Modernizing the Law: Why Our Digital Age Needed the New Music Modernization Act

By Stina Peterson, Esq.

The music industry’s recording, publishing, and sheet music businesses have shared experience with the rapid development of technology and its impact on the industry—photocopiers and digitized sheet music have had an impact on the sheet music business, CDs and streaming have greatly impacted record and publishing companies. However, a trait not shared amongst the three, is that in the record and publishing businesses, unlike the sheet music business, Congress actually sets a lot of business models and financial terms as part of copyright law.

For example, in today’s copyright law, Congress regulates royalty rates set for digital radio, which created in turn a new category of streamed mechanical licenses that never used to exist. However, over the years, the entirely new business structure of digital radio and new rights for record labels and publishers has encountered growing pains.

For example, one of the benefits of the new technology is that almost anyone can record and release songs using services such as CD Baby or TuneCore, creating millions of new copyrights that need to have royalties paid to artists and songwriters. But this new abundance of offerings created a new problem: unreliable “meta data” on royalty recipients; this made it difficult to properly identify the royalty recipients for tens of millions of songs. Services like Spotify that stream songs, ultimately, for whatever reasons, did not pay all the songwriters and publishers, and then got sued, settling the cases for millions of dollars.

Another built-in problem occurred with royalties for sound recordings on digital radio—pre-1972 recordings were not covered under federal law and therefore not subject to the royalty rates for sound recordings in the Copyright Act.

Problems like the above are what the new Music Modernization Act (MMA) solves (the official full title is The Orrin G. Hatch–Bob Goodlatte Music Modernization Act). This new law is the biggest change to copyright law since the 1990s, when the Digital Millennium Copyright Act was enacted and copyright terms were extended.

Signed into law on October 11, 2018, the MMA states it is an Act “to modernize copyright law” and addresses issues that have arisen since the 1990s, providing solutions to bring the law into the digital age.

Divided into three major sections, the first section is aptly named “Music Licensing Modernization.” The MMA deals primarily with the mechanical license—more specifically streamed mechanicals. For example, interactive streams are those where a listener can request a specific song be streamed, or where the listener is able to keep an online “storage locker” of streamed songs. The law requires digital service providers (like Spotify), to pay fees to music publishers and their songwriters every time their song is heard via a digital radio interactive stream. Up until the MMA was passed, a company seeking and paying a streamed mechanical license was required to do so on a per song basis. The MMA has fixed this problem by allowing blanket licenses for these mechanical licenses. There will be a new collective licensing agency, the “Mechanical Licensing Collective” (MLC), similar to ASCAP and BMI, but designed to only collect digital music royalties from digital radio and remit the royalties to music publishers and songwriters.

Royalty payments have also been an issue—information connecting a song to its owner has not been centralized. The MMA creates the new “Musical Works Database” where this information will be unified in one place. This new database will be created by the new MLC.

Royalty rates are also addressed in the MMA. Prior to the MMA, mechanical license royalty rates under the Copyright Act were set based on Copyright Royalty Judges reviewing a limited set of data. Now the MMA details a new mechanical license rate setting standard that is a market-oriented “willing buyer, willing seller” rate standard.

The second section of the MMA is called the “Classics Protection and Access Act.” Before the MMA, sound recordings made prior to 1972 were not covered under federal copyright law. They remained protected under increasingly out of date state copyright laws. This was a loophole that allowed digital radio to play pre-1972 sound recordings royalty-free, as there was no statutory royalty rate for these recordings. The result was increasing litigation over whether the old state copyright laws for pre-1972 sound recordings allowed digital radio to play those older recordings royalty-free. The MMA fixes this loophole and ensures that pre-1972 sound recordings, even without “official” federal copyright law status, are still included in the overall sound recording performance right royalty regime under the Copyright Act, for example for streams on Pandora digital radio.

And, finally, the third section of the MMA “Allocation for Music Producers” does just that—solves the problem of royalty payments to studio professionals. Now, through instructions called a “letter of direction” from recording artists, producers, mixers, and sound engineers that are entitled to royalty payments for digital radio performances on Pandora and similar services will actually receive them, via SoundExchange, the digital radio licensing collective for record labels.

While the sheet music industry has always experienced change caused by new technologies, does the MMA really matter to the industry? Indirectly, the MMA will provide greater income for music publishers and songwriters, perhaps resulting in more marketable sheet music. Also, the “democratization” of music in digital radio, where almost any performer can release their own recordings worldwide, could create demand for printed music that is not available through the traditional large publishers, and potential new revenues from “micro publishers.” Looking further into the future, could the impact of the MMA have a ripple effect that effects sheet music? Is it possible that one day, Congress will turn its attention to regulating digital sheet music? We shall wait and see!

Stina Peterson is an Associate at Corey Field Law Group, P.C. based in Los Angeles, where her practice includes the music and film industries, copyright, and trademark law. Stina is also an experienced musician and former opera singer with an M.M. and B.M. in Music from the University of Utah and a J.D. from the University of Utah, S.J. Quinney College of Law. She can be reached at speterson@coreyfieldlaw.com.

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