As Clock Ticks, New Hurdles Mount Against the Music Modernization Act
The Senate needs to act on the bill before this Congressional term ends, otherwise lawmakers and music industry lobbyists must start the legislative process again next year.
The revised and amended Music Modernization Act that got the okay from the Senate Judiciary Committee June 28 was still garnering accolades from all sides of the music business days after its passing.
Yet, the proposed amendments to the bill -- some that were added in the Senate and some that are still under consideration by lawmakers -- are also raising new questions and concerns, including how to pay for the proposals.
Meanwhile, the clock is ticking: the Senate needs to act on the bill before this Congressional term ends; otherwise lawmakers and music industry lobbyists must start the legislative process again next year after the fall midterm elections bring new officials into Congress. Adding to the pressure is a brewing fight over Supreme Court nominee Brett Kavanaugh, which some fear may take up most of the Senate's bandwidth going forward.
At stake is proposed legislation that music trade groups say will ensure digital music services pay fair royalties for every song they stream, establish better standards for determining royalty rates and eliminate some out-of-date provisions of the PRO consent decrees. In return, digital music services get certainty, legal protection and new streamlined tools to insure accurate reporting and payment to right holders at lower cost. The main element of the legislation creates an agency to issue a blanket license to digital services and collect play information and pay the appropriate right holders, and to build a central database that matches the rights owners of songs with master recordings. It also requires that the consent decrees of ASCAP and BMI to be overseen by rotating judges, instead of having the same two judges involved in that process. Finally, it insures that digital and satellite services pay royalties for pre-1972 master recordings, while also codifying a system to allow Sound Exchange to pay producers the royalties they are due on the records they work on.
In addition to those elements in the bill passed by the House of Representatives in an unanimous vote of approval, amendments approved by the Senate Judiciary Committee include a requirement that the proposed agency be more transparent by including operations, budgets, annual costs and other expenses in its annual report. Another amendment brings in the General Accounting Office (GOA) and the Register of Copyrights in to conduct a study to determine best practices for identifying and locating copyright owners, and adds new oversight and accountability requirements, including an audit to occur every five years to examine the collective's procedures and its financial results, the findings of which must be made publicly available. The amended legislation also requires the mechanical licensing agency to publicize the existence of the database and the procedure for claiming ownership of works, and educate songwriters on how to claim royalties and publicize the collective to publishers and songwriters.
With the passage by the Senate Judiciary Committee, the industry had been hoping that the legislation will be "hotlined," a Senate process that expedites legislation if the Senate leadership thinks the bill may yield approval by unanimous verbal consent. But before this bill can be considered for the hotline process, there are a number of obstacles, including certain proposed-but-not-yet-added amendments, a competing bill and a math problem.
In order to accommodate the study and the audit the bill calls for, for example, the Congressional Budget Office calculated a cost of $222 million over eight years, while the new taxes created by insuring payouts to copyright owners on all plays will produce $175 million in new tax revenue during that period, leaving a $47 million shortfall. Under U.S. law, Congress now must figure out a way to fund that shortfall, before the proposed legislation can become law.
Senator Ted Cruz, meanwhile, has been proposing an amendment that would insure competition to the new agency. Since the proposed legislation would federally create a new entity that could potentially hurt already existing private companies Music Report Inc., the Harry Fox Agency, MediaNet and others that currently implement licensing and provide reports that match plays with songwriters and facilitating payments to rightsholder, his amendment seems to provide a way to allow those types of companies -- termed private entities in his proposed amendment -- to also offer and administer the blanket licenses, as well as the proposed collective.
But instead of holding the bill up in the Judiciary Committee by insisting that his amendment be added to the bill, Cruz voted to let the proposed legislation go to the full Senate. Now, industry sources say that they hope to visit Cruz and with other Senators that have reservations about the bill to offer clarification that might help resolve whatever issues they have with the bill. But sources say that at least one of the owners of one of the aforementioned private companies handling licensing, reporting and payment for digital organizations is lobbying aggressively against the bill, saying it would put their company out of business.
