Unlikely Congressional bedfellows in the U.S. House of Representatives came together last week to unanimously pass a sweeping overhaul of the music licensing and royalty payment laws that may have repercussions from D.C to KC. The bill, known as the Music Modernization Act, now heads to the Senate for debate later this month, where it is expected to pass with little objection.
When you consider how much the music industry has changed over the last two decades, an overhaul shouldn’t seem like a shock, but constantly shifting revenue streams made the topic something of a diplomatic minefield due to the demands of all the players involved – from artists, labels and producers to the digital music services profiting off them all.
Those with sadomasochistic tendencies for legislative legalese can find the full text of Bill HR5477 here. For the rest, the biggest changes in the law are laid out below:
In the age of digital streaming, one of the biggest complaints from songwriters and music publishers has been the hassle of collecting “mechanical” royalties, the revenue paid to a songwriter when a copy of their song is made.
Perhaps the biggest change coming out of the MMA is the establishment of a new agency, the Mechanical Licensing Collective. It’ll be charged with identifying rights holders, distributing mechanical royalties and governing licensing rates.
In addition, the MLC will issue blanket mechanical licenses to the digital streaming services, negotiated by a board of representatives that includes publishers and songwriters.
In the U.S., sound recordings were first given protection through the Copyright Protection Act of 1976. The language of that act specifically stated that it only applied to sound recordings that had been made after February 15, 1972, and that state and common law would control copyright disputes for sound recordings made before that date.
My hope is that these changes will help reignite that practice of working with developing artists. — Joel Nanos, Element Recording Studios
This chronological demarcation gave digital streaming providers a loophole to broadcast music by huge names like Bob, Dylan, Elvis Presley, The Beatles, and Led Zeppelin without paying royalties to the major record labels and the artists that had created the songs. This led to a string of lawsuits – like the one against SiriusXM and Pandora in 2014 – which ultimately resulted in a settlement between labels and the internet radio companies.
And while those agreements were enforceable through contract law, there was not any sort of statutory protection for these works.
Through the MMA, and more specifically the Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society Act — CLASSICS — the somewhat arbitrary, time-based line of copyright protection is erased. Going forward, digital music services will have to obtain a license to play pre-1972 recordings and pay at the same rate and manner as post-1972 recordings. Those royalties will then be collected and distributed by the MLC.
The Copyright Act of 1976 also established the concept of compulsory licenses. In general terms, a compulsory license is one where, under specific circumstances, anyone has the right to reproduce an artist’s music without first obtaining the artist’s consent, as long as that person provides notice to the copyright owner and pays a fee. Traditionally, this fee was codified by statute, and the rate was annually set by a governing body known as the Copyright Royalty Board. But it was generally understood that compulsory license rates did not reflect the market value of these transactions.
By contrast, the MMA establishes a “willing buyer, willing seller” rate standard that will allow the CRB to establish rates and terms that expressly reflect fair-market negotiations – which will presumably cause the royalty revenue to artists and labels to increase.
Also included in the bill is the codification of a practice that had been developed by SoundExchange to benefit other parties to the recording process.
Under traditional, physical album sales formats, producers, mixers, and sound engineers are entitled to their own mechanical royalties if they have an agreement outlining that royalty with the artists. However, the same royalties didn’t translate to digital performance royalties unless the parties specifically agreed to include them, and even then it could be difficult for producers to get paid directly without getting the artist involved, which complicated the process for everyone.
Under the MMA, producers can provide the MLC with a “letter of direction” that will give them a statutory right to receive direct payments for their royalties – thereby protecting those royalties and streamlining the process.
Joel Nanos, owner, producer, and engineer at Element Recording Studios, said this change could allow producers to take more risks with emerging artists.
“It used to be that you could work with an artist, develop them, and get paid on the back end. And with how complicated it has become to get paid as a producer, that kind of evaporated,” Nanos said. “So that means when the artist wants to work with you, they have to pay the full rates upfront. And they don’t always have that. My hope is that these changes will help reignite that practice of working with developing artists.”
The changes proposed under the MMA are sweeping and the response has been mixed. It has been celebrated by songwriters and publishers and condemned by a few internet radio providers. Some fear it will make older music less accessible and make it harder for fully independent artists to make money.
And with yet another legislative hurdle to come, the future and success of the MMA is still somewhat unclear. But given that the industry has suffered for so long upon antiquated legal policy, most will agree that any change is a good change.
— Dan Calderon is Kansas City native, an attorney, and contributor to Flatland. You can contact him by emailing email@example.com, or on Twitter @dansascity.
This article was updated to fix a broken link.