Surprise! The ‘Music Modernization Act’ Prohibits Litigation Against Streaming Services

Music Modernization Act: Careful of the Fine Print!
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The Music Modernization Act has been touted as a progressive step for royalties in the digital era.  Just be careful of the fine print around page 82…

So there’s a brand-new piece of music legislation on Capitol Hill.  Called the ‘Music Modernization Act’ (H.R. 4706), the measure is designed to greatly modernize digital-era royalties and solve a gaggle of previous lawsuits.

Overall, the measure is being applauded as a way to increase royalty payments to rights owners in the future.  All while simplifying the licenses and transparency of payments.

Among other changes, the bill updates Section 115 of the U.S. Copyright Act to create a single licensing entity and a blanket licensing system for mechanical publishing licenses.  That entity would be funded by digital music services and overlooked by various publishers and songwriters.  Both sides seem to like this bill.

About time, right?  But here’s the catch: if passed, it effectively shuts down any potential legal claims on unpaid mechanical royalties from companies like Spotify.  That’s right: if the lawsuit wasn’t filed by January 1st, 2018 (i.e., the past), courts will throw out the suit.  And streaming companies (or any other music platform) get away with it.

Which is one reason why Spotify absolutely loves this bill.

Effectively, that poison pill means that dozens of companies may have simply lost their rights to billions in unpaid royalties.  That is, except for one huge publisher…

We first learned of this little loophole from Randall Wixen, head of Wixen Music Publishing.

Just ahead of the new year, Wixen filed a $1.6 billion lawsuit against Spotify alleging non-payment of mechanical publishing royalties.

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It turns out there’s a very good reason why Wixen filed their lawsuit before January 1st.  Because according to page 82 of the Music Modernization Act, anything filed after that date is null-and-void.

Here’s what Wixen just told MusicRow:

“It’s a really good act.  But on page 82 of that act is a clause that says if you don’t file a lawsuit against a music streaming company by Jan. 1, 2018, you lose your rights to get compensated.  If that act was passed, and we hadn’t filed a suit by Jan. 1, we would have forfeited that right.  It would retroactively give a free pass for a streaming service that has infringed on music rights in the past to build a service worth maybe $20 billion once it goes public.

“I didn’t want to have to tell clients that they can’t be compensated properly because we didn’t file in time.”

According to Wixen, that sneaky provision basically gives companies like Spotify a get-out-of-jail-free card.  So instead of owing $1.6 billion (or whatever the damages are), Spotify owes $0 on pre-2018 royalties if the Music Modernization Act is passed.

The Act has been unilaterally supported by ASCAP, BMI, and NMPA, among others.  Obviously, Wixen isn’t among the supporters — at least as it relates to royalty forgiveness.

And with that, here’s the latest 109-page draft of HR 4706, the Music Modernization Act.  I.e., the one that hundreds of publishers, songwriters, lawyers, and rights owners didn’t read.



20 Responses

  1. dan "the pirate" ek

    is this really a big surprise though? as with anything daniel ek and his band of pirates have been involved with (utorrent, spotify..), personal financial gain at any and all cost to others is the prime motivation. Once a thief always a thief. Until this page 82 nonsense is amended, screw this bill.

    • Paul Resnikoff

      Wixen noticed this. But what if he hadn’t? It’s buried in the fine print of a 109 page bill.

      Not sure I’d be happy if I’m a publisher, songwriter, etc., considering mechanical litigation against Spotify.

  2. Anonymous

    There’s also a bit in there about market share based royalty liquidations for unidentified music. Here’s what that means… If the bill is passed, there would be a single licensing entity who administers the blanket mechanical license. After three years, for any royalties accrued for songs in which the rights owners haven’t been identified, they would be liquidated to all known publishers based on their market share (i.e. the percentage of their songs used on a service divided by all songs used on the service). This ultimately means the bigger NMPA publishers get richer, and the indie songwriters get screwed out of their royalties, with no way to recover them once their music is identified. It’s on page 37.

