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Music Modernization Act Faces Verbal Vote in Senate, But One ‘No’ Could Be Fatal

The music industry powers that be must be confident that they have the votes they need because sources tell Billboard that the Music Modernization Act is planned to be hotlined in the Senate tomorrow…

The music industry powers that be must be confident that they have the votes they need because sources tell Billboard that the Music Modernization Act is planned to be hotlined in the Senate tomorrow afternoon.

Hotlining is a process implemented when the leaders feel that there is the potential for legislation to be passed unanimously by verbal vote. Hotlined bills are generally noncontroversial, technical bills that rarely makes the mainstream newspapers that cover politics. 

However, if one Senator doesn’t vote yes, then the legislation could be stalled and would then have to go to the floor for debate; and where other things could happen to waylay the legislation including amendments and possibly packaging it with another unpopular piece of legislation that could kill the music industry’s chances of getting any copyright revisions at all.

While the opening of the hotlined process means that the Senators are notified that the legislation will be fast-tracked, they have 24 hours to object and if none do  then the billl is considered ready for unanimous consent consideration before the full Senate, according to a memo supplied to Billboard. If a Senate office objects, then the leadership tries to ascertain the reason for the objection and if it can be worked out, the hotline process can start again. If the objection can’t be rectified, chances are the bill will not be added to the docket for debate and likely wouldn’t come up for vote by the end of this term, i.e. year-end. In January, a new Congressional session will begin, which means that all pending legislation will have to start the process all over again.

On Friday evening, the latest version of the legislation was e-mailed to all 100 Senators with the information that the Senate would consider the bill for hot-lining Monday afternoon.

The fact that it will be hotlined means that the Senate has figured out a way to pay for the costs of the legislation. When last heard about, the legislation was expected to create $175 million in new taxes, but cost $223 million to oversee regulation of the bill —which would require digital and satellite services to pay performance royalties to master rights owners and artists; create a blanket mechanical license and a collective to administer it; and codify payments to producers by Sound Exchange — which meant it had a $48 million shortfall. But the legislation appears to be somehow appropriating some funds from legislation regarding advanced nuclear power facilities.

Meanwhile, as it stands, none of the amendments offered by Sirius XM, the main music industry service still protesting the otherwise consensus legislation, appears to have made it to the final version of the bill being considered tomorrow.

Sirius XM objected that the legislation makes them legally responsible to pay for pre-1972 recordings the same as copyright law has for years made it pay for post-1972 recordings. In 2012, Sirius stopped paying for pre-1972 recordings and it took a class action lawsuit by the Turtles, which resulted in two settlements — one with the class action and the other with the major labels — for Sirius to pay royalties on those recordings. Both settlements have a going forward licensing provision, but once those respective licensing periods end, there is no guarantee that Sirius would continue paying, other than its word.

So Sirius has complained that the legislation gives an advantage to its main competitor, terrestrial radio, which doesn’t have to pay performance royalties for master recordings, let alone just the pre-1972 recordings, while the legislation legally adds that Sirius has to pay for pre-1972 recordings, in addition to post-1972 recordings as determined by the Digital Millennium Copyright Act of 1998.

Also, Sirius objected that the legislation also eliminates a carve-out granted to it in the DMCA, which allowed special status to pre-existing services — which apply to three services, Sirius, Music Choice, and CMX — called the 801-B standard, that would allow rate courts to take into consideration how royalty rates would effect the services, such as, in the case of Sirius, the expense of running a satellite system. The MMA eliminates that that carve-out. 

Additionally, the MMA eliminates another limitation on rate setting in that previously rate courts couldn’t take into consideration any royalties being paid to master recording rights holder when setting publishing rates. So now when Sirius rates are being set, the Copyright Royalty Board can consider royalty rates paid to record labels in setting publishing royalty rates for most services, including Sirius.

However, the MMA gives terrestrial radio a carve-out so that the legislation eliminating that carve-out doesn’t apply to analog transmission, i.e. terrestrial radio.

Since the Music Choice cable network was also objecting to the elimination of the 801-B standard, the new version of the legislation gives Music Choice a grace period until 2028, in that the law says that when the current period ends on Dec. 31, 2022, the rates paid by pre-existing subscription services — the only one being Music Choice as Sirius is considered pre-existing satellite service — will stay the same through the next five-year period ending Dec. 31, 2027, with no need to go before the CRB.

So while the MMA takes away Sirius XM’s carve-out, it gives carve-out concessions to both terrestrial radio and Music Choice, another reason why Sirius has objected to the bill.

Finally, Sirius wanted the legislation to say specifically that the money it pays as part of its settlement be split evenly 50/50 between the labels and the artists and musicians. As it is, those payments deduct the legal cost of fighting Sirius over the pre-1972 recordings. However, this Sirius ask doesn’t appear to have made its way into the final version.

In addition to making changes aimed at apparently pleasing terrestrial radio and Music Choice, the legislation also has made changes to accommodate Harry Fox Agency/SESAC/Blackstone, as well as Senator Wyden and Sen. Cruz. 

Since the Senate is proceeding to implement hot-lining on the MMA tomorrow, without any changes to accommodate Sirius, the industry must think it has every Senators vote. Because if any of Sirius XM’s objections resonates with even one Senator, that could derail the legislation this year, and send the industry back to the drawing board.

Industry players with a stake in the proposed legislation couldn’t be reached for comment on Sunday.