Musicians Deserve a Better Music Modernization Act
9 min read

Musicians Deserve a Better Music Modernization Act

Happy to be back, folks! Taylor Curry, one of the copy editors for this newsletter, made a website called “Here Before A Million,” where he selects some of the best music videos with under a million plays on YouTube. Taylor recently took up coding and this was a nice little project he put together, so do check it out if you’re interested! Otherwise, thank you, as always, for your continued readership and support of this project. Now let’s dive a bit deeper into the Music Modernization Act.

How the Record Industry Passed the MMA

During the height of the Obama years, record industry bigwigs turned inward. Neil Portnow, former president of the Recording Academy, gave a speech to industry suits and government officials including Nancy Pelosi and Kevin McCarthy, both high-ranking House members from California, about the need for recorded music to unite around government reforms. The competing interests of major record labels, publishers, radio broadcasters, and the tech giants behind streaming platforms struggled for years to reach a consensus about how the industry should interface with the government. Even though coordinated music industry lobbying dates back to the early 2000s, it wasn’t until 2017 that an agreement was reached. The years of lobbying to former Tennessee senator Lamar Alexander, and many others, didn't go to waste. This produced four potential pieces of legislation: The Allocation for Music Producers (AMP) Act; The Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (CLASSICS) Act; The Fair Play Fair Pay Act; and The Music Modernization Act.

As a consequence of the Songwriter Equity Act’s failure to gain traction in Congress in the mid-2010s, there was a push to cast a wider legislative net and to bring along hesitant streaming platforms. Officially introduced in December 2017, the Music Modernization Act, a fairly wide-reaching piece of legislation, quickly gained steam to move through the House, Senate, and eventually end up on former President Trump’s desk. The bill that was signed included the AMP and CLASSICS Acts; the former aimed to help producers collect royalties from SoundExchange, while the latter required companies like SiriusXM to pay for pre-1972 sound recordings. The Fair Play Fair Pay Act would’ve required radio broadcasters to pay performers (Ariana Grande, not just her songwriters, would be paid when you hear her song on the radio). The National Association of Broadcasters stood staunchly opposed to the bill, and ultimately it remained sidelined, though this loophole continues to cost performers millions of dollars a year. Without that particular act, the Music Modernization Act swiftly was signed into law in October 2018 with bipartisan support. The cross-party endorsement of the legislation should’ve potentially raised more red flags about who exactly stood to benefit from this bit of private business and government cooperation.

Earlier this year in The Baffler, Sam Backer walked through the complex set of negotiations and trade-offs between factions within and outside the record industry that led to the MMA. Here’s how he contextualizes the MMA’s core aims:

The most consequential elements of the MMA are focused on publishing rights, specifically how streaming services pay for what are known as mechanical rights. Mechanical royalties are owed whenever a new copy of a composition is created. Originally, this meant a songwriter was paid when a record (or a piece of sheet music) with his or her composition was produced. In the age of Spotify, this payment is triggered every time someone streams a song, creating what is considered a unique copy on their computer or phone. While the best-selling contemporary albums often top out at around a million copies purchased, streaming totals routinely reach the hundreds of millions. As a result, the number of mechanical payments that are owed to songwriters has ballooned wildly.

Backer sees the MMA’s main purpose as solving one issue: streaming platforms—but Spotify in particular—have not done a great job collecting songwriter information. This oversight—or, to be more charitable, lack of prioritization—of publishing data didn’t go unnoticed. Wixen’s eye-popping $1.6 billion lawsuit, which was eventually settled, generated many headlines and represented a real threat to the industry according to Backer. These songwriter and publisher lawsuits not only posed a threat to those about to be caught up in litigation, but also loomed large over a recording industry that, at least in North America, made 80% of its annual revenue from streaming. This created a need to deal with mechanical rights to avoid facing endless lawsuits.

Say Hello to the MLC

Multiple proposals were presented and the U.S. Copyright Office selected a plan by the National Music Publishers Association (NMPA), the Nashville Songwriters Association International (NSAI), and the Songwriters of North America (SONA), which called for the creation of the Mechanical Licensing Collective (MLC). (Another proposal called the American Music Licensing Collective can be found here for those interested.) The non-profit organization exists to collect money from streaming platforms and song information to make sure unidentified money generated from mechanical royalties can reach its proper rights holder. The MLC initially raised $62 million from the major streaming platforms and according to a recent Billboard piece quoting MLC CEO Kris Ahrend, they currently staff around seventy-five people.

