Over the years, tastes have shifted from bands like the Beatles and Led Zeppelin to more electronically-produced sounds. But no matter your opinion of Justin Bieber’s or Lady Gaga’s artistic chops, there’s no doubt music – and the industry that supports it – has evolved. And, as music changes, so must the laws and regulations that govern it.

In October 2018, the Music Modernization Act (“MMA”) was signed into law in the U.S., implementing a historic victory for the music business and bringing about substantial reform to existing copyright laws. Although typically on opposite sides of the fence, songwriters, and publishers came together with digital service providers in support of the MMA. It’s pretty clear to see why – the MMA brings great benefits to both those who create the music and those who share it with the world.

The MMA revamps the U.S. Copyright Act, bringing it into the 21st Century by making it account for the modern era of music production and distribution. The MMA’s bigger accomplishments include the establishment of a Mechanical Licensing Collective, which must begin operation by January 1, 2021 and will establish a singular database of songs and song ownership information, and an overhaul of the treatment of pre-1972 sound recordings. Let’s take a look at these two major accomplishments.

Background

When we think of a song, we often think of the performer famous for singing it. Not every performer writes his or her own songs. We sometimes forget about the talented individuals who wrote the underlying music and lyrics; however, both the performer and the songwriter have copyright protection in a song.

That is because music is protected by copyright at two levels:

Level 1: Musical Works

First, copyright rights vest in the composition – that is the underlying musical notes and lyrics. Copyright in this musical work generally vests with the songwriter; however, many songwriters transfer some or all of these rights to a music publisher. Thus, when a musical work is copied, distributed, publicly performed, or used in another work for commercial purposes, the songwriter (and/or publisher) generally is entitled to songwriter royalties.

Level 2: Sound Recordings

Second, copyright rights vest in the specific performance of the musical work by a singer or musician. Copyright in this sound recording generally vests with the performer; however, performers often transfer some or all of these rights to a record label. Thus, when a sound recording is reproduced, distributed, digitally performed, or used in another work for commercial purposes, the songwriter and publisher generally are entitled to songwriter royalties and the performer and record label generally are entitled to performing royalties.

To use a sound recording, you need the right to use both (1) the musical work and (2) the sound recording.

The U.S. Copyright Act requires songwriters and publishers to grant to third parties a compulsory license for the reproduction and distribution of their musical compositions (subject to certain conditions). This is referred to as a compulsory mechanical license. When relying on this compulsory license, you must comply with statutory notice, accounting, and other requirements, which can be burdensome. Alternatively, you can obtain separate voluntary licenses from the rights holders (e.g., through the Harry Fox Agency).

Similarly, the U.S. Copyright Act requires performers and record labels to grant to third parties a compulsory license for the non-interactive digital public performances of a sound recording (again, subject to certain conditions). Think of free Pandora account services. These compulsory licenses are administered through SoundExchange, which is a digital performing rights organization formed under the U.S. Copyright Act. Royalties for each of these compulsory licenses are paid based on rates established by the Copyright Royalty Board.

Mechanical Licensing Collective

Before the MMA, if you wanted to use or perform someone’s musical work, then you generally would look to music society databases (for example, those maintained by performing rights organizations like the American Society of Composers, Authors, and Publishers (ASCAP), and Broadcast Music, Inc. (BMI) and by digital performing rights organizations like SoundExchange) to determine who controls the rights in the song.

Once established, the new collective will bring the following advantages:

1. By consolidating rights in musical compositions into a single database, those looking to make commercial use of music will know who owns what songs and to whom royalties must be paid. This database will be searchable publicly.
2. Through the new mechanical licensing collective, digital services (like Spotify, SiriusXM and others) will be able to obtain a broad “blanket” mechanical license for musical compositions. Digital services will pay statutory license fees to the collective, which in turn will distribute those fees to the songwriters and publishers. In exchange, digital services with such a blanket license will have greater flexibility in playing songs without being sued for copyright infringement.
3. The new set-up will help songwriters and publishers receive proper payment (and, hopefully for them, enable them to earn more money overall) for their musical works, and it will enable songwriters and publishers to better police use of their compositions without proper compensation. Unclaimed royalties that are rightly due to industry professionals will be processed to ensure they are received appropriately.

Some fear that the increased costs to digital services may be passed onto consumers, but supporters of the MMA urge that consumers will not be footing the bill for these changes.

Pre-1972 Recordings
Before the MMA, digital and satellite radio services generally were not required to pay royalties to copyright owners of pre-1972 recordings, which were governed under state copyright laws. Now, federal copyright law will apply. Owners of pre-1972 sound recordings will receive a base copyright protection of 95 years and royalties from digital services for commercial use of those works.

One of the most beneficial aspects of the MMA is that it shows that federal laws are able to adapt to modern technologies and business methods, which will benefit consumers, business owners, and IP owners. Although there are still many details that will need to be worked out by the U.S. Copyright Office (such as specific procedures and royalty rates), it is an exciting time in the music industry.

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