This is the first in a series of articles about the Music Modernization Act (“MMA”). Click here for the second and third.

In October 2018, the Music Modernization Act took effect, paving the way for changes in how copyright holders are compensated for their work by streaming services and others who make copies of their musical works and sound recordings. On January 1, 2021, copyright owners will begin receiving these royalty payments. During this transition phase, copyright holders and those who distribute their work online will most especially need to prepare to take full advantage of the Act to receive compensation for their work and to take actions to avoid liability for non-compliance, respectively. L&L is available to help all who wish to secure their fair share of what will be a significant pool of money for use of copyrighted works, and all who need help navigating the new, complex copyright licensing regime. This is the first in a series of articles about the changes to come.

Legislative history

On December 17, 2017, former Congressman Bob Goodlatte (R-Va.) introduced a bill to the House of Representatives known as the Music Modernization Act (“MMA”). The bill was met with little controversy, as members of Congress recognized a need to keep music licensing up to date with digital music providers (“DMPs”) such as Spotify and Apple Music, among other technological advancements in the music industry. In October 2018, after less than a year of discussion, this legislation became law.

The MMA consists of three Title sections: The Music Licensing Modernization Act (“MLMA”), The Compensating Legacy Artists for the Songs, Service and Important Contributions to Society Act (“CLASSICS” Act) and the Allocation for Music Producers Act (“AMP” Act).

Title I: Music Licensing Modernization Act

At the heart of the MMA are mechanical licenses, which are required to “make copies” of musical works and sound recordings every time they are streamed. These licenses will apply not only to music services that stream music 24/7, but also to every website that uses recorded music as a backdrop for their content.

The MLMA is the most substantive and complex section of the law, centralizing ownership of copyrights and royalties for mechanical licenses in a nonprofit organization called the Mechanical Licensing Collective (“MLC”). The MLC, which opened its proverbial doors in January 2020, is responsible for distributing royalties and administering blanket licenses, which allow entities to use any of the works in a database maintained by the MLC for a fee.

To further the purpose of transparency, the MLC database is public and contains information about all musical works and sound recordings, including all parties to whom royalties may be due. If the MLC is unable to find the rightful copyright owner(s), it distributes unclaimed royalties proportionately to persons identified in the database based on market share, as reported by DMPs.

In addition to the MLC, the MLMA establishes the Digital Licensee Coordinator (“DLC”), another nonprofit organization that assists licensees and participates in rate-making proceedings before the Copyright Royalty Board (“CRB”). The CRB’s panel of judges presides over decisions regarding royalty rates and distribution of copyright licenses in cable, satellite and music. Arnie Lutzker has been involved in compulsory royalty proceedings before the CRB since its inception in 2004, and its predecessor agencies (Copyright Royalty Tribunal and Copyright Arbitration Royalty Panel) going back to 1978.

Before the MMA, streaming services were required to serve notice of their intention to copy and distribute songs on an individual basis. Some DMPs were repeatedly charged with copyright infringement because copyright owners claimed they were not receiving fair royalty payments. Now that ownership is centralized, the licensing and royalty payment processes are streamlined for both owners and licensees. It is the hope and plan of the MMA that claims of infringement will diminish and compensation to copyright owners will increase.

Title II: CLASSICS Act

Before the MMA, sound recordings created before February 1972 were only protected to the extent that state laws permitted, while recordings after that date received full federal copyright protection. The Compensating Legacy Artists for Their Songs, Service, and Important Contributions to Society (“CLASSICS”) Act is a new protection for such sound recordings, going back generations.

The CLASSICS Act was enacted in part to curtail expensive copyright infringement litigation against DMPs for taking advantage of ambiguous state laws protecting sound recordings. While the MMA expressly preempts state claims regarding pre-1972 sound recordings, proceedings occurring during the passage of the MMA are up in the air. For example, the classic rock band The Turtles filed a class action against Pandora for use of their pre-1972 recordings under various California state laws, and the case is currently pending on remand to determine the MMA preemption as an affirmative defense. Flo & Eddie, Inc. v. Pandora Media, LLC, 789 Fed. Appx. 569, 572, 2019 BL 397624 (9th Cir. 2019).

Regardless, owners of these sound recording copyrights may now provide the United States Copyright Office with basic catalogue information, and, in exchange, they will be protected in the MLC database and may receive royalties if claimed within the three-year statutory period. The CLASSICS Act also extends the copyright term for pre-1972 recordings for 95 years after first publication, so that copyright owners have ample time to take advantage of the changes.

However, it is worth noting that the CLASSICS Act carves out an exception for non-commercial use of pre-1972 sound recordings. So long as users notify copyright owners and make good faith determinations that any use is non-commercial, they may exploit what the CLASSICS Act calls “legacy artist” recordings.

Title III: AMP Act

The Allocation for Music Producers (“AMP”) Act is a special section of the MMA for music producers and sound engineers. This section provides that copyright owners may send “letters of direction” to authorize royalty payments to any party that was “part of the creative process” in making a sound recording. These letters must be sent to SoundExchange, the only government-designated, nonprofit collective rights management organization responsible for collecting and distributing royalties from digital performances of sound recordings.

In Summary

The MMA has major implications not only for major streaming services, but also for all who use music online, including small, medium or large businesses and educational institutions, which intend to reproduce musical works on their websites or in their physical locations. The deadlines for public comments on the Copyright Office’s most recent amendments are approaching in the coming weeks. It would behoove all potentially affected entities – songwriters, publishers, digital music providers – to remain vigilant. We look forward to sharing more details on the MMA in future articles.

