NMPA Calls on Congress to Allow Direct Music Publisher Negotiations with Streaming Platforms — Here’s Their Proposal

NMPA calls on congress to allow direct music publisher negotiations with streaming platforms
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NMPA calls on congress to allow direct music publisher negotiations with streaming platforms
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Photo Credit: NMPA

The National Music Publishers’ Association (NMPA) is now calling on Congress to allow music publishers to negotiate directly with streaming platforms like Spotify — as the fallout from Spotify’s bundling move continues.

Spotify’s bundle-happy plans have left the music industry less than enthusiastic, with the National Music Publishers Association (NMPA) asserting the change will cost upwards of $120 million in reduced mechanical royalties for artists each year. As a result, the NMPA is recommending that Congress allow music publishers to negotiate directly with streaming platforms like Spotify to leverage more negotiating power in the sector.

In essence, the proposal — advanced by NMPA chief David Israelite — would give publishers the right to directly negotiate terms with Spotify, while also maintaining the MLC to handle existing, statutory rates. Israelite clearly pointed to Spotify’s sneaky bundling shenanigans as motivation for the proposal.

Here’s the NMPA’s full letter:

Dear Chair Durbin, Ranking Member Graham, Chairman Jordan, and Ranking Member Nadler:

The Music Modernization Act (MMA) has offered not only songwriters and music publishers, but also digital service providers (DSPs), unprecedented benefits. However, the bill has amplified the need for corrections to the century-old compulsory license governing their work.

Large, foreign-owned companies, like Spotify, should not enjoy unfair advantages over American songwriters because of outdated federal policy. By making one simple change, Congress can undo a more than 100-year-old mistake in the compulsory license and ensure songwriters and music creators continue to benefit from their creative efforts.

How did we get here? Almost six years ago, members of the House and Senate Judiciary Committees came together to pass the MMA, a landmark piece of copyright legislation for the age of digital music streaming. The MMA took important steps forward in improving the compulsory license imposed on songwriters and music publishers by creating the Mechanical Licensing Collective (MLC) to administer a blanket license under Section 115 of the Copyright Act, which is taken by digital music services.

The MLC increased transparency through a public database, furthered licensing efficiency through a central administrator, and improved the process for distributing musical work royalties. However, the benefits did not extend to, or remedy, the ongoing issues faced by rights holders subject to the government rate-setting process.

The continued abuse of the statutory system by digital services, most recently Spotify, has made clear that additional action by Congress is needed. The royalty rates paid to musical work copyright owners for uses of those works under the Section 115 blanket license are set in a proceeding before the Copyright Royalty Board (CRB), within the Library of Congress, once every five years. In these proceedings, music publishers and songwriters must face off against some of the biggest tech companies in the world: Spotify, Apple, Amazon, Google, among others to establish rates for the use of musical works.

Because the law prevents private negotiations in a free market, publishers and songwriters have seen ongoing abuse of the statutory system and CRB rate-setting process with little ability for recourse. Most recently, Spotify has found a new way to game the statutory rate system to underpay rights holders by hundreds of millions in royalties.

In March, Spotify began manipulating the compulsory licensing rules and reclassified its premium subscription music service, along with almost 50 million subscribers, into what it is calling a “bundle.” The benefit to taking this action is, under the compulsory royalty rates, bundles attribute less revenue — and therefore pay less in royalties — to the music than a premium subscription music service.

Spotify has taken a part of its music service that was previously offered to consumers for free, audiobooks, and it is now calling audiobooks a bundle with its music service to substantially reduce the musical work royalties owed.

Those who do operate in a free market, such as record labels, have negotiated protections against these bad faith tactics. However, music publishers and songwriters have no such leverage under the CRB to do so.

Fortunately, there are solutions Congress can enact that would preserve the benefits of the MMA and the MLC while providing songwriters and publishers a better chance to compete on a level playing field with Big Tech firms like Spotify. Rather than picking who wins and who loses, Congress should allow rights holders the choice to license through the MLC using the statutorily set royalty rates or to withdraw from the MLC and operate in a free market if they meet certain conditions.

If copyright owners chose to withdraw their copyrights from the blanket license, currently administered by the MLC, they would be required to do the following:

        • Require all rights holders who exercise this option to provide 6 months’ notice to the Register of Copyrights and the MLC;
        • Require that the withdrawing rights holders ensure their musical work copyrights and ownership interests are registered in the MLC’s public database;
        • Require the MLC to flag those rights holders and their catalogues as withdrawn from the MLC blanket license and subject to voluntary license negotiations; and
        • Require copyright holders to maintain with the MLC database current, up-to-date contact information, which would be used to contact for licensing.

This would give rights holders the option to stay within the current compulsory system or to operate within a free market. It would also restore basic principles of fairness to the market by requiring streaming platforms to deal with music makers as partners.

Finally, it would provide a needed point of leverage for songwriters and music publishers to negotiate with streamers, like Spotify, who can otherwise use their power to bend government regulations to their advantage. All of this could be accomplished by building on the successful infrastructure created by the MMA and the MLC.