  3. Anonymous

    Under the proposed blanket mechanical license, Spotify would essentially be able to use any song in any of the recordings they license from the labels, without knowing who owns the rights to those songs. I feel that this eliminates a necessary friction. It means that songwriters who aren’t getting paid will continue to not get paid. Under the current system, if Spotify were to actually follow the law, they would only make music available in which the publishing rights are licensed. When labels find that their music can’t be made available, this will give those labels the incentive to create systems in which the publishing information can be communicated to Spotify, so the rights can be licensed prior to the songs being made available, and every songwriter can be paid for every stream. Knowing who owns the publishing rights and licensing those rights should be a requirement before releasing an album on streaming. This bill legalizes the ability for Spotify to make songs available in which the songwriters are not getting paid. That’s not right.

  4. Works in Publishing...

    What this article fails to mention is…

    The MMA will also require the streaming services to pay for a new society similar to ASCAP/BMI to administer and match the publishing rights to the songs on the streaming services. This will be a new society of publishers and songwriters created with the sole purpose of matching recordings to their composition in the digital markey.

    So while, yes, it does limit your ability to sue for a lump sum, it sets up a mechanism to make sure the songwriter and publisher is compensated.

    The only reason Wixen is able to sue is because they have chosen to withhold their rights from the streaming services negotiated rates with other indie publishers. Wixen has done well for their clients by suing under the wire, but their suit will likely push DiMA to lobby harder to get this pushed through.

    • Remi Swierczek

      Music bill written by and for music RAPISTS.
      Naive, polite and business clueless music industry continues to navigate to $30B music GRAVE in 2030.
      UMG endorsed subs and co-created YouTube/VEVO ads have composted last year $300B of annual revenues to just $18B with full excitement at RIAA and labels!

      • Anonymous

        They are not, and they probably wouldn’t fit in anywhere if the bill passes. I suspect it would be a company run by SoundExchange.

        There are existing marketplace solutions that already perform the task of matching recordings to compositions, and they do a far better job ensuring songwriters and publishers get compensated than this proposed new society would do if they were starting from scratch. Spotify never took advantage of existing marketplace solutions (HFA doesn’t really count), nor did they create such solutions themselves.

        There are a lot of things I like about this bill. But I don’t think we need a new society.

  5. lolz

    oh wow in a whole year I received 45$ from mechanical royalties… Seriously do I even care for this money? not even gonna withdraw with due to needing a us tax id…

    Why don’t y’all take a nice cup of stfu and stop bitching about less than pennies.
    Get a life

  6. dhenn

    It’s not a surprise. It was discussed openly with all parties concerned when the legislation was crafted. It was one of the compromises made to craft something that all parties could agree on. Anyone who has heard or read NMPA’s David Israelite lay out this piece of legistlation gets it. Every side is on board. The reality is there is an certain amount of time publishers have to take action and this one is doing so, unfortunately they and the press are only focusing on this one issue and trying to make it into something it is not. The long term benefits of this bill far outweigh this one clause. This is the first time actual songwriters will have a seat at the table to decide how we are paid and how we can collect our money. This is the best piece of legislation to solve many of the issues facing publishers and songwriters in collecting royalties. I’m sorry Paul, but this time you are sensationalizing something that is just a bunch of needless drama that could actually hurt songwriters. I suggest you get with NMPA, AIMP, SONA, NARAS, ASCAP, BMI, NSAI and everyone else who matters and get the facts.

    • dhenn

      Oh, in addition to the groups I mentioned above this bill is also supported by the Digital Music Association (DiMA) which represents Amazon, Apple, Pandora, Spotify and YouTube. So, like I said, all sides, songwriters/publishers and tech co. This is a huge accomplishment and the billneeds to be passed into law.

      • TomNYC

        @dhenn ABSOLUTELY RIDICULOUS. “This is the first time actual songwriters will have a seat at the table to decide how we are paid and how we can collect our money. “.. and please do remind us all exactly who makes/owns the content in the first place? people seem to forget that WE (the actual music makers) own the music and have full control over what happens with it. stop playing ball with these crooks and watch them fold. if you really want to make your “vote” count – don’t use these industry destroying “services” at all. don’t give away your content, don’t stream other peoples content. simple. “sensationalizing something that is just a bunch of needless drama” seriously??? ffs… literally our past due, presently owed and future incomes are at stake here. with these ongoing deception tactics, shady is an massive understatement. bottom line, WE CALL THE SHOTS. not the other way around. *anything even remotely music related that spotify, amazon, google… is involved with = fail (for us that is).

