The Fowlkes Firm
Entertainment and Business Law Firm

Editorial

Editorial

The Senate Passed The Music Modernization Act: What Does This Mean For Hip Hop?

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Let’s Start by Understanding The Main Changes of the Act:

1. Creation of the Mechanical Licensing Collective (MLC):

The MMA, if signed in, would create a formalized collective of publishers and self-published songwriters, that administers the "mechanical licensing" of compositions streamed on services like Spotify, Tidal, Amazon Music and Apple Music. Thus, the MLC will collect and pay out royalties from these digital service providers.

The Act would also provide a publicly accessible database for song ownership information, making it easier for songs to get cleared and for artists to get paid. This database will house song ownership information and would publicly identify songs that have not been matched to songwriters and/or publishers thus allowing publishers to claim the rights to songs and get paid for those songs. An audit right would also be granted to Songwriters and Publishers. which they do not currently have under Section 115 of the Copyright Act;

2. Songs Before 1972 Will Be Protected:

Before the MMA, songwriters and artists did not have guarantee paid royalties on songs recorded before 1972. The MMA would establish federal copyright protection that will guarantee compensation for artists who recorded music before February 15, 1972;

3. Royalties Will Now Be Determined By The Market (“Willing Buyer, Willing Seller” Rate Standard)

Currently,  the Copyright Royalty Board (CRB)— a government body responsible for setting the statutory rate for royalties —applies a legal standard to determine rates that does not reflect fair market value. The Music Modernization Act replaces this current legal standard with a standard that requires the court to consider free-market conditions when determining rates.

4. More Judges Will Handle Royalty Rate Disputes:

Right now, Performing Rights Organizations (PRO’s) ASCAP and BMI are each assigned to a single, respective royalty rate court judge. All case related to royalty rates involving these PRO’s would be assigned to this one judge. Under the MMA, a district judge in the Southern District of New York would be randomly assigned from the “wheel” of district judges for rate setting disputes. This is known as the “wheel” approach. This approach enables BMI and ASCAP, as well as licensees of musical works, to go before any judge in the Southern District of New York on a diversity basis, rather than being assigned to a single judge, for the purpose of rate setting disputes.

5. More Evidence Can Be Entered in Royalty Rate Cases:

The MMA also proposes a repeal to Section 114(i) of the Copyright Act. Currently, Section 114(i) of the Copyright Act does not allow federal royalty rate courts that govern ASCAP and BMI to consider certain evidence during performance royalty disputes involving songwriters and composers. The main evidence barred by the royalty rate court is that judges are not allowed to consider sound recording royalty rates as a relevant benchmark when settling disputes for performance rate royalties. The MMA introduces a system that allows ASCAP, BMI and songwriters to have the opportunity to present evidence about other aspects of the music industry, including sound recording royalty rates, to judges for their consideration. 

Where Does The MMA Sit Now?

On September 18th 2018, the MMA passed in the Senate. It currently sits with the House of Representatives, with many expecting it to pass there as well. Lastly, President Trump has to sign the bill into law.

If the process is streamlined, the MMA could become a law in 2018 and the Music Licensing Collective would begin operating on Jan. 1, 2021.

What Does This Mean for Hip Hop?
For all musicians regardless of genre, the MMA is certainly a win. The biggest need in the music industry was transparency and this Act implements a ton of it. The Music Licensing Collective as well as the database it produces will be huge in regards to production and the payouts of Hip Hop artists, in particular. In a space, that regularly uses samples, it should be much easier for artists to reach out to owners of compositions to use there work since the database will publicly house such information. More information is always a great thing and the database will allow for everyone to claim and monetize off their rights in music. It also helps having a single or limited body administering payouts to artists on a consistent basis, which in turn limits the liability a streaming service could incur if it adheres to the new process. With support from all of the major publishers and digital service providers, regulation and consistency will exist in the tune of transparency and more information for artists, producers and people in the business.  Another note for producers and artists alike relates to the federal copyright protection that will guarantee compensation for artists who recorded music before February 15, 1972. The process of clearing older records that you will sample, will look much the same as newer records that you sample.

Arguably the most important provision of the MMA relates to free-market conditions when determining royalty rates. If you have seen a major label record deal, the phrase ”statutory rate” is often used and, before the MMA, the Copyright Royalty Board determined the standard for a statutory rate without looking at fair market value. Now, the MMA creates a fair market value standard that will subsequently look different for Artists signed to major labels. Im curious to see what rates come from this standard. Regardless, you can expect Artists to receive more statutory rights to royalties than ever before.

In addition, case law and precedent will now be created with diversity in respect to royalty rate disputes. Instead of having a few judges rule on these determinations, other judges in the Southern District of New York will get to adjudicate. This will hopefully create fairer determinations for artists and songwriters especially because the songwriters have the opportunity to present evidence about other aspects of the music industry, including sound recording royalty rates, to judges for their consideration. Judges will be ruling with more information and determining with a clearer understanding of the business.

It’s safe to say the MMA, is something that moves music and hip hop in particular forward. While streaming has revitalized the music industry, it also made some of the current music licensing approaches prehistoric. This Act brings the law closer to where music technology is and brings transparency in ownership and royalty splits. The Act also brings confidence to all of the streaming services that if they follow the new provisions of the Act, they will have less liability. More structure and confidence will lead to more investments into the music industry. Once signed in, the MMA marks a huge step for the music industry.

Karl Fowlkes