music modernization act

What Is the Music Modernization Act and How Will It Affect You?

Music Modernization Act Summary: The Music Modernization Act of 2018 (MMA) was the first major legislation to affect music royalties passed since the Copyright Act of 1976. The act is favorable to musicians and should increase payments to many Songwriters and Producers. In this article, we cover what musicians should know about the MMA, why it was needed, and how it will likely affect musicians, Songwriters, Composers, and Producers.

Note: The author is not an Attorney and no part of this article should be construed as legal advice. Always consult a qualified Attorney when you have questions pertaining to legal issues, such as ownership of a copyright.

In this discussion of the Music Modernization Act, we will explore:

  1. Music Modernization Act explained
  2. Copyrights and music
  3. How the Music Modernization Act affects musicians
  4. Music Modernization Act criticism
  5. Where to find the Music Modernization Act

Most musicians, Songwriters, artists, Composers, and Producers are aware that the U.S. Congress passed groundbreaking legislation in 2018, called The Music Modernization Act, or MMA. But I’ve observed that most don’t fully understand what’s in the MMA and how it potentially could affect them. The MMA, as it is written, is more than 100 pages long, so it’s understandable that most musicians have not taken the time to read it. (See below for a link to the MMA.)

It’s true that the MMA passed in both houses of Congress without a single dissenting vote, and that it’s likely to put more money in the pockets of musicians and artists. It’s also going to help Producers and some older Songwriters who haven’t been compensated fairly for their work over many years. And it should increase musicians’ earnings from streaming and other forms of digital distribution, which have been paltry to date. If you are interested in working in the music industry, you would be well-served to acquire a deeper understanding of what the MMA does and how it potentially might affect you. Read on.

Music Modernization Act Explained

To briefly summarize, the MMA does the following:

  • Makes it easier for Songwriters to get paid.
  • Creates a new clearinghouse for digital mechanical royalties called Mechanical Licensing Collective (MLC).
  • Will funnel new money to some artists, especially older “legacy” artists who weren’t getting paid for streaming.
  • Royalty rates will increase for streaming, by changing how rates are calculated.
  • Will decrease the portion of rights that never reach rightful recipients by creating a database using new technology.

Additionally, the MMA:

  • Should help cash flow to artists.
  • Is the biggest change to copyright law in a generation.
  • Helps Songwriters and Composers recoup money they lost during the transition from sales to streaming.
  • Expands royalty rights for Producers. (It’s the first time Producers were mentioned in a law of this kind).
  • Extends new protections to artists who released recordings before 1972.
  • Was approved unanimously by both houses of Congress; most people agree it’s a very positive development, though there are some pointed criticisms.
  • Will take several years to implement.

It’s true that the MMA passed in both houses of Congress without a single dissenting vote, and that it’s likely to put more money in the pockets of musicians and artists. It’s also going to help Producers and some older Songwriters who haven’t been compensated fairly for their work over many years. And it should increase musicians’ earnings from streaming and other forms of digital distribution, which have been paltry to date.

Copyrights and Music

Before we delve further into the MMA itself, let’s zoom out for a minute and look at some history. America’s founding fathers saw fit to include language in the Constitution charging Congress with the responsibility to protect the intellectual property of creators, in order to incentivize progress in the “useful arts.” This was exceedingly wise since these protections have indeed served to incentivize inventions and creative works which have often led to economic returns. There is a strong correlation between economic prosperity and the rule of law in the vast majority of countries. After all, why would anyone invest the time, effort, and money to invent or create something if they couldn’t profit from it? Our government protects the creators, and this is as it should be.

It’s worth noting that the laws make a distinction between patents and copyrights; patents cover inventions and copyrights cover creative works. Music and software would fall into the latter category. When we are talking about music as intellectual property (IP) we are discussing copyrights, whereas if someone invented a new musical instrument they would seek a patent. Patents are sometimes called “hard IP” while copyrights are referred to as “soft IP.” When we are discussing the rights of ownership of music, this falls into the copyright category.

The MMA was the first major legislation to affect music royalties passed since the Copyright Act of 1976. If you consider how much has changed since 1976 in how music is created, sold, and distributed, it seems that the passing of a new law was long overdue. It’s also notable that in our politically polarized country, this law passed both houses of Congress without a single opposing voice. Most people in the music industry feel that the law helps musicians and the music industry, and increases the likelihood that artists will be compensated for their work in a fair and timely manner. There are also some criticisms of the new law. But what’s actually in the MMA?

