The rise of streaming music services has changed the landscape in ways that most would not have imagined even a decade ago. Among these changes are the ways in which performers, songwriters, and other copyright owners are compensated when their works are streamed on various devices. Simply put, the laws which pertain to such compensation have not kept up with the state of technology. The Music Modernization Act of 2017 (HR 4706 – 115th Congress), a piece of proposed legislation currently being considered in Congress, seeks to address some of these issues. This article touches on some of the more salient aspects of the proposed law.

Doing Away with Bulk Notices of Intention

In order to distribute a sound recording, any would-be distributor must first obtain a license from the owner of the copyright. This is often accomplished by providing a Notice of Intention (“NOI”) to the owner, either directly or by filing a copy of the NOI with the United States Copyright Office when information regarding the owner cannot be easily accessed. Presently, large music streaming services such as Spotify employ a process of filing NOIs in bulk with the Copyright Office, after which time such services simply start streaming the sound recordings. Many copyright owners believe that this bulk filing process gives them short shrift, depriving them of rightful compensation when their works are digitally streamed without their knowledge.

The MMA proposes to rectify this situation by creating the Musical Licensing Collective (“MLC”), a body that would be funded in part by the various large music streaming services. The MLC would collect accurate data regarding the identities of appropriate copyright owners. It would also grant blanket licenses to the streaming services. Presumably, this would allow the streaming services to more accurately identify copyright owners, while simultaneously lessening the legal risk which streaming services court by streaming songs without the knowledge of the copyright owner.

Royalty Rates for Compulsory Licenses

Even if copyright owners can be accurately identified after acquisition of compulsory licenses, they must still be compensated. Presently, this compensation, in the form of a royalty rate, is determined by the Copyright Royalty Board. This rate is set by statute, and employs a mechanical standard which is indexed to inflation. The MMA seeks to alter this formula, basing the calculation upon supply and demand. One of the Act’s sponsors refers to this new standard as the “willing buyer/willing seller” standard.

Procedural Changes

The MMA also proposes a number of procedural changes to the royalty process. Chief among these, it would do away with a fixed panel of rate dispute judges. Instead, a rotating panel of federal judges would hear rate disputes, presumably allowing for a fresh set of eyes upon disagreements between parties who had previously battled over royalty rights.

Unlike most federal legislation, the Musical Modernization Act has bi-partisan support. In addition, the streaming sites, which wield ever-increasing power in the industry, also appear to be supportive of the proposed law. We will continue to track the progress of the proposed legislation, and will provide updates as it winds its way through Congress.