Music Modernization Act Expected to Be Introduced in Congress Tuesday

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The United States Capitol building in Washington, D.C.

It's the first significant music licensing bill in a generation.

On Tuesday, Rep. Bob Goodlatte (R-Va.) is expected to introduce the Music Modernization Act, which will transform the way mechanical royalties are collected and reform the way labels and musicians are paid for the use of sound recordings online. It's the first significant music licensing bill in a generation and the result of five years of lobbying, hearings and compromise.

As expected, the Music Modernization Act, which is scheduled for markup by the House Judiciary Committee on Wednesday combines three previously introduced bills, all of which have been introduced in the Senate, along with an additional rate-setting change. The most important of these bills -- which is, confusingly, also called the Music Modernization Act -- creates an organization to collect and distribute mechanical royalties from streaming services. The new bill also contains the CLASSICS (Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society) Act, which would require digital services to pay labels and performers for their use of recordings made before 1972, and the AMP (Allocation for Music Producers) Act, which would codify the process by which SoundExchange pays producers and engineers who receive royalties on recordings. It also directs the Copyright Royalty Board to determine the rate SiriusXM pays to use sound recordings based on "the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller," which is expected to raise its royalties.

The Music Modernization Act is especially important because, in addition to creating a new collecting organization, it offers streaming services a safe harbor from copyright infringement lawsuits for statutory damages filed after Jan. 1. (Rightsholders could still file for actual damages, but in the vast majority of cases they couldn't hope to make back their legal costs.) This wouldn't affect existing lawsuits, such as the putative class-action case Spotify settled for $43.45 million, but it would prevent further actions and thus remove an existential threat from streaming companies. The problem of how to accurately pay publishers mechanical royalties would remain, but it would be addressed by this organization rather than the services themselves.

The Music Modernization Act would also direct the Copyright Royalty Board to determine rates for both mechanical royalties and sound recordings using the so-called "willing buyer/willing seller" standard. Until now, most digital services used that rate, but others -- including, most significantly, SiriusXM Satellite Radio -- used the "801(b) standard," which usually leads to lower rates. Services would also have to pay to use recordings made before 1972, which are currently covered by state law.

Of these provisions, only the new collecting society has been controversial inside the music business. The CLASSICS Act is opposed mostly by SiriusXM. The bill is expected to pass the House, although it could face headwinds in the Senate. Although Congress is more divided than ever, copyright is a nonpartisan issue and many Republicans who are unpopular among creators have been eager to help them.

"Proponents of this latest version of the Music Modernization Act will likely characterize it as 'consensus,' but that is simply untrue," said a spokesperson for SiriusXM in a statement provided to Billboard. "There were a number of unique and important perspectives which were specifically excluded from discussions and we look forward to working with Congress to make sure those voices are heard. In its current form, this bill is anti-competitive and is harmful to the public interest and consumers."

There is a time limit of sorts, however. Much of the energy behind copyright reform comes from Goodlatte, the House Judiciary Committee Chairman, who is retiring this fall. Since Congress is in recess for most of the summer, that creates pressure to pass the bill by summer. The bill could be re-introduced if it doesn't pass, of course, but it would need a legislator to champion it, as Goodlatte has.

"The Music Modernization Act is the most significant update to music copyright law in a generation and represents unprecedented compromise among songwriter, music publisher, artist, record label and digital music groups, National Music Publishers Association (NMPA) CEO David Israelite said in a statement. "The Music Modernization Act will help ensure a healthy digital music ecosystem, most importantly for the songwriters who create the music that makes such an ecosystem even possible. It was not easy to achieve a consensus package, but we are grateful for music champions like chairman Goodlatte and ranking member [Jerrold] Nadler who have worked to foster agreement and we are eager for them to move this bill forward." Israelite also singled out for thanks Congressman Doug Collins [R-Ga.], the prime mover behind the original music modernization act.

The bill will also benefit from support across the music business, since its different provisions help various constituencies within it: Labels and performers benefit from CLASSICS, publishers and streaming services from the Music Modernization Act, producers and engineers from AMP. Even ASCAP and BMI benefit from a provision of the Music Modernization Act that lets them have cases heard by different judges. Separately, many of these bills would face the same opposition, but get far less support.

"Four years ago at Grammys on the Hill, we said this will work if all of the creators get together and we called for one combined bill," says Daryl Friedman, the Recording Academy's chief industry, government & member relations officer. "Now, four years later, this bill will be marked up just before this year's Grammys on the Hill."

This article has been updated with a statement from SiriusXM.