After receiving streaming information and money, the MLC will then distribute that back out to the correct rights holders. However, in exchange for the creation of this new collection group, these technology firms were granted immunity. This eliminates the threat of Wixen-style lawsuits for this new, still fragile ecosystem. Another wrinkle in this agreement is that the MLC hired the Harry Fox Agency, which threatened to sink the entire MMA if the government tried to create its own database, even though Harry Fox’s troubles identifying songwriters for payments helped lead to this mess. Then we get to perhaps the most insidious part of the legislation: any money that the MLC cannot match within three years is paid back on a market-share basis, which favors large rights holders.

The scale of the unclaimed money in the black box came into focus earlier this year. The MLC announced they received over $424 million from Apple, Spotify, YouTube, and all the other major streaming platforms. The Trichordist blog repeatedly raised concerns about the MMA’s passage:

If our lobbyists are going to celebrate anything, they need to celebrate when every penny is accounted for and paid to the right person. And there should be no cost-benefit analysis because as we were told many times, the services are paying for it. So they should pay for all of it, including the distribution to the long tail. In other words, our lobbyists should celebrate only if the market share distribution is zero.

The Music Modernization Act requires the MLC to spread awareness about this massive pot of money for songwriters to collect, but there are still some issues. Back in January, a small survey (120 participants) by the group Artists Rights Watch found that while 63% of respondents had heard of the MLC, barely a tenth of those people were able to successfully register with the MLC. Despite broad awareness of the MLC, there appeared to be some significant issues with registering music for eventual payment.

This reported lack of success wasn’t unforeseeable. Many industry figures were rightfully worried from the project’s beginning. Right after the bill’s introduction, the Songwriters’ Guild of America and several others highlighted numerous issues with the potential legislation. The group’s concerns ranged from the disjointed nature of the proposal for average songwriters, to a critique that a market-share payout of unclaimed monies would benefit major publishers. The group also pointed out that the immunity from lawsuits leaves songwriters with little recourse should the system be abused by the backers.

David C. Lowery, from the bands Camper Van Beethoven and Cracker, spoke to Backer for his Baffler piece and led an early lawsuit against Spotify that helped kick off this whole endeavor. Lowery recently took to Twitter to express his frustrations over not getting the correct publishing data for his works through the MLC via Harry Fox. Billboard just reported on the initial payouts of MLC monies, which amounted to $24 million going to rights holders with another $16 million being held by the MLC because it’s currently unmatched to either a publisher or royalty holder. The Trichordist blog persuasively argued that the MLC’s success should based on how much money is returned to its rightful owner, not simply that unclaimed royalties were found. Luckily the bill contains a provision requiring that the MLC receive an audit every five years, so we’ll see a more totalizing account of the bill’s effectiveness. Still, that so much effort and corporate resources could produce such large gaps in payment shows an industry that despite press cheerleading, can still proceed with a better path to address these underlining issues.

A Note of Financialization

Earlier this month, Billboard reported that CTM, a mashup of a music publishing, artist management, and media production company, announced a partnership with the Outland Fund, founded by Les Ware, a Dallas-based lawyer and investor. Named CTM Outlander Music LP, the goal of the partnership is to purchase music rights, with a potential budget of a billion dollars to be spent in the next five years. The fund’s first purchase was the Swedish publisher TEN Music Group for an undisclosed amount. One interesting final note is that CTM co-founder and CEO, André de Raaff, helped launch the Dutch music publisher Imagem, which was additionally supported by the Dutch pension fund ABP. Raaff is no stranger to the music financialization space.

The other bit of complex but amusing financial news surrounds Reservoir Holdings, which is planning to go public with a valuation just under $800 million via a special purpose acquisition company in merger with Roth CH Acquisition II. The two main sponsors of this particular fund are the investment firms Roth Capital and Craig-Hallum. I’ll again mention that Reservoir Holdings is currently led by Golnar Khosrowshahi, who comes from multiple generations of Iraian money, and I’ll also say the folks at Roth Capital must be stoked to work with a music publisher since they’re known for their lavish corporate parties that bring out artists and other celebrities. Good to know the number crunchers on this particular deal at least bought into the rockstar lifestyle.

In other news, Sony invested another $200 million into Epic Games, creator of Fortnite. A new face in the music rights acquisition space, Influence Media Partners, funded by Michigan’s Municipal Employment Retirement System, announced this week its first catalog purchase from the songwriter Ali Tamposi. On Tuesday, Primary Wave announced it bought the catalog of songwriter Patrick Leonard, who notably wrote for Madonna and Leonard Cohen.

Music Business Worldwide reported on uduX, an African streaming platform, which just launched PopRev, an investment product led by the Nigerian-based financial tech company PiggyVest. PopRev will allow fans to invest into their favorite artists. That uduX already scored agreements with all three major labels and recently partnered with the successful African telco MTN makes this highly financialized leap in the African market an interesting development.

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