How the Music Modernization Act Affects Musicians

According to Billboard Magazine Guest Columnist and Attorney Jordan Bromley:

“The Music Modernization act…creates a formalized body, run by publishers, that administers the ‘mechanical licensing’ of compositions streamed on services like Spotify and Apple Music (we call them [Digital Service Providers] DSPs). It changes the procedure by which millions of songs are made available for streaming on these services and limits the liability a service can incur if it adheres to the new process. It funds the creation of a comprehensive database with buy in from all the major publishers and digital service providers. This would be the first of its kind that has active participation from the major publishers, representing a vast majority of musical works. It also creates a new evidentiary standard by which the performance rights organizations ASCAP and BMI can argue better rates for the performance of musical works on DSPs.”

Additionally, according to Bromley, the MMA brings music licensing into the 21st century by moving the process to the electronic realm, doing away with the sending of physical letters to Publishers declaring intent to distribute royalties for shares of each song divided among writers, performers, and Producers. (This should save some trees.) Unclaimed royalties will be held by the content community instead of the streaming services as done previously. The reward for the digital service providers will be the certainty that they will be able to license all content for their platforms without the risk of being exposed to huge lawsuits claiming infringement.

Finally, the MMA creates a centralized database where all mechanical rights licensing information will be stored and accessible to all. This hasn’t existed before, although many companies have maintained their own databases, where the information could differ from information maintained by others. Having this information in one central place, accessible to all, will decrease the likelihood of arguments and the expense associated with sorting out true ownership of rights.

Everyone seems to agree that these are all important steps in the right direction and that they will help solve the problems and disputes that have existed for years between the music community and the music distributors. While no law is perfect or can solve every problem, it’s commendable that all parties were able to work with the Congress to accomplish this milestone legislation and work together in good faith to solve long-standing issues.

Most people in the music industry feel that the law helps musicians and the music industry, and increases the likelihood that artists will be compensated for their work in a fair and timely manner.

Music Modernization Act Criticism

In spite of the bipartisan agreement of Congress, and the general consensus that the MMA helps musicians, there are some legitimate criticisms of the MMA from interested parties. The first, and perhaps most important criticism, is related to the nature of streaming music revenues. It’s a fact that 90% of streaming revenues are generated by less than 10% of the songs. This means that for 90% of the artists, including some Pulitzer Prize winners, MacArthur winners, NEA Jazz Masters, GRAMMY-nominees and winners, revenues from their music has collapsed completely. Meanwhile, the streaming companies struggling to make a profit from subscriptions base their earnings on the 10% of songs that earn money for them. This means that record companies are often not willing to advance money for recording albums for most artists, who are left to their own devices to fund their recordings, which can cost tens of thousands of dollars.

Other criticisms have addressed the corporate control of the collective to administer the royalties, saying there would not be enough transparency and there needs to be a provision for artists and Songwriters to audit the streaming distribution and financial allocations. There has also been criticism of provisions in the law to provide immunity from prosecution for the collective if they screw up or are negligent. Additionally, there may be issues with musicians and bands from overseas who would be faced with the hassles and expense of filing for copyrights in the U.S. in order to get paid their royalties.

As with most legislation, the MMA was written mainly by Lobbyists and Corporate Lawyers, in this case working for the major companies that control the music industry, like Spotify and YouTube, with input from major publishing/record companies like Sony/Warner/Universal, who have ownership in Spotify. There are some critics of the law that say this gives these traditional big players too much power to suppress the rights of smaller artists, and that the MMA is the result of clever crafting that just further protects and insulates the powerful Publishers and the big data companies.

If you do some digging on the internet you can find quite a few further strong criticisms of the MMA written by Attorneys and other industry observers. Some of the arguments are incredibly intricate and complex, but the main idea is that too much power and protection was given to the big industry players and some artists will be denied their due process rights and income.

Where to Find the Music Modernization Act

The Music Modernization Act, also called “H.R.1551 – Orrin G. Hatch-Bob Goodlatte Music Modernization Act” is a consolidation of three separate bills introduced during the 115th United States Congress.

Click on this link to read the Music Modernization Act full text.

The law as it stands is over 100 pages long, so make sure you put aside some time if you plan to read the whole thing!

Besides the welcome fact that the law will increase cash flow to artists and musicians, it’s remarkable that this legislation passed unanimously, as it was one of the very few policy initiatives where a divided Congress could reach bipartisan agreement. It will take some time for the law to come fully into force. As the law is implemented, we will gain a greater understanding of exactly how the MMA impacts creators, the music industry, and the listening public.

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