The Music Modernization Act Is Officially Introduced Into the Senate — With a Few Ugly Warts

The Music Modernization Act (MMA) has officially been introduced into the U.S. Senate, with few changes to the House version.  That’s bad news for many smaller artists, but considered extremely positive for bigger players like Spotify, SoundExchange, and the NMPA, not to mention producers and oldies artists.

The Music Modernization Act (MMA) enjoyed an easy victory in the U.S. House of Representatives.  Now, a version of the bill has been introduced into the Senate, with most of the aspects favored by various music industry sectors.

According to details just tipped to Digital Music News, the Senate version is being introduced by Sen. Orrin Hatch (R-UT).   Co-sponsors of the bill are Senators Chuck Grassley (R-IA), Sheldon Whitehouse (D-RI), Lamar Alexander (R-TN), Chris Coons (D-DE), Roy Blunt (R-MO), John Kennedy (R-LA), Kamala Harris (D-CA), Bob Corker (R-TN), Dick Durbin (D-IL), Johnny Isakson (R-GA), Patrick Leahy (D-VT), Mike Crapo (R-ID), Doug Jones (D-AL), Thom Tillis (R-NC), Bill Nelson (D-FL), Shelley Moore Capito (R-WV) and David Perdue (R-GA).

The House version of this bill passed unanimously, 415-0.  That’s a power slam dunk, and a similar victory is expected in the Senate.

Specifically, the bill is S. 2823, though like the House version, it encompasses a number of smaller bills. That includes S. 2334, the ‘original’ Music Modernization Act, S. 2393, the CLASSICS (Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society) Act and S. 2625, the AMP (Allocation for Music Producers) Act.

The Music Modernization Act Will Create a New Copyright Licensing Organization Called the ‘MLC’. What Will It Look Like?

“The introduction of the Music Modernization Act package in the Senate is a massive step forward for songwriters,” wrote David Israelite, president of the National Music Publishers’ Association (NMPA).  “The bill improves both how and how much songwriters are paid while increasing transparency and enabling digital music platforms to thrive.

“The MMA represents unprecedented consensus around necessary updates to how music creators are valued, and we look forward to seeing it become law.”

But this goes way beyond songwriters, with oldies performers receiving a huge break from the CLASSICS Act, while producers will substantially benefit from AMP (Allocation for Music Producers) Act.

“As the organization that represents music’s creators, the Recording Academy is grateful for the introduction of this comprehensive package,” emailed Daryl P. Friedman, Chief Industry, Government, & Member Relations Officer at the Recording Academy (which, among other things, oversees the Grammys).

“The Academy’s songwriter, performer, producer and engineer members in every state will advocate for passage of the Music Modernization Act and they thank Senators Hatch, Grassley, Whitehouse, and all the original cosponsors for their support of music makers.”

Sadly, that ‘consensus’ doesn’t include smaller artists and publishers, most of whom will lose money if the MMA becomes law.

Critics of the bill point to an extremely unfair compensation scheme for collecting royalties, one that automatically pays bigger publishers money on unclaimed royalties.  So, if a smaller artist doesn’t claim a work, that money vanishes after a relatively short period of time, while enriching mega-publishers like Sony/ATV and Warner/Chappell.

The current version of the MMA calls for larger publishers to collect all unclaimed royalties based on previous marketshare figures.  That will happen through a government-sanctioned body called the Mechanical Licensing Collective, or MLC.

In the case of SoundExchange, which is expected to take over responsibilities for the MLC, a very large percentage of non-interactive digital streaming royalties are unclaimed.  One source estimated that 25-35% of mechanical royalties paid the MLC under the Music Modernization Act will be unclaimed, largely because smaller artists will be unaware of the MLC’s existence.

That lack of awareness will likely be fueled by serious conflicts of interest among MLC stakeholders.

Specifically, industry critics note that an NMPA-controlled MLC will have little incentive to get the word out to unsigned or indie artists, simply because every unclaimed royalty ultimately goes to the NMPA after three years.  That has also been a problem at SoundExchange, though the reasons may be different.

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

Separately, insiders are also pointing to  a ‘no bid contract’ for SoundExchange, which is expected to assume responsibilities over the MLC.

The MLC board, which will be composed almost entirely of NMPA members or NMPA-approved songwriters, is largely expected to hand MLC oversight to SoundExchange, with a bidding process largely symbolic.

That’s unfortunate for mechanical licensing players like Music Reports or SOCAN, who could waste considerable resources competing for a position almost guaranteed to go to SoundExchange.  Just recently, SoundExchange’s CEO, Michael Huppe, orchestrated an acquisition of the Canadian Musical Reproduction Rights Agency (CMRRA), a move that may have been designed to meet the specifications of the soon-to-be-created MLC.

