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By: Daniel Garcia

In response to unprecedented changes and challenges in the music industry, The 115th Congress recently passed – and President Trump signed into law – the Music Modernization Act (MMA).[1]  The MMA has sweeping consequences for both performance and mechanical licenses, which are part of the bundle of rights any copyright owner is entitled to.[2]

 

Firstly, with respect to performance licenses, Title III, statutorily guarantees (for the first time ever) performance license royalties for sound engineers, mixers, and producers.[3]  Previously, if those collaborators wanted in on the performance royalties of a collaboration, they needed a work-around to the loophole know as a split-sheet contract.[4]  While split-sheets are seemingly intuitive, independent artists just beginning to develop an online presence may be worse off than, say, larger recording artists with access to a breadth of management resources, including agents and legal teams that are in the know.[5]  In fact, sometimes even for those in the know are confused, which may have been in some part responsible for the 2016 DOJ investigation about “full-work” licenses. [6]

 

Secondly, also with respect to performance licenses, the MMA set an incremental rate court increase for Performance Rights’ Organizations to enact over the next five years, which is a huge development that partially repeals the ongoing consent decrees governing PRO’s.[7]  Typically, any dispute between the PROs and licensees is resolved, pursuant to the consent decrees, by a single rate judge in the Southern District of New York – with the most recent dispute occurring in 2016.[8]

 

Thirdly, the act has designated the creation of a Mechanical Licensing Collective (MLC), which effectively gets rid of the Notice of Intent requirement.[9]   Previously, if a music streaming service wanted to the use a copyright protected recording on their platform, they needed to obtain a compulsory license by filing a notice of intent with the publisher.[10]  The system had its faults, with publishers receiving tens-of-thousands NOIs – more than they could process –daily.[11] Streaming services were not only aware that the system didn’t work, some – like Spotify – even created slush funds in anticipation of future lawsuits.[12]

 

The MLC will function like a non-profit, with a freely accessible public database, while providing blanket licenses to streaming services for the recording-composition matching process.[13]  While two groups bid on the right to establish the technological infrastructure for the MLC, only one secured the designation.[14] On the one hand was the industry consensus coalition comprised of the board members from the private sector (like NMPA) that previously handled this composition-matching processing.[15]  On the other hand was the AMLC, advocating for a competition-based approach to licensing collect.[16] Ultimately, the former prevailed.[17]  Given the recent legislation and sector-wide trends, perhaps other industry actors, such as the DOJ and PROs, will take preemptive actions to update their own outmoded regimes before being statutorily-mandated to do so.[18]

 

[1] See Orin G. Hatch-Bob Goodlatte Music Modernization Act, H.R. 1551, Pub.L. 115-264.

[2] See U.S. Copyright Office, Orrin  G. Hatch—Bob Goodlatte Music Modernization Act (2019), https://www.copyright.gov/music-modernization/ (last visited Sep. 22, 2019) [hereinafter Copyright Site]; see generally 17 U.S.C. §106 (2019).

[3] See Copyright Site, supra note 2.

[4] Dae Bogan, Understanding The Difference Between A Split Sheet And Collaboration Agreement And Why You Should Have Both For Every Song Collaboration, TuneRegistry (Dec. 14, 2018), https://www.tuneregistry.com/blog/understanding-the-difference-between-a-split-sheet-and-collaboration-agreement-and-why-you-should-have-both-for-every-song-collaboration.

[5] See Id.

[6] See U.S. Dep’t of Justice, ASCAP and BMI Consent Decree Review Public Comments 2014, https://www.justice.gov/atr/public-comments (last updated Sept. 22, 2018).

[7] See U.S. Copyright Office, Musical Works Modernization Act, https://www.copyright.gov/music-modernization/faq.html(last visited Sept. 22, 2019).

[8] See Ben Sisario, Judge Rejects Justice Department Ruling on Music Licensing, N.Y. Times (Sept. 16, 2016),  https://www.nytimes.com/2016/09/17/business/media/judge-rejects-justice-department-ruling-on-music-licensing.html?searchResultPosition=6.

[9] See U.S. Copyright Office, Designation of Mechanical Licensing Collective and Digital Licensee Coordinator, https://www.copyright.gov/rulemaking/mma-designations/ (last visited Sept. 22, 2019); see also Request for Information on Designation of Mechanical Licensing Collective and Digital Licensee Coordinator,  83 Fed. Reg. 65,747, 65,748 (Dec. 21, 2018).

[10] See Bill Rosenblatt, Here are the Loopholes Closed by the Music Modernization Act, Forbes (Oct. 11, 2018, 3:26 PM), https://www.forbes.com/sites/billrosenblatt/2018/10/11/music-modernization-act-now-law-leaves-one-copyright-loophole-unclosed/#3a8f12927272.

[11] See Id.

[12] See Ed Christman, Spotify and Publishing Group Reach $30 Million Settlement Agreement Over Unpaid Royalties, Billboard (Mar. 17, 2016), https://www.billboard.com/articles/business/7263747/spotify-nmpa-publishing-30-million-settlement-unpaid-royalties.

[13] See Bill Rosenblatt, Music Modernization Act Proposed Single Solution to Mechanical Licensing Problem, Copyright and Technology (Dec. 30, 2017), https://copyrightandtechnology.com/2017/12/30/music-modernization-act-proposes-single-solution-to-mechanical-licensing-problem/.

[14] See Ed Christman, Why the U.S. Copyright Office Chose the Mechanical Licensing Collective, Billboard (July 5, 2019), https://www.billboard.com/articles/business/8518824/why-the-us-copyright-office-chose-the-mechanical-licensing-collective.

[15] See Ed Christman, Industry Consensus Group Announces Board Members for Proposed Mechanical Licensing Collective, Billboard (Feb. 4, 2019), https://www.billboard.com/articles/business/8496417/industry-consensus-group-board-members-mechanical-licensing-collective.

[16] See American Music Licensing Collective, American Music Licensing Collective Says ‘Competition is Needed’ In Forming Music Modernization Act’s MLC (Guest Op-Ed), Billboard (Feb. 20, 2019), https://www.billboard.com/articles/business/8499237/american-music-licensing-collective-competition-needed-forming-mma-mlc.

[17] See Ed Christman, Why the U.S. Copyright Office Chose the Mechanical Licensing Collective, Billboard (July 5, 2019), https://www.billboard.com/articles/business/8518824/why-the-us-copyright-office-chose-the-mechanical-licensing-collective.

[18] See Diane Bartz, U.S. Justice Department to review 1941 ASCAP, BMI consent decrees, Reuters, (June 5, 2019, 3:25 PM), https://www.reuters.com/article/us-usa-antitrust-ascap-bmi/u-s-justice-department-to-review-1941-ascap-bmi-consent-decrees-idUSKCN1T62GP/

 

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