The laws and regulations governing the music industry are like a central nervous system: full of circuits, endlessly complicated, and in need of expert attention when it breaks. Something that unites most of us, though, is the movement to put more money in the pockets of creators, be they the artists themselves or the songwriters – lyricists, composers, etc – behind the scenes.
In June, Spotify announced that it was seeking to recoup royalties it paid out to songwriters and music publishers in 2018. New guidelines for the pricing of Family and Student plans, set in a decision by the US Copyright Royalty Board in February, mean that Spotify overpaid royalties for songwriters and publishers in 2018. So, Spotify wants this money back, but is also simultaneously appealing the Board’s decision to mandate a royalty increase of 44%, payable to songwriters and publishers. The company’s maneuvering was blasted as “so hypocritical” by David Israelite, who as president of the National Music Publishers' Association, a group that lobbies on behalf of songwriters and publishers.
He was in even less of a mood to mince words when I spoke with him last week. “They are spitting in the face of songwriters,” Israelite said of Spotify. Still, the industry as a whole has seen progress in the past year: the Music Modernization Act, signed into law last October, makes it easier for music producers and engineers to receive royalty payments, extends copyright protections for songs recorded before 1972, and more.
The Music Modernization Act, or MMA, has already changed a lot for songwriters and producers, but as Israelite explained, there’s a lot more on the way. And yes, it could mean more money for creators too. Below is our conversation, edited and condensed for clarity.
One of the MMA’s bills will help songwriters and publishers get higher rates, but it will take some court dates for that to kick in.
DAVID ISRAELITE: The part [of The Music Modernization Act] that helps the writers and publishers has four parts. Two of them help ASCAP [American Society of Composers, Authors and Publishers] and BMI [Broadcast Music, Inc] get higher rates when they go to rate court under that consent decree [from 1941], and one of them changes the rules of the next trial in front of the Copyright Royalty Board that helps the songwriters from that compulsory license [from 1909]. Those three things are in place now, but the benefits of them will not be felt until we go through these future trials where we get the benefit of the law.
The fourth piece of the MMA will help songwriters and publishers track their music’s copyrights and get paid.
The fourth part is the creation of a new entity called the MLC, or the Mechanical Licensing Collective. This new entity is going to be licensing, collecting money, and paying copyright owners. Songwriters will get their royalties distributed with no commission taken off the top. That will be in place once it is up and running — the first thing that needs to happen is the Copyright Office [will] choose between two different groups that are bidding to be this entity. (Note: Israelite is the President of the NMPA, which bid against the AMLC, or American Music Licensing Collective, to helm the MLC. On July 5, the NMPA was chosen).
If a streaming platform cannot match a song’s copyright with the correct owner, the royalties get put aside — this is known as “black box” money. One of the MLC’s jobs is matching as much as possible, so songwriters and publishers get paid.
Everybody agrees that we want to match as much of the money as possible and have it distributed to the rightful owners. There's no question that the old system wasn't working in that regard. Under the new system, there is going to be a singular public, transparent database of ownership information. Every individual songwriter or music publisher has a right to go into that database, look at it, and make sure that the information is correct for your individual copyrights. If you do that, every single service will now be using that database for distribution through the MLC.
What happens if there’s still unmatched money?
Now, if [the MLC has] done everything in [its] power to find the owner, then what the law requires is that you publicly identify that which couldn't be matched in a public, transparent report. Anyone can look at that list and claim what's theirs that was missed, and they have three years to do it.
What happens after that?
At the end of three years, that money now gets distributed. The law dictates that you lay the unmatched money over the matched money from that particular service. If Spotify can't match a pot of money, then you look at who Spotify did match, and you lay the money over that schematic, and that's how it's distributed. The law also says that a minimum of 50% of that money must go to songwriters.
If you’re a songwriter or publisher, indie or otherwise, should you register with the database to help the MLC get you paid?
Every individual publisher or writer will want to go into that database when it goes live and check their information. That is a responsibility that is on you as a copyright creator or owner.
Now, even if you don't do that, you also then will want to probably look at the unmatched money law just to see whether any of your copyright somehow didn't get matched properly. You don't have to register with this new entity. It's the entity's job to try to find you, but you want to make it easier for them to make sure that you get your money.
You’ll also be able to submit corrections and file a dispute if someone else has your copyright. The MLC will be going to great lengths to publicize this process to advertise about what you need to do to invite people to come in and look at the data and correct it if it's wrong. There's a process, by the way, if there's a dispute over who owns what.
We hope that this will lead to a much higher percentage of money being matched properly, and in the end, all of the money will leave the digital companies and go into the songwriting community where it belongs.
How much “black box” money is there?
We don't know, because the digital companies won't tell us yet. Now, under the law, there will come a day when they have to disclose that because they're going to have to turn that money over.
One of the other benefits of the MMA is that for the first time in history, we now have an audit right of the digital companies. The MLC does not start operations until January 1st, 2021, and that's when we'd be able to go in and audit that what they turned over as unmatched is accurate.
Changing two very old regulations could allow songwriters to negotiate bigger payouts from streaming platforms.
If you are a songwriter, most of your income is regulated by the federal government either through a consent decree that has been in place since 1941, or a compulsory license that has been in place since 1909. If you were Spotify, what you pay the songwriters is a combination of two different processes, both of which are under the federal government's control. Both keep the songwriters from having any negotiating leverage.
It's a terrible position to be in for the songwriters. Record labels and artists are in a free market where they negotiate for their copyright with [platforms like] Spotify — right now they’re getting about 52% of the revenue from those services. The songwriters and music publishers, which [are] just as important to Spotify's business model, are getting only about 13% of the revenue from [these platforms]. The difference is that unlike the artist and record labels, songwriters and music publishers can't say no. They can't negotiate the value of their intellectual property.
I think our next big fight is with the consent decrees at the justice department and whether or not, at least for the giant tech companies like Spotify, we can get out of a consent decree and get into a marketplace where there is a real negotiation. Because that is a legal process [and] not a political process like in Congress, we have a better chance at being successful at the Justice Department than we do trying to pass a law over the objection of a giant political force.
How can music fans help songwriters and publishers get treated more fairly?
All streaming services are not created equal. Apple has been a good partner to songwriters and music publishers and already pays above the statutory rate. Now, I don't think they still pay what the market would dictate, but if you're comparing streaming services, Apple treats songwriters with more respect, so fans always have an option of choosing a service that the writers feel are good partners, but beyond that, there's not a lot that a music fan can do to impact the decision of giant tech companies.