IP Law News

SESAC, Music Industry Compromise on Copyright Reform Bill (1)

Aug. 3, 2018, 4:45 PMUpdated: Aug. 3, 2018, 8:41 PM

Music industry organizations have struck a deal to allow pending legislation in the Senate to move forward, according to announcements issued Aug. 2.

The Music Modernization Act (H.R. 5447) passed the House unanimously in April, and the Senate version (S. 2823) quickly made it through the Senate Judiciary Committee. But it stalled on its way to the Senate floor.

The bill seeks to smooth the relationship between on-demand streaming services such as Spotify and music copyright owners. The absence of a one-stop-shop for streamers to get licenses to play music has resulted in a series of high-dollar lawsuits against Spotify.

The holdup was an objection by SESAC, formerly known as Society of European Stage Authors and Composers, an organization that collects royalties on behalf of songwriters. SESAC’s affiliate, the Harry Fox Agency, administers licenses that would be affected by the operations of a new blanket licensing collective in the legislation.

One Company Threatened

Sen. Rafael E. “Ted” Cruz (R-Texas) halted the bill’s progress in the full Senate following SESAC’s concerns, Michelle Lewis, co-executive director of the Songwriters of North America, told Bloomberg Law. But Lewis said that talks among music groups have resulted in SESAC’s agreement to withdraw its objections. Cruz’s office didn’t immediately respond to a Bloomberg Law request for comment.

The compromise will clarify that the new organization only will administer a particular kind of license, and will have exclusive purview only over blanket licenses, according to industry sources. Harry Fox and other organizations will still be able to control individually negotiated licenses.

The bill has not yet been placed on the calendar for a full vote in the Senate.

Sen. Orrin G. Hatch (R-Utah) sponsored the Senate version of the bill, which got unanimous committee approval in June. Hatch’s office didn’t immediately respond to a Bloomberg Law request for comment on the prospects for the bill or details about any amendments that might be offered in light of the music industry compromise.

Blanket License for Streamers

The bill targets what’s known in the music industry as a mechanical license. Under the Copyright Act, songwriters can demand a royalty when someone makes a copy of a song based on a musical composition.

The right was created in the days of the piano player roll, but now applies to online downloads and interactive streaming services, such as Spotify, Tidal, Apple Music, Google Play, Amazon Prime Music, and Pandora Premium. It doesn’t apply to services that prohibit users from choosing specific tracks to play, like Pandora’s free service, Sirius XM Radio, or iHeart Radio.

The volume of music being added to Spotify every month made it impossible for streamers to negotiate individual licenses with copyright owners. So they were using an alternative method, under which the Copyright Act allowed streamers to just send a notice to the Copyright Office that it was using a song. The resulting delays from thousands of notices piling up at the Copyright Office delayed creators’ ability to collect royalties.

The legislation would create a new Music Licensing Collective, which could offer a streaming service one blanket license to play all music, and then bear the responsibility of collecting royalties from streamers and distributing them to copyright owners.

Deal Reached

The Harry Fox Agency administers music licenses on a song-by-song basis, and it proposed to change the legislation to designate itself as the Music Licensing Collective, Lewis told Bloomberg Law.

After negotiations, the Harry Fox Agency and SESAC agreed to withdraw opposition if lawmakers amended the bill, Bart Herbison of the Nashville Songwriters Association International told Bloomberg Law.

The revised bill will restrict the future Music Licensing Collective from offering any other licenses besides mechanical licenses under Section 115. They would not be able to offer licenses such as those allowing radio stations, bars, and restaurants to play music.

Four performance rights organizations—the American Society of Composers, Authors, and Publishers, Broadcast Music Inc., SESAC, and Global Music Rights LLC—offer blanket licenses for those uses, called public performance licenses.

The mechanical licenses restriction constitutes a clarification of the bill, Herbison said. “The Music Licensing Collective was never going to do that,” he said, referring to the public performance licenses.

The Music Licensing Collective will have exclusive domain over blanket licenses for interactive digital streaming services, but the Harry Fox Agency and other entities could still negotiate one-on-one licenses, Herbison said.

“The streaming services can choose whether they want to use the MLC or HFA or anyone else for those direct licenses,” he said.

SESAC didn’t immediately respond to a Bloomberg Law request for comment.

(Updated with additional reporting throughout)

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bloomberglaw.com

To contact the editor responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com

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