Michael Huppe, who has headed the non-profit SoundExchange for years, most recently received a salary of more than $1 million, according to IRS filings.

Then again, this bill is loaded with positives, including a level of licensing clarity that hasn’t existed in decades.

Producers and oldies artists are also getting relief, while tech companies and investors will be less freaked out going forward.  The bill also symbolizes a level of coordination that seemed impossible beforehand, which could pave the way for even greater legislative progress ahead.



11 Responses

  1. Remi Swierczek

    OBAMA CARE for music will soon become a reality!
    Music industry will continue to bask in UMG streaming suicide for at least 5 years or until DIGITAL RAPISTS (Google, Apple, Amazon, Spotify…in that order) will realize that music as a merchandise is at least 20x bigger than music as a FERILIZER on their streaming and advertising farms.

    • Tenn Tux

      Remi, give it a break. Seriously. Get help. Seek the assistance of a psychologist.

      • Remi Swierczek

        Similar business pudding on bigger scale is happening right now in DC.
        Dems send Trump to shrink too!
        Music industry is no different then dem run Detroit, Chicago or Newark – ashes with no logic or hope.

      • Anonymous

        I’ll translate. What he’s been saying this whole time is that the music industry would be a $300B industry if they abandoned interactive streaming altogether and went back to selling CDs and permanent downloads. Also, UMG somehow started the whole streaming business (instead of, you know, Rhapsody, or whoever actually started it).

        If the internet didn’t exist, I might agree with him. I’ve said it before and I’ll say it again. There was a period in history between the invention of the phonograph and the invention of the internet where one could make significant money selling CDs, cassettes and vinyl. That time is now over. Internet piracy will never, ever go away. I do think the industry is leaving some money on the table by not windowing new releases as permanent downloads for a period of time, but this mythical $300B industry Remi imagines where streaming doesn’t exist is a dream, nothing more. The music industry cannot survive the age of the internet without streaming. Whether streaming actually saved it or merely delayed the inevitable remains to be seen. I like to think it’s the former, and there is evidence to support that. But hell, what do I know?

        • Century

          Who is to say it still isn’t?…it just isn’t going to YOU!

        • Keyz

          Simple fix…the bill should have made streaming illegal! Artists then will make money again and less for the corporates. The only reason streaming is legal is because the big companies make $$$ out of it.

  2. Century

    This MMA is really BAD. They are pushing this through for nefarious reasons.

  3. sum guy

    “That has also been a problem at SoundExchange, though the reasons may be different.”
    Ummmm… may be different? As in also may not be different? What does that even mean? Are you saying that the label board members at SoundExchange were motivated to hold onto unclaimed royalties because they could claim those royalties at some point? Because that’s not true. And “not true” may also be called “lying”. If you have some kind of inside information about some evilness that’s going/went on at SoundExchange then I recommend you publish it. Otherwise you need to end this black helicopter conspiracy case you’ve been prosecuting against them. And yes the CEOs of the big collection organizations get paid salaries that are commensurate with what their peers in the for-profit world are getting. They’re not doing those jobs just for the love of it. Shocking.

    • Paul Resnikoff

      Well, I’ll clarify the statement then.

      Specifically, I’m referring to unclaimed royalties. If you dig in, which DMN has done repeatedly, you will find outrageous examples of major, superstar artists who haven’t claimed their non-interactive performance royalties.

      That money ends up in a giant pile. That giant pile generates, in turn, a giant amount of interest. I’d have to double-check, but I think that money gets re-distributed to people who never earned that money after a certain period of time. Sound familiar?

      That tranche also helps to finance ‘administration’ like Michael Huppe’s $1 mm salary. One argument is that this is ‘competitive’. Though that’s the argument that a lot of high-paid non-profit execs offer. Same with Cary Sherman et. al.: major labels should have pulled the plug on those outrageous multi-million dollar salaries 10 years ago.

      Even worse: artists’ SE payments have been plunging, because Pandora pulled out a major part of their SoundExchange payments in favor of direct label deals. The reason they did this, in part, is because a lot of that money was being squandered (via unclaimed ‘tranches’). I know, because I had personal conversations with top Pandora stakeholders about this issue prior to them making this move.

      Also worth noting: SoundExchange gave ZERO notice of this to the artists it supposedly serves. DMN’s Ari Herstand asked Huppe in a panel about this very issue, based on input from artists seeing their payments plunge, and Huppe offered no explanation.


  4. Bookmarked

    There are SO many reasons why this MMA is just simply wrong.