Time to collect your thoughts about the MMA

December 2018

COPYRIGHT: The Music Modernization Act (USA) was signed into law just over a month ago on October 11th, 2018 and will globally impact on songwriters and music publishers, irrespective of nationality or country, by providing for the creation of the Mechanical Licensing Collective (MLC), a new digital music licensing entity which will begin operating in January 2021. 

As the name indicates, the MLC will be a copyright licensing organisation which will create and maintain the world’s most thorough publicly accessible database of music composition copyrights and their owners; issue blanket licences and collect mechanical royalties from digital service providers (DSPs) – e.g. Spotify, Apple Music, Amazon Music Prime, Google Play, Tidal etc – for digital interactive music streaming and digital downloads in the USA; and pay those royalties to the copyright owners and rights holders anywhere in the world, who will be required to register their compositions and (co)ownership(s) with the database in order to satisfy claims for payment.

There is no existing entity pre-designated to become the MLC and the process under which it will come into existence is that: 

• No later than three months after the enactment date, the Register of Copyrights will publish a notice in the Federal Register asking for information on submissions including the name of the entity and affiliation of each member of the board of directors and each committee i.e. the Unclaimed Funds Committee and the Dispute Resolution Committee;

• After reviewing the information collected, the Register will publish the identity of the designated MLC with contact information and reasons for their choice. 

The assumption has been that the MLC would be operated by a collective of the major music publishers (as Board Members) who are also members of the National Music Publishers’ Association (NMPA), with SoundExchange widely expected to administer mechanical payments.  It is worth noting that the MMA does NOT require a board member to be a US citizen/resident as long as they satisfy the requirement; resulting in non-US music publishers and songwriters being eligible for membership to the board of a designated MLC.

However, critics have argued that an MLC operated by NMPA members would unfairly enrich the largest music publishers which has led to the founding of the American Mechanical Licensing Collective (AMLC) who declared themselves last week, and whose board of directors are composed of artists, songwriters, music publishers, musicians and technologists with a history of working for the entire spectrum of songwriters and music publishers globally; and a guiding principle that all songwriters, should be paid what they have earned from streams of their songs in the US – (https://www.songrights.net/). ;

There may yet be other organisations who will declare an interest in taking on the role of the MLC before the deadline for submissions.  One potential candidate could be SESAC which owns the Harry Fox Agency (HFA) and who are a music rights organisation (MRO), issuing both performing and mechanical licences. CEO John Josephson expressed in an interview (Digital Music News June 13, 2018) the hope that the MLC will work with SESAC/HFA on establishing the proposed database after alluding that they already had in place a cloud-based system that integrates mechanical and performing rights information for US and global copyrights.

In order to be eligible to be paid US mechanical royalties by the MLC, music publishers and songwriters must register their copyrights directly with the MLC.  The process has yet to be announced, but the burden is on the rights holders to register, irrespective of country/residence.  Failure to register can result in unpaid royalties being taken and distributed to other music publishers based on their financial share of the US music publishing market (i.e. major publishers will receive a larger share), after a three year period.  One criticism of the MMA is that there is no bar to an entity on the board of directors of the MLC from receiving a share of these “unclaimed accrued royalties” thereby creating a conflict of interest.  Once the money has been given away, it is gone forever.  There is no recovery mechanism for the copyright owner.

Of more immediate concern and one which will focus minds on the run in to January 2021 when the MLC will become operational is the issue of “old” unpaid royalties due since the start of streaming in the U.S. up to the passage of the MMA.  Significant amounts of unpaid royalties have accumulated since the beginning of streaming and it has been reported that the amount now stands in the region of U$1 billion.  The time frame to make a claim against this pot is one year, after which it will be taken and distributed in the same way as for unclaimed accrued royalties.  

For non-US music publishers and songwriters, steps should be taken now to identify any earned but unpaid mechanical royalties.  One option to identify all unpaid streams is by looking at service statements or stream counts of recordings of their own compositions in the US-based service where they have been streamed.  Once it has been verified that mechanical royalties have been earned and not paid, the DSP should be contacted to request payment as the music service must pay directly until the MLC comes into existence and they have a licence.  It should be noted that the deadline for suing for copyright infringement passed on December 31, 2017.

Another option to get the data ready is to affiliate with a (US-based) Reproduction Rights entity; one which works for music publishers and self-published songwriters to licence and collect US streaming mechanical royalties.  Using the latest technology, they can help track and identify unpaid royalties and get these paid so they do not end up being taken and distributed. 

George Chin LLB(Hons), LLM (Entertainment Law)



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