On The Verge: The Biggest Update To Music Copyright Law In Over 40 Years

Wednesday, September 19th, 2018 @ 5:36PM

There’s a copyright bill racing through Congress so quickly that it could become law by the time you read this.

But before we talk about what’s happening now, let’s take a look back at the past for context.

What Does a Piano Have to Do with Music Royalties?

About 100 years ago, player pianos (that is, self-playing pianos) were becoming popular. They relied on rolls of perforated paper to trigger the necessary key and pedal presses that create the music notes we hear.

In 1909, pursuant to a copyright lawsuit that pertained to these player piano rolls, Congress expanded the Copyright Act to include copyright owners’ right to make and distribute (or authorize others to do so) mechanical reproductions of musical works. Monopoly concerns led to the creation of a compulsory license which would anyone to make and distribute a reproduction without consent so long as they paid a statutorily-prescribed royalty of two cents.

That two cent royalty served as a (very low) cap until 1976, when the Copyright Act underwent a major update. (As we always say, the law moves slowly…) That year, Congress decided that mechanical royalty rates would be updated every 5 years. And that’s been the case ever since.

But 42 years later, how we consume music has changed. The media has gone from 8-tracks to cassettes to CDs to digital files. Listening itself has also become more individualized. Headphones have had a major resurgence over the past few years, and music streaming companies use algorithms to serve up custom playlists. Even the very nature of music ownership has changed. Many people that previously owned physical copies of music media now pay instead for a monthly digital streaming license.

As for player pianos? You can still find them, though their popularity has waned. And true to modern life, today’s models often run off of an iPad.

Yet, even with so much innovation in the industry, the laws governing that industry haven’t changed… Until now, possibly, with the impending passage of the Music Modernization Act (“the MMA” or “the Act”).

The Biggest Update to Music Copyright Law in More Than 40 Years

The Act would remove that two-cent cap (which even adjusted for today’s dollars is only 55 cents) and allow the parties to a copyright deal to negotiate freely. The MMA also mandates the creation of a royalties oversight collective and aims to simplify how the money is collected.

The Act is especially good news for songwriters, who often make a very low set amount no matter how many times the song in question has been streamed.

Most of the music industry is on board with the changes – musicians, songwriters, producers, managers, publishers, performance rights organizations, and so forth. In an industry where creators are often pitted against distributors and bitter contractual battles are the norm, this alone is newsworthy.

Of course, not everyone is excited about the bill. Earlier this year, SESAC (a performance rights organization) looked like it might derail the legislation. More recently, Sirius XM looks to be holdout on the industry side. The satellite radio giant argued that the legislation as currently proposed will be exorbitant for them while allowing traditional radio to keep getting royalty exemptions.

The company didn’t seem to mind that it’s battling the rest of the industry… However, that was before 150 artists and executives announced via an open letter their plans to boycott Sirius XM if Sirius XM didn’t change its stance. But some late-stage concessions were added to the legislation that helped secure the company’s support.

To be sure, there are some shortcomings with the bill. For example, the Mechanical Licensing Collective is expected to cost $222 million to operate over the next eight years, while new taxes will bring in only $175 million over the same period. That’s a $47 million shortfall that’s unaccounted for. There’s also the potential for the royalties to be distributed to the wrong party.

Still, even with its flaws, proponents are pushing to have the MMA passed as soon as possible. Why the hurry? The installation of a new Congress could mean starting over from scratch. They’d rather get something passed now while support for it has proven to be so strong.

Congress has been keen to oblige. The bill passed unanimously in the House before heading to the Senate Judiciary Committee, where it again passed unanimously. And as of this writing, the bill was hotlined through the Senate, which means it passed on an oral vote with no objections or discussion. Now it has to go back to the House to approve the changes. Assuming it passes, then it’s on to the President for his signature.

You Said Taxes…

You may have noticed the “T” word – “taxes” – three paragraphs ago. The good news is, the difference in what you’ll pay for music will be miniscule, if anything. The MMA isn’t about asking consumers to pay more. It’s about changing how payments are allocated.

Once the MMA passes and takes effect, we’ll find out for sure… and of course, we’ll keep you informed if there is any consumer impact.

Do You Have Questions About Copyrights, Trademarks, or Patents?

Our firm focuses on intellectual property and entertainment law, including copyright, trademark, and patent transactions and litigation. We would be happy to discuss your matter with you. Call us at (561) 953-9300 or complete our contact form to schedule your free consultation.

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