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Deck the Halls with New Music Law: What You Need to Know About the Music Modernization Act

December 17, 2018

by Emily Doan

Tis’ the season for music copyright law! On October 11, 2018, new legislation was passed that set the stage for major updates to copyright law for music licensing and royalty payments in the digital age.  The Orrin G. Hatch-Bob Goodlatte Music Modernization Act was met with approval by songwriters and music industry executives alike, and praised by stakeholders for addressing issues with digital music streaming services.  The Act combines three separate bills, The Music Modernization Act (MMA); Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (CLASSICS) Act; and Allocation for Music Producers (AMP) Act.  These bills, as well as our take-aways for copyright owners, are summarized below:

MMA: Have Yourself a Merry Little License
To streamline the licensing process for digital music providers such as Spotify and Soundcloud, the MMA will eventually establish a blanket license regime for digital music providers, to be administered by a “mechanical licensing collective” (MLC) organized by the Copyright Office.  Under the present process, digital music providers must obtain licenses for every song licensed, streamed, and/or available for download and remit royalties to each individual copyright owner. Musical works have two copyrightable elements under the Copyright Act: the musical composition and the sound recording.  Because there are often multiple owners for the musical composition and sound recording copyrights in a single recorded song, identifying the underlying owners of all rights creates a huge task for the digital music providers. Especially challenging in some circumstances is to identify the underlying owner of the musical composition, which creates huge legal risks for digital music providers if they use songs without first identifying all copyright owners.

The MLC should be ready to administer the licensing process after January 1, 2021.  Digital music providers will pay the MLC for streaming and digital download rights, and the MLC will pay the appropriate copyright owners.  Digital music providers will also fund the administrative costs of the MLC.  Until 2021, digital music providers must continue licensing on a song-by-song basis. However, the digital music providers can accrue and hold royalties they owe to unidentified copyright owners provided they made a good faith, commercially reasonable effort to identify all the copyright owners for a song.

Music copyright owners should familiarize themselves with the MLC to determine whether the collective will adequately represent their rights.  Music copyright owners should be prepared to bring their licensing and royalty concerns to the MLC.  In addition, music copyright owners should review the copyright registrations for their musical works to ensure that all information regarding copyright ownership is readily available for use by digital music providers and for distribution of royalties by the MLC.

CLASSICS Act: O Come, All Ye Pre-‘72 Songs
The CLASSICS Act grants federal copyright protection to all pre-1972 sound recordings.  The Copyright Act of 1972 created copyright protection for all sound recordings existing as of February 15, 1972, but did not extend this protection to sound recordings predating this date.  Then, in 1995, the Digital Performance Right in Sound Recordings Act created a public performance right in digital streaming of sound recordings covered under the Copyright Act of 1972, providing recording artists with the opportunity to collect royalties for their performance on sound recordings fixed on or after February 15, 1972.

Before enactment of the CLASSICS Act, protection for pre-1972 songs was determined on a state-by-state basis, with several states developing laws to compensate recording artists for digital public performances of pre-1972 songs. Now, the CLASSICS Act extends the public performance right to all pre-1972 sound recordings, requiring digital music providers to pay for pre-1972 songs, and compensating recording artists on pre-1972 sound recordings.

The CLASSICS Act creates federal rights for pre-1972 sound recordings. As such, copyright owners of pre-1972 sound recordings should review their catalogs to determine whether they should make their pre-1972 songs available for licensing by digital music providers.  It is crucial for publishers and artists to see whether any of their older songs are already being used by digital music providers but are newly eligible under the CLASSICS Act for royalty payments by the digital music providers.

AMP Act: Royalties Are Coming to Town
Under the AMP Act, music producers, mixers, and sound engineers will now directly receive royalties for their involvement in creating sound recordings.  A non-profit organization, SoundExchange, will directly distribute royalties to producers for digital streaming of these sound recordings.  Before the AMP Act, it was voluntary for artists to share royalties garnered from digital streaming of sound recordings with producers directly through SoundExchange.  Now, for sound recordings released after 1995, SoundExchange will directly pay producers royalties per a royalty arrangement memorialized in a “letter of direction” between the recording artist and producers.  For sound recordings released prior to 1995, SoundExchange will directly pay producers royalties without a letter of direction.

Music producers should understand this new, formalized process to receive royalties, as SoundExchange promises to remove the need for music producers to seek royalty payments from the artists.  Now, music producers will turn to SoundExchange for administration of letters of direction and for payment.

We will continue to keep our clients informed of updates in music copyright law and how changes to the law will affect them.  McNees has a group of attorneys and paralegals that is experienced with copyright registration, music licensing, and intellectual property counseling and litigation.  Happy Holidays from the McNees Intellectual Property Group!

© 2018 McNees Wallace & Nurick LLC
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