Closing loopholes in the Music Modernization Act

Although it’s been called one of the biggest changes to the United States copyright law in recent history, it’s being seen as less a complete overhaul than it is a closing of some troublesome loopholes in existing copyright law.

These loopholes created burdensome paperwork for streaming services like Spotify, Apple Music, Amazon Prime and Tidal, leaving them open to legal action for alleged violations of copyright law, and left gaps in copyright protection for songwriters and performers.

The full name is The Hatch-Goodlatte Music Modernization Act (H.R. 1551) and President Trump signed it into law on October 11, 2018. The bill was broadly supported by musicians and by stakeholders within the music industry and passed both houses of congress unanimously.

Agreement over the need for smoother royalty payment processes without having to become embroiled in extensive litigation helped bring stakeholders (songwriters and performers, digital music streaming services and music publishers) together and lead to the bill’s passage.

The Music Modernization Act (MMA) accomplishes several goals:

• It creates a new body to be called the “Mechanical Licensing Collective” that will offer streaming services blanket rights to digital downloads, ending the need for services to secure rights from each individual copyright holder.
• It creates new federal protection by assigning copyright to sound recordings made before 1972, which were previously governed by a confusing and cumbersome patchwork of state laws.
• It ensures that royalty payments go to producers and featured artists on sound recordings, codifying what had been conventional practice for a long time.

A simplified, streamlined process for music licensing

For digital music streaming services, the MMA directly addresses issues concerning royalty processing and related paperwork that were expensive, complicated and burdensome for them, and that left them open to potential legal action.

The act makes changes to what is referred to in copyright law as “mechanical licensing” (a “mechanical” is a license to copy and distribute a musical composition, defined as music and lyrics). The act now relieves streaming music services of the responsibility for all paperwork and royalty processing that digital music services have up to now had to manage in order to comply with existing mechanical licensing law.

Music services take in many thousands of new tracks every day and are obligated to license them properly. Prior to the passage of the MMA, streaming services have been subjected to legal action for alleged errors in their handling of mechanical licensing requirements.

Going forward, the MMA will make mechanical licensing the responsibility of the US Copyright Office, which will set up a nonprofit licensing agency (the Mechanical Licensing Collective) within nine months of the signing of the act.  Under the new system, streaming music services will agree to a few conditions and request what the MMA refers to as a “blanket license” (a license to all copyrighted music, instead of to each individual composition).

The streaming services will report music play activity on an ongoing basis and will pay periodic fees to the mechanical licensing agency, which will in turn be responsible for paying royalties to rights holders.

Protections to help ensure creators receive royalty payments

Music creators have for the most part cheered the MMA for supporting their right to be paid for their efforts.

It promises to do this by ensuring that songwriters and musicians receive royalties for songs recorded prior to 1972.  It will allocate royalties for music producers. And it will update licensing and royalty rules for streaming services with the result that these services will pay rights-holders in a more efficient way:

• The MMA confers federal copyright to sound recordings made prior to 1972 (pre-1972 recordings previously had copyright protection only under a patchwork of state laws). The change should clarify the scope of copyright protections, exceptions and limitations for these pre-72 sound recordings. For music services, Federal copyright protection is expected to end legal disputes over royalty payments concerning non-payment of royalties for these older recordings.
• With the passage of the MMA, when sound recordings made pre-1972 are played on digital radio, royalties must now be paid to the record label and performers. Formerly, when sound recordings recorded before 1972 were played on digital radio such as SiriusXM Radio in the US, royalties were not required to be paid.
• The MMA ensures that royalty payments go to producers and featured artists on sound recordings, codifying what had been a conventional practice for some time.

Potential concerns that might result from the MMA

Although a key element of the MMA is the establishment of the Mechanical Licensing Collective to administer blanket mechanical licenses, concerns have already been raised about how well the blanket mechanical license and the collective to oversee processing and managing collections, payments and reporting to songwriters and music publishers will actually work.

The collective will be responsible for building an industry-wide and comprehensive public database with the purpose of matching compositions to recordings, but this difficult undertaking has been previously attempted by the music industry without success.  

It seems likely that it will take time for the collective to build trust; music publishers may continue to pay rights licensing, administration, digital-reproduction collection and royalty-accounting agencies to verify the accuracy of the work of the collective for some time after passage of the Music Modernization Act.

Handling copyright permissions

LAC Group’s research & intelligence services division offers a range of services in the area of copyright and other rights clearance. Copyright permissions and rights clearance are time-consuming tasks, with consequences that can be costly and damaging to your organization’s reputation. LAC Group ensures the legal use and distribution of any content for all users within your organization.

We have streamlined the process for rights clearance, obtaining copyright permissions for existing licensing agreements and permission for one-time use.

For rights clearance and copyright permission, LAC Group has experience dealing with major content licensing bodies, including music and performing rights organizations the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Incorporated (BMI).