Music Modernization Act: A Guide for Digital Music Providers

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By Arnold P. Lutzker, Carolyn Wimbly Martin and Ethan Barr
Copyright Law + Entertainment, Culture and the Arts + Internet and Social Media

This is the second in a series of articles about the Music Modernization Act (“MMA”). Click here for the first and third.

Here, we examine the protocol for prospective blanket licensees and individual voluntary licensees.

Although radio stations and cable operations have dealt with similar licensing schemes for years, the MMA will significantly alter the way in which digital music providers (“DMPs”), including streaming services like Spotify or Apple Music, do business with copyright owners. Through the establishment of the Music Licensing Collective (“MLC”) as a liaison, DMPs may deal directly with a single intermediary, rather than negotiating with each individual copyright holder. Blanket licensees who seek access to multiple musical works must abide by the protocol set forth by the MMA, specifically by filing notices, reporting usage, ensuring accurate royalty payments and collecting data.

While the compulsory licensing scheme of the MMA was primarily contemplated for larger DMPs, not every licensee will require access to hundreds or thousands of songs within a blanket license. The basic obligations for these significant non-blanket licensees (“SNBLs”), who engage in direct licensing with copyright holders outside the scope of blanket licenses, are not substantially different from those of blanket licensees. However, the amount of filing and reporting work for SNBLs may be less onerous.

Blanket licensees

The first requirement for a blanket licensee is to file a notice of license (“NOL”), certified by a representative of that entity, with the MLC. In addition to basic contact information, these NOLs must contain descriptions of the way(s) that DMPs plan to use the musical works under the blanket license, such as whether the works will be available for permanent or interactive download.

Second, DMPs and other blanket licensees are required to provide both monthly and annual reports of usage, detailing the information so that the MLC is not overburdened when computing royalties. The MMA’s role is to use these reports to ensure royalties are allocated to all deserving parties, such as producers, publishers and featured artists. Each piece of reported information will fall into a certain tier, determining whether it must be reported in any instance, only to the extent it is acquired by the DMP or to the extent acquired within metadata.

Third, the MMA requires all blanket licensees to deliver royalty payments in a manner determined by the MLC. All payments, invoices and reports of usage must be certified by a licensed CPA. As is the case with many statutory payment schemes, licensees also may be subject to late fees.

Finally, the MLC maintains discretion to require some DMPs to provide additional data (outside the scope of the reports of usage) that may not be required of other providers, such as the use of “samples” or instrumentation of classical compositions. While data matching and curation is the responsibility of the MLC, blanket licensees must still make reasonable efforts to obtain all applicable information from licensors. The Copyright Royalty Board (“CRB”) may require the U.S. Copyright Office to revise their examples of information that the MLC may seek outside the scope of reports of usage as the regulatory scheme evolves.

Significant non-blanket licensees

Although SNBLs may be subject to individually negotiated licenses with copyright holders, they are still required to file notices of non-blanket activity (“NNBAs”) with the MLC to fulfill the MMA’s objectives of transparency and efficiency. These NNBAs are much like NOLs in that they provide information concerning the licensee entity and the works that will be used.

SNBLs must also make the appropriate royalty payments for activities covered under the MMA. Like blanket licensees, they may be subject to liability or late fees for failing to pay royalties under any voluntary or individual download licenses.

However, SNBLs will operate with minimal additional statutory requirements. They are not obligated to provide monthly reports of usage reflecting covered activities or deliver CPA-certified annual reports. Also, the restrictions surrounding data collection and audits are less stringent.

Conclusion

The U.S. Copyright Office is currently in the process of soliciting public comments regarding the rules and amendments of the MMA. Furthermore, future CRB decisions from royalty rate-making proceedings may affect the general operation and timing of reports of usage, adjustments and other processes surrounding invoicing and payment. The law will almost certainly change shape over time, and we look forward to continuing to share more details as it evolves.

As mentioned in a previous post, L&L is available to help all who wish to secure their fair share of royalties, and all who need help navigating the more nuanced details of this new copyright licensing scheme.

Arnie Lutzker has decades of experience helping owners and users of copyrighted works to benefit from the rights conferred by the Copyright Act of 1976, as amended over the years, and to help individuals, companies and institutions fairly and legally license, acquire or otherwise exploit works. He has also practiced before the Copyright Royalty Board and its predecessors for more than 40 years. The legal team at L&L is ready to help you navigate these new copyright requirements.