shortcoming, music owners either don’t receive royalties or the royalties are paid out to the wrong people, in turn leading to more issues and potential lawsuits. The MMA establishes the Mechanical Licensing Collective (the “MLC”), consisting of music publishers and songwriters, as a centralized entity that will be able to deal with licensing and royalty issues. The intention is to incentivize DSPs to pay royalties to the MLC, which the MLC can then pay to correctly identified rights holders, and in turn issue a blanket license to the DSP to stream any song and therefore be protected from any infringement claims brought by song owners for unpaid royalties. Essentially, any issues will now be more easily rectified as the MLC will be responsible as opposed to several different DSPs. This ends the tedious Notice of Intent (NOI) process and ensures that songwriters are being compensated in a timely manner.
When Congress created sound recording copyrights in 1971, these copyrights did not retroactively cover songs recorded before 1972. The MMA deals with this issue by granting a term of protection for these pre-1972 recordings for 95 years from the date of publication plus additional periods at the end of the term depending on certain conditions. While this will benefit digital music companies like Pandora and Sirius XM, who have private agreements including payment for some pre-1972 recordings, it will make it harder to hear a lot of these recordings.
While the details in the legislation are important, it is also important to note that part of the reason such issues arise are because the law can seem very mystifying to the average person, and the exclusion of artists and music owners from the process of creating such legislation creates an imbalance in bargaining power, or a complete absence of any bargaining power for the artists and music owners. Here’s what various layperson groups need to know about the MMA:
- Songwriters and music publishers will now be paid royalties that otherwise would not have been paid due to the slow and complex system that was in place, especially for songs recorded before 1972. The MLC will now be responsible for royalty accounting and will have to deal with any grievances pertaining to the accuracy of royalty statements and payments. If composition owners are unidentified or unregistered with MLC, they will be held in an interest-bearing account for three years, after which they will be distribute to other music publishers based on their market share.
- DSPs will easily be able to obtain blanket mechanical licenses to stream any song without having to worry about acquiring proper licenses for them. However, they must pay royalties to the MLC at a negotiated rate.
- Radio stations must pay royalties to songwriters and publishers for pre-1972 recordings.
One big criticism of the MMA is that it benefits the biggest companies and executives. Many have questioned why the Act called for a government-commissioned mechanical licensing body when there were several that already existed. The MLC will kill at least 100 jobs at an institution such as the Harry Fox Agency. Moreov
er, the MMA and the creation of the MLC seem to have whiffs of insider deal-making. For example, one of the provisions of the MMA states that any unclaimed money will be frozen after three years, after which it will be distributed to the largest music publishers such as Universal Music Publishing Group and Warner/Chappell. The unclaimed royalties will then be distributed by market-share, often going into the wrong hands as these publishers don’t even have any legitimate claim to the works in question. We still have a ways to go with reaching the balance artists seek with the new gatekeepers of the music industry, but the MMA provides a step in the right direction from which we can build.
Dolapo Akinkugbe is a second-year law student and rapper who performs under the name DAP The Contract. You can explore his music here.