Say You Want a Revolution? U.S. Copyright Office Modernizes Key Part of Digital Licensing

Music publishing is currently mired in legal battles, settlements and public debates over whether on-demand streaming services are correctly licensing songs and properly compensating rights owners, the U.S. Copyright Office has taken an important step, finally making it possible to file compulsory licenses digitally.

Late last year, after artist advocate and songwriter David Lowery filed suit against Spotify following the company's admission of this massive blind spot (after being called out by Victory Records and Audiam), the music publishing and digital services community reached out to the Copyright Office, saying it needed the compulsory license process digitized in order to clean up the mess going forward and make sure songwriters and publishers get proper compensation.

"At this point, 500,000 new [songs] are coming online every month, and maybe about 400,000 of them are by indie songwriters, many of whom who don’t understand publishing," Bill Colitre, vp/general counsel for Music Reports, a key facilitator in helping services to pay publishers, tells Billboard. "For the long tail, music publishing data from indie artists often doesn’t exist" when their music is distributed to digital services.

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Music Reports seems to have become the first to digitally file notices of intent (NOIs) for compulsory licenses, on behalf of the Guvera music subscription service. (Guvera made unrelated headlines earlier this week after its IPO was blocked by the Australian Securities Exchange)

Services say they can’t locate licensing information because a standardized database doesn’t exist. Some publishers and songwriters say that’s bull; all the services have to do is use the compulsory license system. Those publishers and songwriters counter that services ignored the compulsory licensing process and played their music anyway, in violation of copyright law.

Additionally -- and onerously, some would say -- many streaming services didn’t build systems to handle publishing data, or didn’t properly use the compulsory license process, which is why companies like Spotify and other digital services are involved in class action lawsuits combined with settlements with publishers

If a direct deal hasn’t been cut with the publisher but the streaming service, or its agent -- often companies like Music Reports Inc., the Harry Fox Agency’s Slingshot operation, and Musicnet -- know all the rights owners of a song, it has to file a notice of intent with those rights owners. If it doesn’t know all the rights owners, the service can search the Copyright Office's database to see if that song and its owners are registered and, if so, can retrieve addresses and issue a notice of intent. If it can’t find the song or the owners, then the service has to file a notice of intent for the compulsory license for that song with the U.S. Copyright Office.

Until recently, this was a time-consuming, work-intensive, and costly process. NOIs had to be filed manually, by paper and under a prohibitive pricing structure. So if you started a service and had the publishing data for say 5 million songs, but did not have the information for another 500,000 songs, the service would need to file NOIs, saying it is licensing and using those songs with the Copyright Office. That process would cost $75 to register for the filing of all those songs, and $2 a song, or about $1 million. Also, the NOI for each song would need to be filed individually, although they could all be batch delivered to the Copyright Office.

But about two months ago, the Copyright Office revamped the way it is willing to accept NOIs and changed its pricing structure. Now, NOIs can be filed on excel spreadsheets, with something like 20 columns of relevant data needed to be completed for each song. This electronic filing still requires an upfront fee of $75 but it now only costs 10 cents a track. So now, filing NOIs for 500,00 songs will only cost $50,075, instead of $1.000075 million.

MRI began with a test run of less than 100 songs for Guvera. "It was designed as a test run to ensure the process was working," Colitre write in an e-mail. "The test was a success, and we are now gearing up for far larger batteries with several other clients."

Chairman of Guvera Phil Quartararo has said the new process would help efficiently manage the unprecedented volume of new releases Guvera receives from its label and aggregator partners, ensuring that publishing rights holders and composers are more quickly notified and compensated for the use of their work.

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Moreover, MRI has other capabilities that allows it to maximize this filing process, says Colitre. First off it has its Songdex database, which has metadata on over 70 million tracks. (There is some duplication in the database because songs are often available on many albums). Songdex is not just song ownership, but it has the whole chain of rights from the composer to the publishers to the sub-publishers, including related business information like contact information and whether the owner or its administrator preferred to be paid by check or have the funds wired. "At this point, I know we have the largest number of tracks matched to compositions in the world; its above 16 million tracks," he adds. While it appears that 56 million tracks still need to be matched with publishing data, Colitre points out that less than 4 million tracks account for 98 percent of plays, and MRI has those tracks matched with publishers.

In order to make things easier for publishers, MRI has built a claiming system for its database that allows publishers to match their songs to the tracks used by MRI’s digital service clients. Moreover, if a publisher's song or songs are not in Songdex, each publisher has a song-builder interface so that the song and relevant information can be entered into the MRI database. While publishers may say, "great, this means we have to do MRI’s work for them for free," it is one way to insure that payments are issued properly and quickly. So far publishers have input 300,000 songs to its claim system, which are then vetted by MRI's research team. After a claim is made, payments are generally made 45 days after the close of the quarter, Colitre claims.

"Bottom line: we’ve created a super-efficient mechanism to help solve the problem of mechanical licensing at scale in the United States," Colitre says. "The DSPs [digital service providers] who use this platform will have bigger cleared catalogs with lower risk; the publishers who use it will get paid faster and more transparently... it is online and operational today.”