The Music Modernization Act: Updating Copyright Law for the Digital Age
When was the last time you purchased a physical CD of your favorite musician or band? For many, it may have been years, as music streaming services such as Spotify, Apple Music and others have increased in popularity and provided consumers with access to an enormous amount and range of music and other audio content. These services provide a powerful, convenient, and affordable way for consumers to create and listen to the newest Coldplay album or their Old School Hip Hop playlist, as well as giving the music industry a mechanism to counter the musical piracy often associated with digital content. However, flaws and loopholes in U.S. copyright laws often created challenges for publishers and songwriters to get paid when their music is streamed online and subjected digital streaming providers to potential liability for copyright infringement and unpaid royalties.
Congress and the music industry’s answer to these issues was the passage of the Music Modernization Act (MMA). On October 11, 2018, President Trump signed the MMA into law, updating music licensing laws for the first time in over 20 years in a bipartisan package that incorporated several pieces of consensus legislation. With the support of essentially the entire music industry, the MMA should help reform the music licensing landscape in several important ways.
Currently, digital streaming providers (DSPs) like Spotify and Apple Music are responsible for identifying rights holders for each song in their catalogs. Under the MMA, DSPs will be funding a Mechanical Licensing Collective (MLC), an agency overseen by publishers and songwriters, which will be responsible for tracking, collecting and distributing royalties to rights holders. The MMA supports this effort by mandating the creation of a publicly accessible database that houses song ownership information, which will generate business efficiencies and transparency. In turn, those DSPs will be granted blanket mechanical licenses for interactive streaming or digital downloads of musical works and would relieve them from liability for misidentifying or failing to locate rights holders of the songs on their services, so long as the DSPs pay the costs for the MLC and accurately report music usage and royalties owed. Ultimately, this new framework should be a boon for songwriters by helping them to get paid timely and accurately.
The MMA will also update the manner in which royalty rates for mechanical licenses to songwriters are determined. Mechanical licenses grant the right to reproduce and distribute copyrighted musical compositions. The MMA will replace the current legal standard that often gave deep discounts to certain “pre-existing services” with a one that should equalize the rate setting process for all licensees by requiring courts to apply a “willing buyer/willing seller” standard and consider free-market conditions when determining rates.
Further, the MMA overhauls the rate court system by creating a “wheel” approach enabling the two major performing rights organizations, ASCAP and BMI—which are responsible for collecting and distributing royalties to publishers and songwriters for public performances of musical compositions—and licensees to go before any judge in the Southern District of New York on a rotating basis. This is a change to current practice, where ASCAP and BMI are each assigned to a designated judge, and is intended to allow fresh eyes to make fact determinations for each rate case based on the record in that particular case. Further, under the MMA, courts setting performance royalty rates are now permitted to consider sound recording royalty rates as a relevant benchmark when setting performance royalty rates for songwriters and composers, which should result in a fairer system by allowing those rights holders to present evidence about other aspects of the music ecosystem for judges to consider.
The MMA also incorporated the Compensating Legacy Artists for their Songs, Service, and Important Contributions (CLASSICS) Act. Previously, federal copyright law did not cover sound recordings made prior to February 15, 1972; therefore, the individual states were left to craft a complex patchwork of laws designed to address these recordings. The MMA now provides that songwriters and artists will receive royalties on songs recorded before that time.
In all, while no law is perfect, and there will certainly be criticism and room for improvement, the MMA makes great strides in updating our copyright laws to account for the significant changes created by digital content and streaming services, reflects the modern music marketplace, and gives DSPs confidence in the operation of their services and helps music creators get fairly and accurately compensated for their artistic contributions.
If you are songwriter, publisher, or other musical industry professional looking to see how the MMA will impact your musical properties, please reach out to RWR Legal for a free consultation with an experienced attorney to evaluate your needs and see how you can best protect the valuable rights in your music and copyrights. Call us at (512) 320-0601 or email us at firstname.lastname@example.org
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