Despite the turmoil and gridlock in Washington, D.C., the Senate and House of Representatives appear poised to pass sweeping legislation that would overhaul the music copyright licensing infrastructure. On December 21, 2017, a bipartisan group of 52 members of Congress introduced the Music Modernization Act of 2017. Only a month later, nine Senators, both Republicans and Democrats, introduced nearly identical legislation, the Music Modernization Act of 2018.

The bills would fundamentally alter § 115 of the Copyright Act, which regulates compulsory licenses in nondramatic musical works, or songs outside of a movie, television show or play. If passed, the new law would make three key changes:

  • First, the Act would create a new agency to handle licensing and royalties. That agency would be led by a board composed of a currently undefined number of representatives from various sectors, including publishers and songwriters. It would have the power to issue blanket mechanical licenses to digital services — like a streaming service. The new agency should provide certainty and consistency for artists and streaming services alike. The Music Modernization Act tasks this agency with identifying rights holders and, from there, collecting and paying royalties. For songwriters, this means getting paid with fewer complications. Streaming services would no longer have to identify rights holders and — perhaps more importantly — would not be exposed to statutory damages for failing to identify the correct rights holder. The bill would require that digital services collectively pay for the agency’s operating costs.
  • Second, songwriters would receive a mechanical royalty every time someone makes a copy of their track. And, more notably, this rate would be a negotiated one, rather than fixed (as rates currently are).
  • Finally, the bill would alter the rate court system. Rate courts hear disputes over royalties paid by digital services. Currently, one judge hears all rate court cases for ASCAP and another decides all for BMI, the largest music publishing performance rights groups. The Music Modernization Act would have a judge from the Southern District of New York randomly assigned to each individual case. Relatedly, the act would repeal Copyright Act § 114(i) to allow rate courts to consider sound recording royalty rates. This, in theory, would allow judges to more accurately gauge the market for musical compositions.

As it stands, there is support for the Music Modernization Act from artists, streaming services and labels. However, each interested party is still jockeying and negotiating for more favorable terms. Songwriters associations and the National Music Publishers’ Association have agreed on proposed changes, including increasing the representation of songwriters on the new agency’s board.

The bill is likely to undergo additional changes before it comes to a vote, but, as is, the restructuring proposed by the legislation aims to provide clarity and stability for all parties involved.