Further complicating the picture are several other industry players who are hoping to make further amendments to get into the bill before the full Senate votes on it. Even though the bill is already considered compromise legislation -- authored by digital services working with the publishers, the labels and radio in hopes of presenting a united front -- some fear new additions could potentially rock the boat.
For instance, the Content Creators Coalition and Music Answers applauded the Senate Judiciary Committee for allowing the bill to go to the full Senate, but also said they were pushing for more changes.
"While we support the legislation and are proud of the changes we have achieved as artist and songwriter advocates, we continue to have concerns about three key issues: whether the entity that is designated as the [Mechanical Licensing Collective] is being foreordained by the bill and precludes competition with the MLC; the composition of the Board of Directors of the MLC, which is unduly tilted towards major publishers; and the methods used to distribute royalties from works where even using best practices the authors could not be identified," the two groups said in a joint statement.
They continued, "We urge the full Senate and the House to consider further improvements to those flawed provisions and we call on the Copyright Office to ensure in implementation of the final legislation that no stakeholder group can dominate the MLC and that all royalties are distributed in a fair and equitable and non-self-interested manner."
Likewise, while Sirius XM supports the proposed legislation, it has also expressed unhappiness with the Classics Acts portion of MMA, pointing out in an op-ed in Billboard that the proposed legislation still gives its main competitor, terrestrial radio, a free ride in that broadcast radio doesn't have to pay master recording royalties. All digital and satellite radio have to pay master recording royalties, but some like Sirius refused to pay those royalties to pre-1972 recordings since the master recording copyright only covers back to then. The proposed legislation would extend a master recording performance royalty to pre-1972 recordings, but Sirius is pushing for terrestrial radio to at least be included in having to pay for playing pre-1972 recordings.
"During the same period that SiriusXM paid $2.2 billion for its use of post-72 works, terrestrial radio paid them nothing. If Congress truly wants to correct an unfairness in the Copyright Act, terrestrial radio should be subject to the CLASSICS Act just like satellite and internet radio," the SiriusXM op-ed read.
Finally, so-called Copyleft organizations -- which generally seek to weaken copyright or prevent it from strengthening -- are also fighting against the CLASSICS elements of the proposed legislation, suggesting that component elongates the length of Copyright for recordings made in 1923 to 144 years, though there were few recordings made that year.
Those objectors are embracing Democratic Sen. Ron Wyden's Accessibility for Curators, Creators, Educators, Scholars, and Society (ACCESS) to Recordings Act, which is now being pitched as an amendment; as well as Republican Sen. Ben Sasse's amendment to strike the CLASSICS Act from the MMA.
Since the MMA was passed though the Senate Judiciary Committee, sources say that the labels have made an additional compromise pitch to Wyden that the senator has rejected, although negotiations continue.
Some have suggested that the two senators are motivated by trying to appease the big boys of the internet, Google, Apple, Facebook and Amazon, all of which have data centers in Wyden's home state Oregon; or hope to soon have data farms like Facebook is planning for Sasse's home state of Nebraska.
If the bill isn't passed by year's end, it's back to the drawing board in 2019: the industry will have to line up elected officials in both the House and Senate all over again to sponsor a bill and introduce the legislation.
But music industry groups are urging lawmakers not to get sidetracked.
"With support from lawmakers on both sides of the aisle, plus unprecedented cooperation between the music and technology industries, the MMA will update the music licensing system for today's online world and correct long-standing problems that have denied songwriters and publishers full control over their works," said an AIMP statement issued by AIMP President Michael Eames, the organization's New York executive director, Alisa Coleman, and the Nashville executive director, John Ozier.
The Songwriters of North America (SONA) said after the passing of the bill through the Senate Judiciary Committee "we are now one step closer to bringing music licensing into the 21st century. SONA encourages the Senate to move swiftly and pass this bill without diluting the long overdue benefits it will provide for music creators, ensuring that the art of the American songwriter will continue to proudly flourish for generations to come."
Recording Academy President and CEO Neil Portnow also applauded the amended legislation. "As the organization representing all creators, we are gratified to see the industry and Congress work in harmony to pass the Music Modernization Act through the Senate Judiciary Committee," he said in a statement. "Following years of advocacy by music creators, we look forward to that momentum continuing as the Music Modernization Act heads to the Senate floor."