The Music Modernization Act at 5 Years – Recap of the House Judiciary Committee Hearing
Background
The Music Modernization Act (MMA) was signed into law nearly five years ago on October 11, 2018. This legislation modernized the music ecosystem, bringing it into the 21st century, and reflected recognition by all stakeholders that the prior system was not working and was in need of reform. Approaching the law’s five-year anniversary, the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on June 27, 2023, to examine the impact of the legislation and review areas where the system could be further improved. DiMA President and CEO Garrett Levin testified at the proceeding. This blog summarizes key points from the Nashville-based field hearing.
The MMA at Five Years
The MMA was and continues to be necessary for today’s music ecosystem. The key provisions of the law –including the blanket license, centralized, authoritative database, limitation on liability, and extensive reporting requirements, to create efficiency in licensing and royalty payments and provide legal certainty—are fundamentally working.
Two Important Takeaways on the MMA:
- The entire team at The Mechanical Licensing Collective (MLC), as well as many across the industry, including MLC Board Members, have been and remain committed partners in the success of this improved system. The passage of the MMA, which laid the foundation for standing up the MLC, is a model of how the industry working together can solve hard problems for the benefit of all.
- Industry should continue to diligently identify areas for improvement to reach the full potential and intention of the law. In particular, this includes ensuring that regulatory and statutory positions reflect the MMA’s critical balance; and ensuring that the MLC’s budget is reasonable and cost-effective.
The importance of a neutral MLC
The MLC sits at the heart of the MMA’s blanket mechanical license system. It is governed by a Board of songwriters, publishers, and three non-voting Board members from organizations representing songwriters, publishers, and digital streaming services. The MLC administers the blanket license and distributes royalties. In its best form, the MLC should serve as a neutral, level seat of a three-legged stool, administering the blanket license system in an effort to balance the interests of three sets of stakeholders—songwriters, publishers, and streaming services.
As a neutral administrator and best-in-class back-office service provider, the MLC processes massive amounts of data provided by digital music services, provides a one-stop authoritative shop for rightsholders to register their works in a centralized, public database, matches more works to recordings than previously possible, and effectively and efficiently pays out hundreds of millions of dollars in royalties every year to publishers (who in turn pay songwriters). This was a point echoed throughout the hearing, by multiple witnesses and Members of the Committee. As one witness eloquently put it, “The MLC is an administrative body, not a policymaking body.”
Areas for Improvement
In the first year of operations in particular, the MLC worked bilaterally with services to ensure they successfully transitioned to the new system. Unfortunately, on broad interpretations of the statute and regulations, in several instances the MLC acted not as a neutral administrator but rather as arbiter or advocate on behalf of one set of stakeholders.
Instead of siding with any one stakeholder, the MLC should seek clarification from the Copyright Office and rely on the authority the MMA granted to the Office. To do otherwise is contrary to Congressional intent and produces results that distort the necessary balance of the statutory licensing regime in light of the MLC’s powers over all stakeholders. Ensuring the MLC acts as a neutral administrator will help to advance the goals of the MMA and further improve the system for all.
Measuring The MLC’s Reasonable Costs
The need for neutrality is paramount given the unique funding structure of the MLC, which requires the digital services to pay for the reasonable costs of the MLC’s operations (on top of their royalty obligations). This structure has led to the absurd circumstance that the services are paying for both their own advocacy costs and the MLC’s costs in advancing opposing arguments often indistinguishable from the music publishers. That was not the intention of the MMA.
Twice now, the services have agreed to fund the costs of the MLC at the amount requested, even as those costs increase significantly. The MMA explicitly provides that the services are responsible only for the reasonable costs of running the collective. The MMA did not hand the MLC a blank check.
The true measure of reasonableness should be material improvements in efficiency and effectiveness at the MLC’s core functions: are more royalty-bearing works registered, are more works matched, are more royalties paid through to the right owners, and is all of that done with increasing efficiency over time? Regular review by Congress of budgeting and spending against ongoing performance improvements will help ensure that the law lives up to its full potential and help the parties avoid inefficient and expensive litigation over costs before the Copyright Royalty Board.
DiMA members need the MLC to succeed
The MMA was a major stride forward in improving music licensing for the digital age. DiMA and its members were proud to be a central part of the law’s passage and continue to support the law. DiMA member companies interact with the MLC on a near constant basis.
DiMA’s members want the MLC to succeed. More than that, they need the MLC to succeed. When the MMA passed Congress, it was described on multiple occasions as a once-in-a-generation measure to improve the licensing system for all stakeholders. Five years in, that is still true. Ongoing attention from Congress will help further strengthen the new system and ensure it lives up to its full potential.
Additional resources on the 6/27/23 Congressional hearing:
- Hearing page (includes written testimony and video of the proceeding)
- Variety guest column from Subcommittee Chairman Issa
