by Cam Cassels

What is the Music Modernization Act? How will one piece of legislation alter the foundations of the music industry as we know it? How will this act affect every artist from the bedroom producer just starting out to multi-platinum artists selling out stadiums? The MMA is set to shake up the chain of command and serve artists a larger slice of the revenue pie. Here's what you need to know:

Modern Music

Music does not normally sit at the heart of U.S. politics. Healthcare, immigration, and taxes customarily rule the political discourse. However, the Music Modernization Act (MMA), proposed legislation capable of changing the landscape of the music industry, has overtaken the current conversation.

Under the MMA, a mechanical licensing collective (MLC) would permit outright mechanical licenses for streaming and digital downloads. Publishers and self-published songwriters would oversee the MLC to help match creatives with their recordings.

The MMA has unanimously passed through the House of Representatives and Senate Judiciary Committee. Now, the Senate must vote. Amidst boiling dissent between Democrats and Republicans, the MMA has been hailed as an unprecedented piece of compromise legislation receiving unanimous support across the aisle. Among the music industry, the bill has received widespread backing from songwriters, publishers, labels, streaming services, and top executives who typically remain as divided as our government.

What is the MMA?

The Music Modernization Act is a comprehensive bill aimed at working with streaming services, songwriters, and publishers to bring the music industry into the 21st century. As streaming dominates the landscape, the way musicians get paid remains as outdated as the CD. Currently, artists upload their music to services like Spotify or Apple Music to worldwide listeners. The current compensation system lags far behind the technology of streaming, and is wildly inefficient at identifying and paying the singers, songwriters, instrumentalists, and other parties involved in their work. No unified database exists.

Under MMA, the entire music industry would pull from a single, government-created database. When artists finish a project, they would upload the credits to this database, streamlining the payment process. If digital service providers (DSPs) like Spotify and Apple Music adhere to the new process, they will incur less liability when something goes wrong. Also, unclaimed royalties will funnel back to the creative community, rather than the DSPs. Artists and songwriters are deprived of millions of dollars in payments when unmatched songs revert to the DSPs.

As of now, multiple databases exist with little concordance and accuracy. With the new system, the MMA will fund a comprehensive and correct database as a mechanical licensing resource for the entire music community. Creatives get paid more efficiently, corporations avoid billion-dollar lawsuits, antiquated payment processes will become extinct.

Why Do We Need The MMA?

In the midst of this disconnect, creatives across the U.S. claim that they are not fairly compensated. Law requires these streaming services to properly identify and pay artists, which can be difficult in the currently tangled system. The confusion leaves streaming services vulnerable to massive lawsuits.

Last year, Spotify was sued by Wixen Music Publishing $1.6 BILLION for unpaid royalties to singers and songwriters. Wixen claimed that Spotify had taken shortcuts in acquiring rights to their artists’ music, including Tom Petty and The Doors. The U.S. Copyright act states that two copyrights exist for each song: one for sound recording and one for composition. However, this law has its roots in player pianos, automatic pianos created in the 1800s. The law states that artists and songwriters must still receive a physical piece of paper stating how much they are owed and how their songs are being used. Claiming that Spotify paid only for the rights to sound recordings (and didn’t mail millions of physical letters), Wixen sued Spotify for $150,000 per song (over 10,000 songs in question).

Many artists and songwriters state that they are not properly paid for their work, even when that work leads to millions of streams. Some artists are paid years after the agreed upon due date, and many are never paid at all. Paper tracking, no central ownership of rights, and overall uncertainty have hindered the industry.

Although both sides of the industry have made concessions, the framework of the bill remains exceedingly intricate. Updating a flawed payment system handling millions of dollars will have setbacks, but both sides of the industry are willing to endure initial complications for the betterment of the landscape.

Barriers to Entry

A few weeks back, the bill ran into a roadblock. With months to suggest changes to the MMA, SESAC (a performance rights company) and HFA (a provider of rights management and collector/distributor of music licensing fees) proposed a last-second amendment that could have derailed the bill. The Blackstone amendment (Blackstone, a multinational private equity firm, owns SESAC and HFA) came after Ted Cruz proposed a separate amendment to create competition for blanket licensing.

In the original MMA bill, three main things would change:

Improved process of digital royalty payouts for artists
Digital royalties paid for songs made prior to 1972
Formation of a government-created collective that would oversee the digital mechanical licensing

Blackstone proposed an amendment to block the third change of a government-funded licensing collective. This collective would eliminate a significant mechanical licensing revenue stream for both SESAC and the HFA. Blackstone argued that their amendment would foster a competitive marketplace, more innovation, and improved ownership/copyright payments. Many within the industry believe that Blackstone proposed the amendment to save profits. If the amendment were to remain part of MMA, the entire bill would have needed to return to House of Representatives which would put the legislation in jeopardy in of passing.

Then, on August 1st, Blackstone and songwriters reached a compromise. The updated amendment states that the government funded licensing collective will handle only digital mechanical licensing, leaving other types of licensing (synch, performance, and lyrics) to the free market, as it always has been.

This compromise amendment is receiving similar support that the original MMA bill received. While this compromise brings the bill closer to passing, obstacles still remain. Senator Ron Wyden is sponsoring the ACCESS to Recording Act which stands in opposition to the MMA’s CLASSICS Act constituent. CLASSICS Act will guarantee that pre-1972 recordings receive royalty payments from digital and satellite radio, but not traditional radio (think 106.7 Power FM). Traditional radio stations do not pay for any sound recordings (pre or post-1972). Wyden’s ACCESS to Recording Act proposes streamlined laws for more dated music and fewer copyright protections than the MMA.

Also, Congress needs to figure out a funding plan for the MMA. Congress expects to raise $175 million taxes for the bill, which is over $40 million shy of the estimated cost. With midterm elections in November and a fresh Congress in January, the bill would need to pass soon before the process starts all over.

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