GLOSSARY

Understanding the legal changes inspired by the MMA requires an appreciation of a veritable symphony of acronyms and phrases. Coupled with the nomenclature associated with a number of music industry trade associations and organizations involved in the lawmaking process, it is quite easy to get confused. As the MMA undergoes a host of potential of amendments, including possibly new terminology, it is likely to become even more of an “alphabet soup.” Our glossary that follows will introduce the key terms to enable a steady navigation of this new legal digital landscape.

AMP Act

Allocation for Music Producers Act. Title III of the MMA. Allows copyright owners to authorize royalty payments to producers and sound engineers.

ASCAP

American Society of Composers, Authors and Publishers. One of the most prominent American performance rights organizations (see PRO below for more information).

Blanket licenses

All-in-one licenses that make it easier to license songs in bulk to licensees, administered by the MLC. Digital providers are no longer required to serve notices of intention to copy and distribute songs one by one.

BMI

Broadcast Music, Inc. One of the most prominent American performance rights organizations (see PRO below for more information).

CLASSICS Act

Compensating Legacy Artists for Their Songs, Service, and Important Contributions to Society Act. Title II of the MMA allowing pre-1972 songs to obtain royalties from SoundExchange.

CO

U.S. Copyright Office.

CRB

Copyright Royalty Board. United States board consisting of three copyright royalty judges (CRJs), who determine rates and terms of copyright licenses and distribution of subsequent royalties collected by the Library of Congress.

CRJ

Copyright Royalty Judge. Judge that sits on the Copyright Royalty Board.

DDEX

Digital Data Exchange. International organization that sets standards and protocol for more efficient communication along the digital supply chain, currently focused heavily on the music industry. The organization consists of about 100 member entities, including ASCAP, BMI and SoundExchange.

DLC

Digital Licensee Coordinator. Entity that assists licensees and participates in rate-making proceedings before the Copyright Royalty Board. Designates one representative to serve as non-voting member of MLC.

DMP

Digital music provider. Service that provides music, typically a streaming service like Spotify, Apple Music, etc.

DPD

Digital phonorecord delivery. This occurs when a sound recording is digitally transmitted, such that another entity receives one specifically identifiable reproduction of the sound recording. When a streaming service allows users to play songs for more than a “transitory duration,” this is the perfect example of a DPD.

GDPR

General Data Protection Regulation. European Union data privacy law.

HFA

Harry Fox Agency. Primary royalty processing vendor for mechanical licenses on behalf of music publishers in the United States. Currently owned by The Blackstone Group.

ISRC

International Standard Recording Code. Unique identifier, like a barcode for a sound recording (Note: this differs from an ISWC for musical works).

ISWC

International Standard Musical Work Code. Unique identifier, like a barcode for a musical work (Note: this differs from an ISRC for sound recordings).

Mechanical licenses

Licenses required to “make copies” of musical works and sound recordings every time they are streamed. The MMA was designed to address the concern that streaming services were infringing the copyrights of artists who were not receiving fair royalty payments for use of their works on these services.

MLC

Mechanical Licensing Collective. Non-profit organization responsible for distributing royalties and administering blanket licenses. They maintain a public database of information about all musical works and sound recordings. MCL began operations on 1/1/2020.

MLMA

Music Licensing Modernization Act. Title I of the MMA establishing the MLC and DLC. Outlines blanket license plan and subject to public comments before being finalized by the CO.

MMA

Music Modernization Act. The comprehensive 2018 law.

NMPA

National Music Producers’ Association. Trade association for US music publishers.

NNBL

Notices of non-blanket licenses. Required for significant non-blanket licensees who engage in direct licensing with copyright owners and who demonstrate an intent not to license songs in bulk from DMPs.

NOI

Notification of inquiry. Notice published by U.S. Copyright Office (or any government agency) in the Federal Register, requesting public comment on a particular law or section of a law.

NOL

Notices of license. DMPs are required to file these notices when seeking blanket licenses.

NPRM

Notice of proposed rulemaking. Notice published by U.S. Copyright Office (or any government agency) in the Federal Register, requesting public comment on a proposed amendment to an existing law.

NSAI

Nashville Songwriters Association International. Non-profit trade association for songwriters.

PRO

Performance/performing rights organization. Liaising organization that helps copyright owners collect royalties from parties who wish to “publicly perform” their works, such as restaurants or retail locations. The most prominent US PROs are ASCAP (American Society of Composers, Authors and Publishers), BMI (Broadcast Music, Inc.) and SESAC (no longer an acronym for anything).

Reports of Usage

DMPs must report blanket license usage each month and provide cumulative annual reports, certified by a CPA.

RIAA

Recording Industry Association of America. Trade organization of record labels and distributors established to protect recording artists’ rights. They are widely recognized for creating the system of certifying records “gold” or “platinum,” which has been followed worldwide.

SNBL

Significant non-blanket licensees. Parties who engage in direct licensing with copyright owners, rather than blanket licenses with the DMPs.

SoundExchange

The only government-designated, non-profit collective rights management organization. It is responsible for collecting and distributing royalties from digital performances of sound recordings.

Arnie Lutzker has decades of experience helping owners and users of copyrighted works to benefit from the rights conferred by the Copyright Act of 1976, as amended over the years, and to help individuals, companies and institutions fairly and legally license, acquire or otherwise exploit works. He has also practiced before the Copyright Royalty Board and its predecessors for more than 40 years. The legal team at L&L is ready to help you navigate these new copyright requirements.