How the Music Modernization Act Makes Copyright “Cool”
The Legislation
Online music streaming has become more readily accessible and plentiful over recent years. With the evolution of technology and the expansion of ways to listen to music, licensing and paying royalties to songwriters and artists has become increasingly difficult. New legislation is attempting to pave the way and make these processes more streamlined and efficient in order to bring the music industry into the 21st century.
The Orrin G. Hatch-Bob Goodlatte Music Modernization Act (“The Act”) was signed into law on October 11, 2018 as a bipartisan piece of legislation. The Act was introduced in order to improve legal licensing of music by digital services and was intended to benefit songwriters, publishers, artists, record labels, libraries, and the public. The Act is separated into three main titles: Music Licensing Modernization, Classics Protection and Access, and Allocation for Music Producers.
Title I of the Act establishes a blanket licensing system for digital music service providers to give the public access to activities such as permanent downloads, limited downloads, and interactive music streaming. This is only applicable to digital music though, and physical copies of music (CDs, vinyl, tapes, etc.) will still be licensed for use per-work. This will make is easier for music copyright holders to receive royalties when their music is streamed. Essentially, the Register of Copyrights designates a non-profit collections society as the licensing collective to preside over the blanket licenses, as well as distribute royalties to publishers and songwriters. This collective entity will maintain a database of digital sound recordings that will be available to the public.
Title II of The Act extends remedies to pre-1972 sound recordings, bringing these works into the federal copyright system. Pre-1972 sound recordings were not protected by copyright law. Artists and composers will now receive royalties on sound recordings made prior to 1972. There will also be a process established for lawfully engaging in noncommercial uses of these works. Title III of the Act allows producers to receive part of the royalties collected for uses of sound recordings. This section also sought to increase royalties paid to audio engineers for the sound recordings they worked on.
Benefits of the Act
The Act modernizes the licensing system by having all licensing done electronically rather than sending individual Notice of Intentions to each publisher for each share of each song. Also, unclaimed royalties will fund the process, instead of being claimed by the digital service providers. Essentially, digital service providers will pay for maintaining the database by forwarding these unclaimed royalties and will have an easier time obtaining blanket licenses. Additionally, digital service providers must pay licensing fees for using songs that were recorded and released before 1972.
Performing rights organizations such as The American Society of Composers, Authors, and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”), the predecessors of The Act, are organized to collect licenses from artists, store them in a collective database, and then provide these licenses to broadcasters and other users in exchange for a fee. However, these organizations have been unable to keep up with the rapidly changing environment of music streaming. ASCAP and BMI supported the Music Modernization Act because it will aid them in offering licenses from a large, comprehensible database and they recognize the need to pay artists and other contributors fairly for their music.
What this Means for Entrepreneurs
Entrepreneurs in the music industry should be aware of The Act and the effects it may have on their business. The Act is not going to impact consumers of music streaming and is aimed at being fair to songwriters and other players in the music industry. With the evolution of music streaming sites, such as Spotify, revenues for music streaming and downloads have skyrocketed, but the holders of the sound recording copyrights have not received their fair share of the royalties. For example, if a song has 100 million streams this will generate revenue in the multi-millions of dollars. However, only about 5% or less goes to the music publishers, with the bulk of the revenue going to labels and singers. The portion going to publishers (songwriters) is called mechanical royalties and is often split several ways. Basically, the labels and singers are receiving more in royalties than songwriters and the Act aims to remedy this.
The licensing system and royalty payments will be streamlined, making it easier for artists to get paid for the use of their music. The existence of a centralized database of music licenses in which major publishers and streaming sites will participate will help all players in the music industry by providing structure. Independent record labels and other entrepreneurs in the music industry should keep up to date with changing laws in the entertainment field. Independent record labels will be affected, if not already, by streaming sites and will receive royalty payments from theses sites using licenses the label owns. These labels must also be cognizant of the royalty payments their artists receive and ensure they adequately reflect the percentage due to not only the singer but also the songwriter.
Overall, the changes will take place on a scale larger than independent record labels. However, The Act changes the face of copyright in the music industry arena, and it is important for all musicians and labels to maintain an understanding of their place in the industry.
Sources:
https://www.soundexchange.com/advocacy/music-modernization-act/
https://www.copyright.gov/music-modernization/
http://www.copyright.com/blog/music-modernization-act-introduced-house-senate/
https://www.ascap.com/about-us/stand-with-songwriters
https://blog.songtrust.com/what-is-the-music-modernization-act
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