This will mainly affect the streaming world and it’s similar to a bill the House introduced in December. The Music Modernization Act updates music licensing laws with a goal of making it easier for songwriters to get paid when their music is streamed or purchased online. It creates a new licensing entity that would handle digital mechanical licensing, funded by streaming companies, operated by publishers and songwriters. Streaming companies would be able to obtain a blanket license from that organization, which would then be in charge of identifying all of the correct copyright owners and paying them the digital mechanical royalties they are owed.
BMI President & CEO Mike O’Neill said The Music Modernization Act is an important step forward in protecting the rights of the American songwriter. “While we believe there is still more to do to protect the value of the performance right, we are encouraged by the inclusion of two important provisions that go a long way towards ensuring that songwriters and composers receive fair compensation for their creative work; the wheel assignment for rate court judges and the repeal of 114 (i) application to digital services. While we know this bill is not yet final, it represents an unprecedented cross-industry effort to introduce comprehensive music reform, and we look forward to working with all of the interested parties to further support this much needed legislation.”
READ THE ENTIRE SENATE-PROPOSED MUSIC MODERNIZATION ACT HERE
Senator Orin Hatch, a bill co-sponsor said music licensing laws are convoluted, out-of-date, and don’t reward songwriters fairly for their work. “They’ve also failed to keep up with recent, rapid changes in how Americans purchase and listen to music. The Music Modernization Act will streamline and update our licensing laws to ensure that streaming services and other digital music providers are able to obtain the licenses they need while simultaneously making sure that songwriters are paid a fair market value for their work. This is a consensus piece of legislation that brings together all sides of the music industry, and I intend to work my hardest to see it enacted in the near future.”
Here are some of the key points from the legislation:
– Adopts a simple licensing system for digital music services to make it easier for services to obtain a license to play a song and to reduce the likelihood of litigation.
– Ensures songwriters will be paid the fair market value for their songs by directing the Copyright Royalty Board to set songwriter royalties according to the fair market value rather than the current, below-market standard.
– Removing a provision of law that narrows the scope of evidence the Federal Rate Court may consider when setting songwriter royalties for songs performed in public, such as in a restaurant or at a concert.
Senator Lamar Alexander, also a co-sponsor said the legislation addresses two of the greatest challenges facing songwriters: One is that the arrival of the Internet has meant that many songwriters aren’t paid royalties when their songs are played, and two, when they are paid, they aren’t paid a fair market value for their songs. “It is also the first major bill that has the support of music creators, publishers, and digital music companies. With such broad support, I’m hopeful we will be able to pass the legislation this spring.”
The legislation is supported by the National Music Publishers Association, the Digital Media Association, ASCAP, BMI, the Nashville Songwriters Association International, Songwriters of North America, the Recording Industry Association of America, the Recording Academy, and the American Federation of Musicians.
Here’s the basic problem: This law only deals with the exchange between music and companies. It doesn’t talk about how those companies will get money from the public. Right now, streaming companies are losing money because of the current royalty rates. Pandora, with all of its success, has never made a profit. This law would increase those royalties even more, with no provisions for how those royalties will get paid. No one really knows how to collect money from the public. The two models are ad-supported and subscription. When given the choice, the majority of the public chooses free ad-supported music. When you talk about “fair market value,” what do you do when the public has said they want music for free? If you’re going to get the government involved, which is what the music industry has chosen, there needs to be something in the bill to guarantee that the companies paying the royalties can make money. That might mean a tax on music, or a tax on devices, or some kind of mandated system where the people who listen to the music are paying for it. This bill, and all the other bills like it, only covers part of the system. If the public feels it’s their right to hear music for free, then the fair market value of music is zero.