Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney. For more info about Benom, visit his website at www.professorplumbmusic.com.
Songwriters and Streaming Companies Partner on New Federal Legislation: The Music Modernization Act (The Tennessean)
In October of this year, I wrote an article titled “Music Industry and Big Tech Aim to Streamline Mechanical Licensing." In that article, I commented on pending legislation being crafted with input from songwriters (NSAI), music publishers (NMPA) and music streaming companies (DiMA). As of yesterday, that collaborative effort is now officially on the legislative docket.
The legislation has been dubbed “The Music Modernization Act” (MMA) and aims to pay higher royalties to songwriters and music publishers, while easing the licensing burdens of the music streaming companies. The MMA, with its songwriting emphasis, is in addition to the much talked about “Omnibus Bill” which primarily concerns sound recording issues.
The MMA legislation was introduced by U.S. Rep. Doug Collins (R-Georgia) and U.S. Rep. Hakeem Jeffries (D-New York) on Thursday morning in Washington, D.C. Rep. Collins has been an outspoken advocate for songwriters and music publishers. As recently reported in Billboard, Rep. Collins has become an unlikely but helpful advocate for songwriters on Capitol Hill.
The Tennessean reports that the bill has four key components:
#1 - Rate courts will be able to consider sound recording royalty rates paid to record labels and artists as a factor when rates are set for songwriters and publishers.
Plumb’s take: This is a big deal because it addresses the “value gap” between the sound recording and composition. The ability to factor in sound recording royalty rates would most certainly lead to an increase of music publishing royalties.
Currently, the sound recording earns much more in streaming royalties than the composition does, often 10x or more. But the rate courts have never been able to consider that data when setting the composition rates. If that data can be used in the future, the composition side could get a more fair market value rate. At the least, royalties would increase, it’s just a matter of how much.
#2 - ASCAP and BMI would be able to have their rate-setting disputes heard by any federal judge for the Southern District of New York, instead of being assigned a single federal judge for each performing rights organization.
Plumb’s take: This has long been requested by both ASCAP & BMI. It should improve the efficiency of these painfully common legal proceedings.
#3 - The Copyright Royalty Board would start considering a willing-buyer, willing-seller standard during rate-setting proceedings.
Plumb’s take: Very good news as well. This willing-buyer, willing-seller concept helps attain a more fair market value for the song. To help emphasize the kind of rate a song can get in the free market, let’s consider synchronization licensing...
A synchronization license often earns the sound recording and composition the exact same rate of $5,000+. These TV & film license rates are negotiated in the free market and in most cases, each “side” of the music (recording and composition) gets the same amount. The willing-buyer, the TV network, is paying a fair market value rate for both the sound recording and composition. There is not any compulsory regulation by an outside party or government involved in the transaction.
#4 - The bill would create a new mechanical digital rights organization (working title is called “SongExchange”), run by music publishers but funded by streaming companies. It would be in charge of identifying the copyright owners of songs that digital services want to license. In exchange, the streaming companies would be able to attain a blanket digital mechanical license from the new organization, also avoiding future lawsuits for using songs without permission. The new agency would be governed by a 10-member board consisting of eight music publishers and two self-published songwriters.
Plumb’s take: Some questions still remain unanswered here. The Harry Fox Agency (HFA) controls a large portion of the mechanical licensing market and administers millions of digital mechanical licenses. How will this new organization be handled in conjunction (or in competition) with the digital mechanical licenses and royalties that the HFA already administers? How will SongExchange work differently from HFA? Will both mechanical licensing organizations be sharing data?
Overall, I am encouraged with the proposed legislation. It’s a lifeline to songwriters in the digital streaming market. If passed, this bill could vastly improve songwriters' streaming royalties, while also reducing the liability of music streaming companies in making their ability to license music easier. We’ll have to wait until after the new year to see, but 2018 may just be “The Year of the Copyright Bill”.
And now for this week’s other headlines:
- Court of Appeals Sides With Songwriters, Publishers on Fractionalized Licensing: ‘This Is a Massive Victory’ (Billboard)
- SiriusXM Hit with Big Rate Hike by Copyright Royalty Board (Variety)
- Universal Music Group Strikes Major Licensing Deal with Facebook (Billboard)
- Sony and Universal Agree to Multi-Year Global Licensing Deal with YouTube (Music Business Worldwide)
