Inside the Music Modernization Act's Last-Minute Negotiations With SiriusXM

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The US Capitol building in Washington, D.C.

The monumental bill passed the Senate on Tuesday, thanks to an 11th hour compromise between the satellite radio service and the rest of the music industry.

Tuesday started out with knives drawn and war in the air, as the music industry was going toe-to-toe with SiriusXM over the Music Modernization Act. The bill needed unanimous approval from all senators in the 24-hour hotline process, meaning a single objection could move it to debate on the Senate floor -- possibly killing it altogether at this point in the year. But instead of a bloodbath, the day ended in kisses and hugs as most sides came together to celebrate the bill's passage, thanks to an 11th hour compromise.

For the last six months, SiriusXM has been pushing back against the Music Modernization Act saying it treats the satellite radio company unfairly when compared to its competition. This public relations gambit almost ended with an artist/songwriter boycott of Liberty Media, which owns a controlling interest in SiriusXM. But late Tuesday night, before the day turned, SiriusXM put out a press release announcing a deal had been struck and the company was happy the legislation had been approved by the Senate.

"We are pleased to join with the music community in sponsoring amendments that protect artists in this legislation," Liberty Media President and CEO Greg Maffei said in a statement. "It is important that the music industry move forward so that artists can showcase their work throughout the United States."

SiriusXM CEO Jim Meyer added, "SiriusXM is a platform that respects and actively supports artists and all music creators, and we are delighted to have reached this agreement to help pass this bill."

On the other side of the table, RIAA President Mitch Glazier said, "We are pleased that SiriusXM and the music community have come to an agreement that ensures the protection of artists, songwriters, publishers, labels, producers, and all music creators who will benefit from this long-sought, consensus legislation."  

Likewise Full Management co-founder Irving Azoff said in his statement, "This is a monumental occasion for artists and songwriters who are now assured -- in law -- that they will receive their deserved royalties.  We are proud to be a part of this critical consensus and the ongoing fight for artists' rights."

After a weekend of negotiations between all the legislation's major stakeholders, early this week compromise was in the air. But it was still unclear whether it would be enough, with the bill's success hinging on whether any senators would object to the planned fast-track hotline process. As of Tuesday, 82 senators had signed on as co-sponsors of the bill, but it was unclear exactly what the remaining 18 would do. And when industry proponents found out Tuesday morning SiriusXM had lined up at least two senators to object to the Music Modernization Act, proclamations of war and pandemonium broke out.

At that point, MMA proponents tried to find out which senators might be staging to block the legislation while also considering making a decision: try to strike a compromise with SiriusXM or call its bluff and see what would happened. If there was an objection and the legislation was pulled from the hotline's unanimous approval process, industry executives figured they could still probably get it passed on the floor. But, with Brett Kavanaugh Supreme Court confirmation turmoil, chances are it wouldn't get to the floor before the recess. They could probably still get a vote during the lame duck session after the November elections, but that also presented risks: Once the bill hit the floor, a senator could try to attach amendments the industry might not want or package it with another unpopular bill.

By 2 p.m. Tuesday, the MMA's music industry supporters were aware Sen. Lindsey Graham (R-S.C.) was sympathetic to SiriusXM's issues and might still object, while Sen. Mike Lee (R-Utah) still had concerns about the bill's blanket license provision impacting competition, sources say. Given those possible objections, Senate leadership encouraged the industry to try and compromise once more with SiriusXM. Those negotiations began with Sen. Lamar Alexander (R-Tenn.) going to SiriusXM, opening the doors for the industry to resume negotiations while racing against the hotline's ticking clock.

At this time, SiriusXM was still seeking the same amendments it had been pushing for the last few months, although it had modified its stance somewhat. The company initially wanted the 801(b) standard restored -- a provision the MMA eliminates -- which provides rate courts use additional consideration when setting rates beyond its standard criteria for most most other digital players. (Rights holders complain these special considerations result in lower rates for digital services established before the 1998 Digital Millennium Copyright Act, such as SiriusXM.) The company also wanted wording included that ensured the royalties it pays for pre-1972 recordings were divided evenly 50 percent to labels and 50 percent to artists and musicians, since its earlier payment held back from artists the amount the labels spent on the pre-1972 litigation. Finally, SiriusXM wanted the same consideration given to terrestrial radio that it wouldn't have to contend with its publishing rates being influenced by the royalty paid to labels. (The MMA eliminated that restraint for all other digital services, which music publishers and songwriters hope means higher payments for publishing rights.)

The 50-50 split was an easy compromise for the industry, once Azoff and Susan Genco from his company weighed in with help from Songwriters of North America (SONA) legal counsel Dina LaPolt and attorney Jacqueline Charlesworth . In fact, negotiations for this part of the compromise had already begun over the weekend with Azoff and Genco getting the labels on board. As part of the deal, SiriusXM agreed to give up considerations given to pre-existing services as well as losing the prohibition of using royalty rates paid to labels when setting publishing rates -- all in exchange for rate certainty through 2027. That means, SiriusXM's existing copyright royalty rates of 15.5 percent of its revenue to be paid to labels and artists will hold for nearly another decade. 

Publishers and songwriters didn't have to make any concessions to win Sirius endorsement of the legislation.

The final deal and all of the elements came together between 4 p.m. and 5 p.m., as the legislation finally gained Senate approval and was announced around 6 p.m.

While some sources insist SiriusXM had previously been offered and turned down a compromise similar to what was finally agreed upon, others tell Billboard that was not the case. But on Tuesday afternoon a key compromise was struck between RIAA, the labels and Sirius that would keep their royalty rates locked in until 2027 (see here for more details). 

With most sides now happy about the bill and hoping its momentum carries forward through House approval and then signing by President Donald Trump, some see a new dawn where the industry might finally come together to solve problems rather than the frequent infighting of old.

"The Senate's unanimous passage of The Music Modernization Act is a monumental step forward in getting this critical piece of legislation signed in to law," said BMI president and CEO Mike O'Neill in a statement. "This bill has been the product of unprecedented collaboration across the entire industry, and we thank ... the entire Senate, for helping to ensure that songwriters and composers can continue to earn a living creating the music that is loved all over the world."

"After 5 years of collaboration and helping to bring people together from all parts of the music business, we have finally harmonized as an industry," SONA's attorney LaPolt said in a statement. "This is a historic occasion for the music industry, copyright reform, and marks the beginning of a new era for music creators in consensus with stakeholders industry-wide."