Is the Music Modernization Act Enabling ‘Legal Theft’ Against Smaller Artists?

As the Music Modernization Act barrels towards approval in the Senate, dissenting voices are getting drowned out.  Should we be paying more attention?

The music industry is used to bills dying in Congressional committees.  Which is why the Music Modernization Act, or MMA, is such a godsend to a rapidly-recovering music business.

Just last month, the bill won unanimous approval in the House, 415-0.  That’s extremely rare for Congress, much less the music industry.  And it’s the result of an unprecedented level of cooperation between the tech, songwriting, and publishing communities.

But dissenting voices — including unsigned artists and smaller tech companies — are crying foul.  And most of their complaints are about what will happen after the MMA is passed — when a government entity known as the Mechanical Licensing Coalition, or MLC, is formed.

The details surrounding the MLC are now coming into sharper focus, with serious questions over how it will collect and disperse mechanical licensing funds.  And, who exactly gets to run this government agency.

(For a quick overview on what functions the MLC will perform — and not perform — read this introduction).

‘Legal theft’?

A huge point of contention is how the MLC will hold unclaimed funds, and then redistribute those funds after a relatively short period of time.  Specifically, the MLC will collect a giant tranche of mechanical licenses from streaming services like Spotify, who will be legally obligated to pay the MLC.  The MLC will then match — theoretically — those funds to the proper rights owners.

But what happens to the millions of works that aren’t properly matched?  That’s where things get a little shady.  Because the way the MMA is drafted, the MLC will have the right to redistribute unclaimed funds after just three years to a select group of publishers based on marketshare.

Those publishers didn’t earn that money — because it was accrued for somebody else’s music — but they will capture the revenue after a relatively short period of time.

And once that money hits the wrong bank account, there’s no way to get it back.

In fact, the actual rights owner will probably never know the MLC even exists, much less understand the process.  In all reality, the songwriters who are not receiving their MLC funds will typically be unsigned, aspiring artists who are unfamiliar with how the music industry works.  They can’t afford sophisticated publishers or attorneys, so they’ll lose money they didn’t even know they were owed — even if that’s a large sum of money based on a recent hit.

“25-35% of all of the mechanicals wont’ get registered,” one source to DMN estimated.  “The struggling rapper from the inner city will never see that money — ever.”

And once three years is over, there’s absolutely no way to recover the lost funds. Which kind of sounds like a scam, except it’s not — because it will become the law.  One source to Digital Music News complained that it was merely ‘legal theft,’ sanctioned by a Congress that doesn’t understand copyright law well enough to realize what they’re voting for.

Dae Bogan, a music licensing expert and entrepreneur behind companies like TuneRegistry and RoyaltyClaim, has tried to get lawmakers to avoid this ethically-questionable arrangement.

Just recently, Bogan urged members of Congress to “ban the practice of distributing by market share unclaimed royalties that rightfully belong to DIY musicians and songwriters,” a group that is highly unlikely to claim their funds.

Bogan told Digital Music News that he’s met with government officials and tried to gain traction on the Hill.  But most of his efforts are being ignored.

Sadly, Bogan says there’s an incredibly easy fix to this problem: simply require anyone uploading music onto Spotify to supply proper ownership data.  So, an artist uploading via Tunecore, Symphonic Distribution, CD Baby or oneRPM would simply have to supply all the extra information.  That way nothing goes unclaimed.

It’s so easy, that it’s hard to figure out why it’s not part of this legislation.  As part of a longer list of recommendations (read it here), Bogan called for Congress to simply “mandate that record companies provide complete and accurate (at the time of release) publishing information for each track within the metadata delivered to distributors/aggregators, and that the latter provides that information to DSPs.”

So why not require this easy fix as part of this groundbreaking legislation?

Cynically, critics of the bill say the reason is pretty simple: major publishers, as represented by the National Music Publishers’ Association (NMPA), don’t want it that way.  And the reason is that such a requirement would make it impossible for member publishers to collect money that isn’t theirs.

‘Music Modernization Act’ Page 38: Artists Forfeit ALL Unclaimed Royalties After 3 Years

But that’s not only damaging the the smaller artist and songwriters who will never get paid.  It’s also damaging to digital service providers (DSPs) like Spotify, who are forced to pay royalties to the wrong person.  Alternatively, that money could be used to reinvest in the company — or better yet, deployed to the actual rights owner.

And frankly, Spotify isn’t stupid: they understand that the MMA contains some unsavory aspects that are harming smaller rights owners. It gets them out of billions in potential damages while offering unprecedented protection from future lawsuits. But that doesn’t mean it’s ethically correct.

