v30#6 Legally Speaking — Music Modernization Act 2018

by | Feb 18, 2019 | 0 comments

by Anthony Paganelli  (Western Kentucky University)  PDF copy

On October 11, 2018, singer, songwriter, and rapper Kanye West made an appearance at the Oval Office of the White House to have a conversation with President Donald Trump, a discussion which immediately went viral.  Interestingly, the conversation between President Donald Trump and Kayne West overshadowed a significant piece of legislation that was signed into law early that morning by the president.  Prior to West’s visit, singer, songwriter, rapper, and musician Kid Rock arrived at the White House, along with Mike Love of the Beach Boys, Jeff Baxter of the Doobie Brothers, country singers John Rich and Craig Morgan, Sam Moore of Sam and Dave, and members of the Christian band MercyMe, as well as legislators and music industry leaders who all came to witness the moment that the President signed the Music Modernization Act in the Roosevelt Room of the White House.

The Music Modernization Act is legislation that enhances the U.S. Copyright Law by providing better financial support for artists as the digital streaming era continues to dominate the music industry.  Since this legislation was passed, the last major legislation to help assist with music copyright laws was passed in 1998 with the Digital Millennium Copyright Act (DMCA) to confront the issues of online music content.  While other legislation had been introduced regarding compensation for artists, the Music Modernization Act will expand the rights of songwriters and artists, as well as producers and others that can be credited for their contributions to a specific copyrighted song or songs.

According to U.S. Senator Orrin Hatch, a republican from Utah and one of the legislators that introduced the legislation, noted that the previous copyright laws were outdated and needed to be reformed based on the significant increase of musical content being utilized online.  He stated, “Our music licensing laws are convoluted, out-of-date, and don’t reward songwriters fairly for their work. They’ve also failed to keep up with recent, rapid changes in how Americans purchase and listen to music.”

In 2016, songwriter, singer, and musician David Crosby discussed in an interview with Ryan Leas the financial struggles with music streaming providers.  Crosby stated, “the streaming services, which is the direction it’s all going in, are worse.  They don’t pay us at all. If you played Déjà Vu 10,000 times I could buy you a cup of coffee.  Is that right? No, that’s not right.” Due to the lack of royalty payments by the streaming providers, Crosby noted that several songwriters and musicians are beginning to rely on concert tours to help compensate the lack of income.

The Senator’s comments reflect the Music Modernization Act that addresses the compensation issues of paying artists and songwriters, which had not been maintained during the past twenty years as digital streaming increased the changes in musical usage.  Several bills were introduced to provide financial support for songwriters and artists during this time period, but most failed to get passed. The Music Modernization Act is legislation that assists in updating the copyright laws that benefit both the artists and the publishers, while collaborating with digital streaming providers.

The Music Modernization Act provides support for three previous acts.  The CLASSICS (Compensating Legacy Artists for their Songs, Service and Important Contributions to Society) Act (H.R.3301/S.2393), the AMP (Allocation for Music Producers) Act, and the Fair Play Fair Pay Act (H.R. 1836).  The legislation also closes the pre-1972 AM/FM radio loophole, provides compensation for producers and audio engineers through the “letter of direction” from the copyright owner, provides compensation to eligible participants of recordings made prior to the 1995 digital performance rights through the digital royalties, ends the “Notice of Intent” process to establish the Mechanical Licensing Collective to compensate artists efficiently, creates a publicly accessible database for sound recording royalties, and allows courts to set rates for sound recording royalties fairly.

As noted by Senator Hatch, the U.S. Copyright, legislation, and policies needed to be updated and created to maintain the growth of digital uses for music in order to properly pay artists and other contributing personnel involved in the creation of music.  The process to create the Music Modernization Act took several years and attempts to create the legislation that a bipartisan leadership and leaders in the music industry could agree upon.

A portion of the Music Modernization Act was first introduced in the House of Representatives on April 10, 2018 by Utah Representative Bob Goodlatte that included the AMP (Allocation for Music Producers) Act, which was introduced by New York Representative Joseph Crowley on February 6, 2017.  The AMP Act would allow the copyright owner to direct assigned royalties to producers, mixers, or sound engineers before November 1, 1995.

In addition, the Music Modernization Act reforms the U.S. Copyright Section 115 by eliminating the Notice of Intent and funds a Mechanical Licensing Collective (MLC) entity that would create a blanket music licensing for streaming and digital downloads, as well as a public accessible database of publishers and artists that would be governed by music publishers and songwriters.  Writers will also have auditing rights, which was not established in Section 115. Furthermore, Section 115 will provide a legal standard to require courts to set conditions in determining royalty rates. This includes the “Wheel” approach that assigns district judges for rate settlements for the performing rights organizations.

