Why Music Modernization Act Is Best Path Forward [Op-Ed]

Music Modernization PerilWhile the Music Modernization Act to revamp music copyright has its critics, most in the industry support it. Here, Sound Royalties' Alex Heiche explores the objections in detail, and finds most insufficient to dampen enthusiasm for the bipartisan legislation.


By Alex Heiche, Founder and CEO of Sound Royalties

The recently proposed Music Modernization Act is garnering wide support throughout the music community, including from my music industry specialty finance firm Sound Royalties.

This bipartisan music reform bill would update Section 115 of the U.S. Copyright Act to create a single licensing entity, funded by digital music services and governed by publishers and independent songwriters, that would provide blanket licenses for mechanical reproduction rights for all digital music services.

It would also replace the single, respective rate court judges with a wheel approach whereby judges would randomly be assigned to each rate dispute lawsuit.

Finally, the legislation would remove Section 114(i) of the Copyright Act, thus allowing a rate court to consider all relevant evidence when determining songwriter compensation, including the rates that artists earn, which currently and surprisingly, is prohibited by law.

"Some have raised concerns."

But as the proposed bill makes its way through Congress, some have raised concerns about particular pieces of the legislation.

One argument is that the bill would only benefit larger publishers who join the collective.

The solution for the smaller publishers here is simple and obvious – join the collective. The creation of this collective should be music to the ears of publishers everywhere, especially smaller ones with more limited resources, since it would greatly simplify the claiming process by routing all streaming royalties through one single entity. Similarly, it would also ease the process for streaming services since they would make all payments to that same single entity.   

In contrast, streaming services are currently obligated to secure a compulsory license from the publisher for each of the tens of millions of works they stream daily or weekly. But the vast increase in music consumption on these platforms has made this an impossible task.

More: MMA Sets Stage Fir Songwriter, Publisher Tug Of War and Will Music Modernization Act Precipitate The Decline Of BMI, ASCAP, SESAC?

After often having no luck in locating the publisher, the streaming entity posts an NOI or a “Notice of Intention” to secure a compulsory license. These NOIs can be filed in bulk, with tens of millions currently issued and outstanding.  

I recently asked a group of savvy publishers if they were familiar with these NOIs and very few were. These mass amounts of unpaid sums account for a large share of unpaid royalties and aren’t even included in the whopping $19 million in unclaimed royalties that Sound Royalties identified in 2017.

Some also allege that the bill would harm small publishers and musicians by limiting the amount of time that creatives have to collect their royalties.

To clarify, the “limited” amount of time this refers to is a very fair three years. It is understandable that the collective cannot hold these funds forever, and this new window for collection is a vast improvement to the current system where unidentified NOIs sit uncollected indefinitely and most likely will never be paid. And as we addressed earlier, those who simply register with the collective won’t face this issue because the collection process will happen naturally.

Others have taken issue with the fact that the Music Modernization Act would limit the ability of small publishers or artists to sue streaming entities for statutory damages. This applies to works streamed prior to the new system being enacted.  

This argument is flawed because it faults the bill for limiting the ability for legal action, when in fact, these small entities would not sue anyway because their pending totals are not large enough to merit legal action and 99 percent of commercially viable music has already settled on this issue. This new rule on litigation also applies to all publishers and musicians – large or small. It is not targeting the “little guys.” Truthfully, it probably impacts them the least and creates a system where they will finally be paid.

We also must understand that some compromise is needed from all sides to create a workable solution for the good of the entire music industry. Streaming services, which have long been faced with the unfeasible challenge of chasing down countless publishers, are willing to come to the table, but they have to draw the line somewhere. Instead of looking backwards, it’s much more productive to focus on the future and create long-term solutions that work for everyone.  

The long list of benefits, including an acknowledgement that a mechanical royalty is due and exists from an interactive stream, changes to the rate standard, creation of a central database, audit rights and more, do warrant things such as relief from future litigation.  Again, it doesn’t mean you won’t get paid these royalties, just that you can’t pursue an infringement suit.    

Through all of these discussions, it is important to remember the Music Modernization Act is proposed legislation that is still open and evolving. If you have an issue with a particular section of the bill, I can only reference the great Bob Marley: “Get Up, Stand Up” and be a voice to help shape the bill, or else propose a preferable solution.  

No, the proposed Music Modernization Act isn’t perfect, but it does have significant benefits for all sides and is infinitely better than the current broken system we’re inefficiently operating within. Now is the time to work collectively to create a fair music licensing process and a regulated path to proper compensation that works for the entire industry, so that the music can live on.