All of which might explain the presence of Loudr, recently acquired by Spotify this year.  Loudr is a company specialized in mechanical rights licensing, and a group that could help Spotify better match mechanical rights owners. But frankly, none of our sources truly understood the Loudr acquisition given that the MMA will simply require Spotify to send a lump payment to the MLC.

Meanwhile, sources are also pointing to some very shrewd planning around the MLC once the MMA is passed.

That includes the expectation of a ‘no bid’ MLC government contract being handed to SoundExchange, based on information shared with sources close to the post-MMA planning.   That story involves an NMPA-loaded board and players like CMRRA and SXWorks, a group that will easily guide Congress to a pre-selected group like SoundExchange.

But we’ll save that very detailed discussion for the next article.


The NMPA’s CEO, David Israelite, did not respond to an email about the MLC.


11 Responses

    • Remi Swierczek

      OBAMA CARE for music industry delivered!

      Another 5 years erased from lives of musicians and music industry by bit more complicated BASKING in UMG created streaming and advertising COMPOST!

      Just get new FAIR USE ACT and start $300B music business obvious to BORAT!

  1. annoying

    It’s called SAMPLING. Which is THEFT. And this law is perfect for those thieves that can’t register shit.
    I’ve been angry at free sampling before 1970 my whole ‘career’ … I really do hope all the people that didn’t clear the samples get now a big enough copyright bill to start making it’s own music. Working with stolen samples is easier than putting together Lego bricks. Last time I checked I was doing that when I was 6 years old.

    • annoying

      Can you believe I got a copyright strike on a private video on youtube by some cd baby artist.. Guess on what. On a fucking break from 1965..
      I was like this guy smoked a lot of crack to click the youtubemoney option.

  2. Anonymous

    “Alternatively, that money could be used to reinvest in the company — or better yet, deployed to the actual rights owner.”

    I agree with the second part. As to the first part, I’m reminded of Stan Lee’s cameo in Black Panther. I won’t spoil for those who haven’t seen it, but those who have will understand.

    • HELLO!?

      no time for beating around the bush ….fucking spill it

  3. Anonymous

    “Bogan called for Congress to simply ‘mandate that record companies provide complete and accurate (at the time of release) publishing information for each track within the metadata delivered to distributors/aggregators, and that the latter provides that information to DSPs.'”

    I agree with this so much. Unfortunately, labels don’t see it that way. For reasons I could never quite fathom, publishing rights for new releases often take months to get worked out. Labels don’t want to wait to release their product until publishing is finalized. My opinion… make them wait. Finalizing publishing rights prior to release of an album should not be an unreasonable thing to ask for.

    • Paul Resnikoff

      Labels can figure this information out pretty easily.

      Outside of that group, every distributor can just make it a requirement for distributing artists. Within 1 year, 6 mos., whatever — 99% of artists would probably update their info (after all, many would trust info from their longtime distributor instead of something called ‘MLC’. That’s always been a problem with SoundExchange, artists thought their ‘outreach’ was some phishing scam).

      Shockingly easy to implement.

  4. Lest it be overlooked...

    “Copyright, the court reasoned, does not impermissibly restrict free speech, for it grants the author an exclusive right only to the specific form of expression; it does not shield any idea or fact contained in the copyrighted work, and it allows for “fair use” even of the expression itself.”

    Though it was tempting to start a diatribe on the First Amendment implications, among other things, clearly set out in the above quote of the US Supreme Court, or otherwise, to rant about the absurdity of those who seek “forever less a day” copyright extensions, or to which “Producer” does the MMA actually refer (see note 21), or harp on the Supremacy Clause, or the due process implications, et cetera, but I reasoned that in view of the CLASSICS Act, I would direct attention to the following for the esteemed DMN readership:

    “In sum, we find that the CTEA is a rational enactment; we are not at liberty to second-guess congressional determinations and policy judgments of this order, however debatable or arguably unwise they may be. Accordingly, we cannot conclude that the CTEA which continues the unbroken congressional practice of treating future and existing copyrights in parity for term extension purposes is an impermissible exercise of Congress’ power under the Copyright Clause.”

    I cannot help but question whether or not classics’ copyrights actually still exist, and the ramifications of such in light of, for example, this Supreme Court decision.

    Though the article below makes mention of Eldred v. Scott, I believe the writer was mistaken and actually meant Eldred v. Ashcroft, 537 US 186 (2003).

    Perhaps the US Senate will realize the folly of wrapping so many acts into one in that, if one falls, so do they all?

  5. Jody Dunitz

    “Cynically, critics of the bill say the reason is pretty simple: major publishers, as represented by the National Music Publishers’ Association (NMPA), don’t want it that way. And reason is that such a requirement would make it impossible for member publishers to collect money that isn’t theirs.”

    Exactly. As previously ranted, there is no ‘S’ [as in “Songwriters”] in NMPA.