The Music Modernization Act: The Legislation Tasked with Reshaping the Music Industry

February 2, 2018

From the outside looking in, the music industry could not be doing any better. In 2017, the music industry: saw its first double digit growth in sales and revenue in almost twenty years, streaming services brought in $883.9 billion in royalties, and paid music subscriptions more than doubled, now accounting for at least 22.6 million users. These numbers and statistics are astonishing, and something to be celebrated considering the music industry has been struggling to find its footing in an age where physical album sales have declined and the access to free music has grown exponentially. Yet, behind the curtain, things are not as fantastical as they seem.

The current copyright laws under which the music industry is regulated have made profit and royalty sharing inequitable in the modern age. Individual streaming of songs generates fractional-sized profits in comparison to individual downloads of a song, leading to concerns about the long-term sustainability of this business model.

In an effort to address such issues, lawmakers recently introduced a bill titled The Music Modernization Act (MMA). The MMA would “usher copyright laws into the 21st century,” by overhauling portions of the U.S. Copyright Act of 1976 to better serve the needs of industry members (specifically songwriters). These changes would materialize in three specific ways. First, the MMA would create a new government agency that would monitor and issue music licenses, as well as “collect and distribute” royalties to copyright holders. Under the current system, it is the responsibility of streaming services, such as Spotify, to identify which copyright holder is owed royalties for each specific song in their catalogues. Due to the vast number of works in these catalogues, companies have been slow to identify copyright holders, leading to long delays in royalty payments. In many instances, when a company is unable to identify ownership information for a song, they file Notice of Intentions (NOIs) with the United States Copyright Office. NOIs allow these companies to obtain a license to use the song without having ownership information, making it impossible to adequately pay songwriters even though they have used their song. It is estimated that this has resulted in millions of dollars in lost income for songwriters over the years. The MMA would fix this issue by centralizing the duty of identifying ownership information to one federal agency, with streaming and digital companies paying the government for this service. Most importantly, this agency would create a database of song ownership information that would allow songwriters to “identify which songs haven’t been properly attributed to them.”
Secondly, the MAA would allow songwriters the opportunity to receive a more fair and equitable royalty rate for any mechanical royalties they are eligible for (mechanical royalties incur each time a copy of a songwriter’s song is made). Under current industry standards, songwriters are far removed from the negotiating table. Rather, Copyright Royalty Board (CRB) judges (referred to as “rate court judges”) determine what is considered a fair-market rate based on an arcane test which has “depressed rates” for years. The MAA would establish an open-market rate system where negotiations on rates could take place. Lastly, the MAA would overhaul the rate court judicial system. As it currently stands, many of the major music publishers are assigned one judge who hears all of their cases. In an effort to avoid partiality, the MAA has been written to incorporate a rotating selection of judges that would allow for more streamlined and consistent decisions.
The dire need to fix the royalty system for songwriters and artists alike has spurred policy uniformity in an industry where cohesion is rare. Nevertheless, with bipartisan support and backing from many Silicon Valley companies, the MAA has the potential to be a game changing piece of legislation for the music industry.