Alex Heiche is the CEO and founder of Sound Royalties, a company working to transform the way that music professionals fund their creativity.

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  1. Is the squote below saying that claims of plagiarism of copyrighted music cannot be perused? …
    “Again, it doesn’t mean you won’t get paid these royalties, just that you can’t pursue an infringement suit”.

  2. RESPONSE – Proposed
    Music Modernization Act
    I am an Indie Artist who has written and recorded 35 original songs in a 4 year period in a professional studio. I am currently withholding most of my songs from digital release. This is because I believe that price fixing and regulating royalty rates on music violates free enterprise.
    We do not go into an art gallery and tell the artist how much they can charge for their works of art. We do not tell Apple or Amazon how much to charge for the products they’re releasing. Copyrighted Music is Intellectual Property. Royalty Rates on Music should be set exclusively by the Copyright Holder – not the government. In a free enterprise system – it’s whatever the market will bare.
    Music regulation originated during an outdated era of Record Companies exploiting songwriters and performers, and paying off legislators, so they could take the lion’s share of the profits. Now streaming sites are doing the exploitation, typically paying less than one hundredth of a penny to spin a song, while their net worth climbs into the billions.
    This is not the business model we should use for the future of music. Free Enterprise must now be applied to Creatives.
    In a free enterprise system, the Copyright Holder, at their discretion, has the right to control the royalty rate, how the music is used, and who will use it.
    Keep in mind, 50 years ago people put 25 cents in a juke box to play three songs. That 25 cents is now worth upwards of 60 cents, which equates to roughly 20 cents a spin in today’s money. Why have we devalued music?
    Why have we allowed multi billion dollar corporations to pay songwriters and performers next to nothing, so they can give away music, and violate copyright law?
    The transfer of songs to a consumer’s device without a mechanic’s license is aiding and abetting and copyright infringement. Subscription fees are not being shared with Copyright Holders. The tiny fraction of a penny payments continue, while subscriptions snowball. Consumers are much less likely to buy songs, if they can get them for free or a fraction of the cost. Again, devaluation.
    I propose a “Standard Royalty Scale”, ranging from 1/2 cent to 5 cents per spin to the songwriter, and another 1/2 cent to 5 cents per spin to the performer:
    1/2 cent increments: 10 coded categories of music royalty rates for songwring rights, and 10 coded categories of music royalty rates for performance rights. This pay scale should also be used for radio air play.
    The copyright holder chooses what rate will be collected,
    From 1/2 cent to 5 cents per spin. The copyright holder may change the rate at any time, up or down, depending on demand, thru a central, interactive website.
    Three optional special categories should also be provided for the Copyright Holder:
    — (1) Use of copyrighted music only by express written consent, whereby Copyright Holders set their own royalty rates, or negotiate a higher or a lower royalty rate with the music playing industry.
    — (2) Private use Only of copyrighted music – released exclusively through Private Music Clubs – not available to the general public, and not available to the music playing industry, or the music marketing industry, without written consent.
    — (3) Royalty Free use of copyrighted music, at the discretion of the Copyright Holder.
    The Proposed
    Music Modernization Act should also include organizing a complete Central Directory of songwriters, performers, publishers, record companies, etc., who want to provide their contact information, in order to facilitate the collection of unpaid royalties, with no strings attached, and no forfeiture of the right to sue.
    Another clause should allow the Copyright Holder to OPT OUT of any website, any marketing service, any streaming service, any video service, and any radio airplay providers, and the like. Note that the Music Publishing Service CD BABY already has a partial system in place, whereby the artist chooses who will and who won’t handle their music. (does not yet apply to standard radio)
    Now the wealthy music playing industry wants to limit their liability and not take responsibility for their violations of copyright law.
    Taking away Intelectual Property Owners right to sue is all wrong. If copyright holders are not allowed to sue, they can not enforce their legal rights. That conflicts with the spirit of copyright law.
    Copyright Holders must retain the right to sue entities for statutory damages, whether they register or not. The players need to pay damages and correct their mistakes.
    The Central Collection Agency is a good idea. Especially if Copyright Holders can set their own rates, they should register for the Collective – BUT WITH NO STRINGS ATTACHED – NO FORFITTING THE RIGHT TO SUE. THE VIOLATORS HAVE PLENTY OF MONEY TO COMPENSATE COPYRIGHT HOLDERS AND FIX THEIR MISTAKES.
    Indie Artists took 40 percent of the Grammy Awards this year. The best is yet to come. If you want great music, then place more value on it. Reach in your pocket, pull out a penny, listen to a song, and protect the rights of songwriters and musical artists.
    This is the time to do it.
    Denis “Aureon” Kwolek

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