        • Works in Publishing...

          Unfortunately, you are wrong here… This bill is for songwriters. Under the current copyright laws, songwriters have no control over what happens to their songs after they grant a first use license. This is why Taylor Swift could remove her catalog from Spotify as an artist, but couldn’t stop covers of her songs from being posted.

          By fighting the streaming services, you are just being stubborn old men who can’t embrace the future. All the major labels have and they are now receiving record earnings from streaming royalties…

        • dhenn

          Tom, See Works In Progress comment. You are the one that is being ridiculous. This is a songwriter bill. We have very little say in how our works are used or how we are compensated for them. As far as not giving our music to tech companies and they will all fold, that ship has sailed. Either get on board and work to make the changes that are needed or just play your music for yourself. Because those are your choices.

          As for the rest of us who understand this is a songwriting bill – that will also benefit those of us who also create music – Here are two links to the basics of the bill in plain English:

          Or you may visit the SONA website and scroll down to get the above info

          Paul – I think this will also be good for you to see and perhaps publish.

          • TomNYC

            it isnt streaming that is the issue – its the people and the way they are operating that is. the current system is not only criminal, it is not sustainable. it has wiped out the middle class. its my product, if you want it, you must pay for it. just like with any other product or service in the world. don’t want to pay for it? then do without. I am perfectly fine with that. if streaming isn’t paying me fairly, whats the difference? I might as well keep full control over my product and fully profit from selling/streaming/licensing direct to my clients and fans, cutting out the useless bloodsucking leeching middle-flimflam-men that wrote this bill and desperately need my content to continue profiting. after all I dont make music to make them and only them money. It is my content, I invested in it, I created it, I own it. either they get with my program or do without and fold. simple.

    • Anonymous

      To be fair, this bill does have a lot of good things in it, and I would like to see some form of it pass. I just think the bill as currently drafted removes incentive to ensure that all songwriters are getting paid, particularly those songwriters not affiliated with NMPA, which make up a large portion of music being made available for streaming. I would suggest removing the market share based liquidation of unclaimed royalties that takes place after three years, and retaining some sort of penalty for using unclaimed works. That penalty doesn’t have to be 150k in stat damages, but it’s gotta be enough to create an marketplace incentive for all parties to ensure that all songwriters and publishers on an album are able to get paid their royalties for every stream, prior to that album being released to streaming. Do that, and I’m on board.

  7. Jody Dunitz

    The bill sounds like it will make future licensing more efficient, increase the likelihood of compliance for payment obligations. The bill sounds like it gives publishers and writers more legal tools to argue why they deserve more money. But, how do writers actually get more money from a pot from which the record labels have already claimed 65%? How does the bill disgorge the labels? Unless a single court or rate authority is empowered to decide both recording and song rates simultaneously, this bill — no matter how much it improves on the status quo — still just rearranges the deck chairs on the Songwriters’ Titanic.

    • Anonymous

      If a judge gives publishers a higher mechanical rate, and the labels want Spotify to continue making their music available and not go out of business, they’ll renegotiate at a lower rate. If they don’t… well, I hope the labels like their YouTube royalties, because that’s how we’ll be listening to their music.

    • Works in Publishing...

      This bill also sets up a higher standard for the rate courts to set the stat rate for mechanicals. Instead of it being tied to the cost of a page of sheet music, it would now be tied to the value on the open market.

      So in the case of digital sales or streaming, where it costs nothing for the label to distribute, the value of the composition would be much higher than currently allowed the stat rate.

      It will never be equal, but this legislation will allow publishers and songrighter to fight for a fairer share.

  8. Frank1

    Talk to me when there is a bill NOT written by the crooks that created this mess in the first place. Spotify is comprised of, owned/operated by uTorrent, Napster, Facebook, major labels etc…. it’s business as usual for them. Green lighting an immunity deal in the hopes that it’ll fast track things back into the right direction is flat out delusional. This is nothing more than yet another get out of jail free card loophole created by them, for them, to continue fleecing the independent music industry and nothing else. Clearly many of the comments here are from people on the clock with an agenda, paid to create hype and smokescreens around the web. Get a clue people!