Music modernization act gets new year update

The Music Modernization Act implemented in 2018 is already changing as three sections go into effect on Jan. 1.

If all goes as planned, major provisions to the act will create a transparent and simplified system for collecting and delivering royalties. O'Melveny & Myers LLP litigation associate Daniel Cooper noted that, although the act touches quite a few areas of the music industry, Title I, "which impacts how songwriters are paid, what's called mechanical royalties," has been his focus.

The legislation was aimed at creating a blanket license for interactive streaming services and establishing a mechanical licensing collective, as well as a digital licensee coordinator, to make it easier for services to obtain licenses and for creators to collect royalties.

"That section of the act basically tries to clean up how songwriters are paid through digital streaming platforms, because a lot of this licensing regime has evolved over many years," said Cooper. "It made sense back when there were player pianos and we were distributing vinyl and CDs, but it doesn't make as much sense given the digital streaming world."

Some background: When a platform such as Spotify, Apple Music or Amazon wants to stream a song, it must procure public performance rights and mechanical rights. These streaming services also must obtain sound recording license agreements, which cover the rights to a particular recording, and musical composition license agreements, which cover the owners of the rights to the song.

O'Melveny & Myers LLP partner David Marroso gave the following example: Dolly Parton wrote the iconic song, "I Will Always Love You," but it was famously performed by Whitney Houston. It was then incorporated into the soundtrack of romantic thriller film, "The Bodyguard."

"There are so many interrelated copyright interests at issue with that one performance that it's a sticky wicket," Marroso said.

Parton and Houston were entitled to different rights, and according to Marroso, who heads the firm's litigation department in Century City, "synchronizing it to a movie soundtrack is yet another right."

Cooper notes all the different rights and copyrights involved make it "a pretty messy space." There are two main constituents: the digital platforms themselves - "They're trying to protect themselves from copyright infringement liability," Cooper said, - and songwriters and publishers, "who want to make sure they're being paid and that all of the revenue is being accounted for."

Cooper described the mechanical licensing collective - or MLC - as a middleman to facilitate payments to songwriters and publishers.

"It's pretty interesting," Cooper said. "In theory, I think it looks great. It could really be great for songwriters to get out of that black box and make sure they're getting all the money that they deserve, but also pretty ambitious, I think, particularly with a big database, making sure that it is populated and it has all the information in there."

Cooper and Marroso agree the downside for changes to Title I is in implementation.

"The real source of the problem and a potential source of the solution is going to be a centralized, transparent, open database that links all sound recordings to all underlying copyright owners," Cooper explained. "If they can actually pull this off, it'll be great. It'll work. It'll not only facilitate payments and transparency, but also be open to everyone to see."

With proper implementation, these provisions have the hallmarks of benefiting everyone in the music business, from writers and publishers to broadcasters, distributors and listeners.

"The entire premise behind copyright law is: We want to compensate the geniuses who create things that are entertaining to many people," Marroso said. "The more money that they make, the more they are incentivized to create more works of art, works of genius, and the idea here is the songwriters will have better transparency and better distributions from their work."

Under the legislation, Title II, the Classics Protection and Access Act, creates federal rights for owners of sound recordings made before February 15, 1972. And Title III, the Allocation for Music Producers Act, creates a path to collect certain royalties for music producers, mixers and sound engineers. All three titles will go into effect on New Year's Day.

Marroso said most of the firm's clients feel good about these changes, but it depends on which client.

Songwriter and publisher clients of O'Melveny & Myers are hopeful this legislation will lead to transparency and the free flow of information, he said. There has long been a problem of unmatched works accruing royalties with no clear identification of who the recipients should be.

"The hope is, by 2023 . . . all of those monies that have accrued will be distributed," Marroso said. "On a going forward basis, there will be few, if any, what they call unmatched works. The songwriters and publishers think this is great, or hope that this will be great. Obviously, the devil's in the details."

--Skylar Dubelko