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The Music Modernization Act: the Future of Digital Publishing

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John Simson inside the Kogod School of Business.
John Simson at the Kogod School of Business. Credit: Will Diamond

The Music Modernization Act is on-the-move. Last Wednesday, April 25, it was unanimously passed by the US House of Representatives, sending the bipartisan bill to the Senate for hearing on May 15. The US House Judiciary Committee also passed it unanimously in early April.

So, what is the music modernization act, and why is it so popular? And, if it also passes in the Senate, what does that mean for the music industry?

The Music Modernization Act, H.R. 5447, is a combination of several different bills-the largest of which proposes creating a centralized agency to monitor the music industry's digital publishing rights. The organization would collect and distribute mechanical royalties, as well as help enforce a new blanket mechanical license.

The Act would also start a song database, and eliminate some standards used in rate setting, substituting them by determining rates under a willing buyer/seller marketplace.

"This is a good solution for the unintended [publishing] problems caused by music streaming. Ultimately, it will help streaming companies like Spotify license songs more easily, as well as increase royalty payments to songwriters and publishers," says John Simson, program director of Kogod's business and entertainment program.

Simson, a music industry and entertainment law veteran, has been in the music industry since 1971. He's worked as a manager and entertainment lawyer, and as executive director of SoundExchange, a digital performance rights organization that collects and distributes digital performance royalties. He's now director of Kogod's business and entertainment program, an undergraduate major that integrates basic business knowledge with the economic and legal aspects of the entertainment industry.

"I think the legislation is very likely to pass, since both the users and major publishers are on board," Simson says. "Those opposing are not as strong and will likely get some concessions to make it work for everyone."

To get more insight into the Music Modernization Act-what it is, how it works, and its potential impact-we sat down with Simson. Read more from our interview below.

KSB: Any thoughts on who might lead the yet-to-be established agency?

JS: It seems clear that the National Music Publisher's Association will be the primary stakeholder in the new entity. The users of music (Spotify, Apple, Amazon, Pandora) have offered to pay for the creation of the agency, which is novel-but they see it in their collective interest.

KSB: What are some immediate challenges the agency would face?

JS: First and foremost: credibility with independent music publishers and songwriters. Everyone is worried that the major publishers will control the organization and won't have incentive to find the smaller niche songwriters and music publishers who will be owed money.

KSB: A key part of the Act is establishing a song database. Can you talk about this proposal?

JS: There are a lot of individual databases that have "pieces of the puzzle," but no centralized place that stores all the information. ASCAP, BMI, SESAC and GMR all have great information about their individual members and what they own, but thus far haven't agreed to combine their assets, which would create a comprehensive database. Many services now believe this is the "holy grail."

There is one bill in Congress that proposes forcing the industry to create such a database. Its sponsored by Jim Sensenbrenner of Wisconsin, and it's not very good for the music industry because it would remove most of the penalties for copyright infringement.

KSB: The bill would benefit both music publishers and songwriters. Are there any constituencies it might hurt?

JS: Some believe that independent songwriters might be hurt because they are less likely to register with the new agency or be unaware of the new change in the law. If they don't register they could lose their entitlement to their royalties after a specified period of time.

SoundExchange had this very issue at its outset. We delayed forfeitures for quite a long time to give artists and labels additional time to understand their new rights and responsibilities.

KSB: How likely is it that it will be approved?

JS: I think it is very likely to pass, as both the users and major publishers are on board. Those opposing are not as strong and will likely get some concessions to make it work for everyone.

KSB: What are some ways this could impact musicians and their managers?

JS: This really just impacts songwriters and music publishers, as well as interactive music services like Spotify, Apple and Tidal. It really has no impact on musicians unless they are composers; nor will it impact managers unless they are managing songwriters. Managers will need to be aware of another place their clients must register to collect royalties.

KSB: What about organizations, like SoundExchange?

JS: SoundExchange may well benefit from this, as they are well-positioned to be selected to perform the back-office tasks of the new agency. This is very similar to what they do now, although their primary information is labels and artists, not songwriters and publishers.

KSB: What do you see the digital music world moving towards, and how does this bill support-or go against-this future?

JS: This bill helps streaming services operate with much lower risk of lawsuits (which is a major problem right now). If passed, on-demand services will have a streamlined process to pay for music publishing at a much lower transactional cost. This should help boost the growth of these services.

Read more about John Simson and the Music Modernization Act.