Section 114 is repealed under the Music Modernization Act.  The prior section stated that a performing rights organization could consider the sound recording statistics as a benchmark to determine royalty rates for artists.  For instance, the performing rights organizations could base the fee of a song through sound recording sales, which could potentially lower royalty rates paid to artists.  Currently, writers can provide other evidence to base the rate for songs to the judge, instead of the sound recording data.

Due to the unanimous bipartisan acceptance of the proposed legislation, it was able to move directly to the president for his approval and eventually becoming a law through the “hotline” process.  While it appeared the act was not met with opposition, the major satellite radio provider SirusXM did have opposition towards the legislation, which did have two senators considering to vote against the legislation that would have sent the legislation back to the senate for further debate.

SirusXM was against the elimination of the U.S. Copyright 801(b) section that allowed courts to set rates when establishing rates for licensing music, which the 1998 Digital Millennium Act typically allowed lower rates for the satellite radio providers.  Furthermore, the company wanted to ensure that the law included a 50-50 split between the artists and the record labels for the pre-1972 recording payments because prior payments from the SirusXM did not include the artists.  Finally, the company was concerned about the terrestrial radio royalty agreement that would require the company to provide royalties to music publishers and writers.

After a last minute agreement, SirusXM agreed to the legislation that prevented the bill from returning to the Senate.  The 50-50 split payment was easily agreed upon by the artists and publishers, because that was an increase in royalties, as well as the new standards for setting royalty rates.  However, SirusXM was not successful in the terrestrial radio issue that closed the AM/FM radio royalty loophole of music recorded prior to 1972, therefore digital music providers will have to pay royalties for music pre-1972.

A significant aspect of the Music Modernization Act is the public accessible database, which would be more efficient for academic libraries to locate copyrighted materials and secure music licensing agreements for patrons faster.  The database would also provide transparency, as well as convenience. Another aspect of the act, is the new standards in royalty payments that could possibly make some music more affordable and accessible.

An issue with the act has been noted that includes the public accessible database, which is required by the law to provide a database of each copyright owner in order to pay the royalty.  This is the mechanical licensing collective system that receives payments, identifies the copyright holders, and distributes royalties to the owners of the rights. The mechanical licensing collective has to create a public accessible database that contains the information of the copyright owner, as well as maintaining the database, which is important to ensure that the database is accurate and the owners receive their royalty payments.

In addition to maintaining the database, the legislation changed once the Senate revised the legislation.  The House bill required an independent group to oversee the mechanical licensing collective that would be selected by the U.S. Copyright Office.  In addition, the House bill required a group that would consist of members from all stakeholders to evaluate the mechanical licensing collective. Instead, the Senate bill provides an audit every five years, which the information is reported to the mechanical licensing collective board of directors that includes music publishers and songwriters.

Furthermore, the Music Modernization Act’s pre-1972 recordings are under the Federal regulations, which excludes state laws regarding the fair use, the first sale doctrine, and protections for libraries and educators do apply explicit, which would avoid any issues that the state law could possibly hinder in music usage.

Overall, the Music Modernization Act will benefit the artists, as well as other important people within the industry.  The legislation will also provide a foundation for digital music usage in the future.  In addition, the U.S. Copyright was enhanced to maintain the changes in the digital era.  Hopefully, the mechanical licensing collective system will create a database that will be transparent and better assist libraries that seek music licensing agreements.

Bibliography

Leas, R.  “Q&A David Crosby Talks Twitter, Streaming, Kanye, and His New Album Lighthouse.”  Stereo Gum.  (October 12, 2016): https://www.stereogum.com/1904725/qa-david-crosby-talks-twitter-streaming-kanye-and-his-new-album-lighthouse/franchises/interview/

Levine, R.  “Allocation for Music Producers (AMP) Act Introduced to Senate.” Billboard.  (March 23, 2018): https://www.billboard.com/articles/business/8257740/allocation-music-producers-amp-act-introduced-senate

“Music Modernization Act.”  U.S. Congress.  (2018): https://www.congress.gov/bill/115th congress/house-bill/5447/related-bills

“Senate Passes Music Modernization Act.”  Variety.  (September 12, 2018): https://variety.com/2018/music/news/senate-passes-music-modernization-act-1202947518/  

 

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