The Tune Is Changing in the Digital Music Landscape

Anthony Volpe, left, and Savannah G. Merceus, right, of Volpe and Koenig.

Prior to 2018, the last significant piece of copyright legislation addressing digital developments in music was the 1995 Digital Performance Right in Recordings Act (DPRA), see Digital Performance Right In Sound Recordings Act Of 1995, 109 Stat. 336. In light of the rise of digital music providers, the DPRA recognized the need for a public performance royalty for the digital transmission of sound recordings. While the DPRA was impactful at the time, legislators could not have anticipated the monumental shift from physical to digital music consumption. In the 20-plus years from enactment of the DPRA, it became clear that another update was necessary.

The Music Modernization Act (MMA) was signed into law on Oct. 11, after passing unanimously in both the Senate and House, 115 P.L. 264, 132 Stat. 3676 (2018). The law reforms the intricacies of music licensing and accounts for the impact on royalties from interactive and noninteractive digital music services. (An interactive service is one “that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording ... which is selected by or on behalf of the recipient,” 17 U.S.C. Section 114(j)(7)).

Pursuant to the Copyright Act, 17 U.S.C. Section 106, copyright owners have six exclusive rights. These rights vary depending on the fixed medium of the copyrighted work, but by and large the rights are the same. Musical works have two copyrightable components under copyright law, the composition and the sound recording, and each of these works is entitled to independent exploitation under the Section 106 rights. However, there are some limitations to these exclusive rights. Compositions, for example, are subject to compulsory licensing under Section 115 of the Copyright Act. This section provides that anyone may obtain a compulsory license to make and distribute phonorecords (CDs, vinyl, digital downloads, etc.) without first obtaining permission provided that she pays a statutory fee. These fees are known as mechanical royalties.

Let’s say a local musician hears “Hello” by British singer-songwriter, Adele. The musician decides she loves the song and wants to record her own version. Under Section 115, she may rerecord the song without permission provided that she pays the statutory rate and does not alter “the basic melody or fundamental character of the work.” The mechanical royalties will then be paid to the song’s writer, Adele.

For digital music providers, the process of obtaining compulsory licenses proved cumbersome. Prior to the MMA, providers could file bulk notices of intent (NOIs) with the Copyright Office to streamline the rights-clearance process. The practice, however, proved problematic. The Copyright Office did not require digital service providers to identify authorship, only requiring the name of the author “if known,” see 37 CFR Section 201.18(d). With proper attribution virtually impossible, many songwriters did not receive appropriate royalty payments. The MMA addresses this concern by establishing the Mechanical Licensing Collective (MLC). Funded by digital providers, the MLC will be responsible for collecting mechanical royalties from digital music providers. The collective will not only provide blanket licenses to interactive digital music service, but it will also be charged with developing and managing a public database of musical works and sound recordings. The database along with a more centralized licensing service is likely to benefit authors immensely.

Sound recordings—the other copyrightable work associated with a song—will also see significant licensing changes under the MMA. The Classics Protection and Access Act (Classics Act) received support from traditionally opposed sides of the music world like the Recording Industry Association of America and the Copyright Alliance. Notably, the act finally grants federal copyright protection to sound recordings fixed before 1972. Prior to the MMA, a loophole in copyright legislation rendered sound recordings fixed before Feb. 15, 1972, exempt from federal copyright protection and as a result, ineligible for public performance royalties. The Digital Performance Right in Sound Recordings Act of 1995 recognized a public performance right in digital streaming services but that right did not extend to pre-1972 sound recordings.

Let’s consider major recording “My Girl” by The Temptations. The Motown-era group recorded the song in 1964 and it has since demonstrated longevity. While many attribute the song’s success to The Temptations, Smokey Robinson and Ronald White of The Miracles actually penned the hit and were instrumental in its popularity. When a digital music provider plays “My Girl,” the act constitutes a public performance under 17 U.S.C. Section 101. As the right to perform a work publicly is an exclusive right, digital music providers must compensate the copyright holder, typically the songwriter, accordingly. Here, Robinson and White are entitled to mechanical royalties because they are the songwriters and most likely the copyright holders. The Temptations themselves receive none of the mechanical royalties. The group would otherwise be eligible for digital performance royalties for the sound recording but because the song was fixed in 1964, Temptations members David Ruffin, Eddie Kendricks, Melvin Franklin, Paul Williams and Otis Williams, were excluded from the royalty structure. Now, the Classics Act will enable recording artists—those responsible for bringing the compositions to life—to receive long-overdue royalties from digital performances of their sound recordings.

While the MMA passed Congress unanimously, it has not proceeded without criticism. SiriusXM CEO, Jim Meyer, publicly opposed the MMA citing the additional financial burden on digital music providers—a burden circumvented by terrestrial radio. See "SiriusXM CEO Jim Meyer Explains the Trouble With the Music Modernization Act" Guest Op-Ed) (Aug. 23, 2018), see also Section 114(d). Additionally, and while not unique to the MMA, there are concerns about how the law will be implemented and executed. The Copyright Office is currently working a number of regulations and public outreach and will solicit information to aid in the formation of the MLC.

One final concern is how artists will actually collect their royalties. For songwriters, the MLC is slated to substantially improve the compulsory licensing scheme so that artists get paid what they are owed. For recording artists, the process is more complicated as digital music providers negotiate licensing fees with record labels to obtain sound recording rights. Nevertheless, negotiations for use of pre-1972 recordings are already underway. For noninteractive platforms like Pandora and SiriusXM, pre-1972 recording artists would be wise to register with Sound Exchange. The nonprofit organization is responsible for collecting and distributing digital performance royalties for noninteractive streaming services; however, artists must register to take advantage of this service.

While the full effects of the law remain to be seen, the MMA’s passage is a good move toward a reasonable exploration of these rights against a contemporary backdrop that recognizes the impact of music digitization.

Anthony S. Volpe is a shareholder at Volpe and Koenig. He has corporate and private practice experience in all aspects of intellectual property rights.

Savannah G. Merceusis a law clerk with the firm.