Bipartisan Music Licensing Legislation Looks to Help Music Industry Clean Up its Act

                       Architect of the Capitol, The Western Front of the United States Capitol, 1997.

For years, the music industry has dealt with music licensing issues, largely due to technological developments such as streaming radio and digital downloads, which have created new challenges for providing the appropriate levels of compensation for songwriters and publishers. Now, after years of discussion and lobbying efforts, a bipartisan bill may provide a much-needed solution.

Introduced in the Senate in late January, the Music Modernization Act (“MMA”) – sponsored by Senators Orrin Hatch (R-UT), Lamar Alexander (R-TN), and Sheldon Whitehouse (D-RI), and co-sponsored by Senators Dick Durbin (D-IL), Bob Corker (R-TN), Chris Coons (D-DE), Johnny Isakson (R-GA), and Doug Jones (D-AL) – proposes several changes to Section 115 of the Copyright Act so that rights holders, including composers and publishers, can be fairly compensated.¹ The MMA seeks to create “a blanket mechanical licensing system,” elect a new agency to administer it, make changes to royalty rates, and modify the way royalty rate disputes are handled.²

By creating a blanket license, streaming service companies like Spotify and Apple Music would no longer have to go through the hurdles of finding out which composition underlies a specific sound recording in order to pay that composer and/or music publisher for use of their work.³ The new music licensing collective will be tasked with matching recordings to compositions, thus paying composers and publishers accordingly, and maintaining a database for use by the streaming services companies.⁴ In addition to proposing that royalty rate disputes be rotated to various federal judges in the Southern District of New York, as opposed to the same judicial panel for ASCAP and BMI royalty determination cases,⁵ the MMA also allows for rates to be applied using a free-market, “willing buyer/willing seller” standard rather than the current standard that doesn’t reflect market value.⁶ Collectively, this would pave the way for better rates for songwriters.

While many have lauded this as a step in the right direction – including the National Music Publishers Association, the Recording Industry Association of America (“RIAA”), and performance rights organizations (“PROs”) like ASCAP and BMI,⁷ others believe that many of the past problems with licensing, and those affected by them, will be overlooked. Things weren’t looking good for the Act’s progress due to hold-outs from groups such the National Association of Broadcasters (“NAB”). The NAB was concerned with the MMA’s repeal of Section 114(i) of the Copyright Act, which provides that the rates which record labels receive for sound recording performances can’t be used as evidence during rate determination trials for public performance of musical works.⁸ However, those concerns were alleviated and the NAB is now in support of the MMA because the repeal of section 114(i) will be limited so that it will not apply to terrestrial radio and simulcasts.⁹

Despite the NAB and others coming around, giving the MMA almost universal support from members of the music industry, questions remain about whether composers will be appropriately paid when their work is used. One concern is a potential discrepancy between what songwriters receive compared to publishers.¹⁰ Under the MMA, the licensing collective that will distribute royalties will give any unmatched royalties to music publishers on a market share basis.¹¹ However, most music contracts (other than those of big stars) contain exclusion clauses that don’t allow writers to collect money obtained by publishers unless the funds are specifically tied to the writer’s work.¹²  Therefore, only prominent artists will receive a portion of those funds, while publishers effectively receive a windfall.¹³ Another concern is that the MMA’s creation of a licensing collective could result in the end of PROs like ASCAP and BMI, in favor of a one-stop licensing entity, which would end many private contracts between songwriters and PROs.¹⁴

However, as shown by its bipartisan efforts and wide support, the MMA appears to be a big step in the right direction for music licensing. The MMA hopes to provide major changes to deal with the problems of compensation to songwriters and publishers while continuing to adapt to new technologies and services that play a major role in music. As technologies continue to emerge, other changes may need to be made. However, where previous attempts, such as the Transparency in Music Licensing and Ownership Act, were not as successful,¹⁵ the MMA’s centralized approach to mechanical licenses shows promise for streamlining distribution of royalties and providing a balance between paying composers and publishers for use of their works and creating an efficient and profitable environment for streaming services companies to continuing thriving.