Hailed as a major milestone and major opportunity for the music industry, the Music Modernization Act (MMA) of the USA was signed into law by President Trump on the 11th October 2018. The MMA also has a global impact due to the USA being a signatory to the Berne Convention which dictates that the copyright law of the country where music is played, performed, streamed, downloaded, etc regardless of the country in which it was created; is the applicable jurisdiction.
The MMA comprises three Bills previously introduced to the US Congress, which were enjoined and finally passed:
Title I: Music Licensing Modernization
This part of the MMA dictates how digital music providers (DMPs) of on-demand interactive audio streaming services e.g. Spotify, Tidal, Apple Music, Amazon Prime, etc, will in future obtain a blanket mechanical licence for interactive streaming or digital downloads; and the creation of a Mechanical Licensing Collective (MLC) to administer the blanket license. It also replaces the current legal standard for setting the statutory rate by the Copyright Royalty Board (CRB) with a new standard taking free-market conditions into consideration when determining rates.
The MLC will be a non-profit quasi-government agency which will (i) collect, distribute, and audit the royalties generated from the blanket licenses; (ii) create and maintain a public database which identifies musical works with their respective owners; (iii) provide information to match works with their respective sound recordings; and (iv) hold unclaimed accrued royalties for a minimum of 3-years before distributing them to copyright owners based on market-share reflected by royalty payments made by DMPs.
Title II: The CLASSICS Act
This is an acronym for ‘Compensation Legacy Artists for their Songs, Service and Important Contributions to Society’ Act which changes how pre-1972 recordings are treated. Prior to the passing of the MMA, when pre-1972 recordings were played on digital radio e.g. SiriusXM, no royalties were required to be paid to the record label or the performers, as they were not protected by federal copyright law and relied on state copyright law which granted protection in some states while others did not. Royalties were paid for post-1972 recordings when played on digital radio. Now, all pre-1972 recordings played on digital radio are under federal jurisdiction and royalties will be paid for the recordings and the performances.
Title III: Allocation for Music Producers (AMP) Act
This part of the MMA provides for a music producer, mixer and sound engineer who was part of the creative process that created the sound recording to receive part of the royalties paid on sound recordings when played on digital radio; to be collected and administered by SoundExchange. This is already the industry practice which is now codified in law.
Music publishers/songwriters and DMPs, as the main stakeholders affected under the first part, are getting to grips with the detail and how it impacts on them. Under the current system, the DMPs have the burden of identifying the writers of streamed musical works and making sure they are paid mechanical royalties. If this was not possible, they would file a Notice of Intent with the Copyright Office and if the songwriter/copyright owners come forward they can be compensated; however, this method is inefficient as the DMPs would make bulk filings of thousands of works and it was not possible to identify all of the songwriters, resulting in lawsuits against Spotify for copyright infringement.
Under the MMA this deficiency was addressed. The MLC will issue blanket licences for every single composition, past present and future, in the World and collect fees for the licences. The DMPs do not have to know whose music they are using neither will they have to pay mechanical royalties to the songwriter. The burden will now be on the publishers/songwriters to register their copyrights directly with the MLC in order to get paid earned US mechanical royalties. Every single entity in the US and the rest of the world must register with the MLC to be eligible to be paid, or the money will be regarded as ‘unclaimed accrued royalties’ which, after a minimum time frame of three years, can be taken and distributed to other music publishing entities based on their market share of streaming royalties paid.
This concept also applies to all the ‘old’ unpaid royalties which have accrued since 2000 when streaming began until the passage of the MMA. Unable to reach a deal with the music publishers, the DMPs agreed to pay advances which would be recouped from future royalties when the songwriters/copyright owners were identified. Reported to be in the region of £800 million to $1 billion, the time frame to potentially claim from this pot is one year before it is taken and handed to the other copyright owners based on their US music publishing financial market share.
There is a 2-year transition period before the MLC comes into existence in 2020. In the interim, the existing system applies, with the exception that it is no longer possible to sue a DMP for copyright infringement and statutory damages; the cut off point for filing was December 31st, 2017.
George Chin LLB (Hons), LLM (Entertainment Law).