What the Music Modernization Act Means for Music Streaming

When the Music Modernization Act was passed into law by the US Congress in 2018, it was heralded by the songwriting community as the last best hope to restructure the new digital music economy in a way that would treat songwriters equitably.

Having spent the last several years trapped in a doomsday scenario in which the owners of master recordings collect almost five times more per Spotify stream than the creators of the song, songwriters and music publishers have high hopes that the Music Modernization Act can restore the balance between songwriters and publishers, record labels and artists, and the digital service providers like Spotify, Apple, Amazon, YouTube and Pandora.

To that end, the Music Modernization Act provides for the creation of a new organization called the Mechanical Licensing Collective (MLC) which is intended to change the way that mechanical licenses are granted and royalties are collected from the digital service providers. It will create a new, all-encompassing database that will issue blanket licenses for the use of all music on the various streaming platforms. The collective is in development now with the goal of going live in 2021.

Needless to say, that’s a sizable undertaking and there are a lot of questions about how viable this will be in practice. Clearly, it will bring major changes to the publishing industry, which has clung largely to the same infrastructure for the processing of licenses and royalties over the past 50 years, despite all of the technological shifts that have rocked the industry during that time. If you’re a songwriter, whether you act as your own publisher or have assigned your publishing rights to an outside company, the game is about to change in a big way.

So before the Music Modernization Act really takes effect in 2021 with the formation of the new Mechanical Licensing Collective (MLC), here are four things you can do to be ready for it.

1. Learn to Get Along

There is nothing that has done more damage to the music publishing industry, and probably nothing more likely to torpedo the effectiveness of the new Mechanical Licensing Collective than the single most intractable problem in the entire music industry: the simple inability of songwriters to get along. I don’t mean “getting along” in the sense of going out for beers or a pizza and telling funny stories to each other. Songwriters are experts at that. I mean actually learning to work together in an organized way to handle the fundamental business of songwriting, which all comes down to working out the splits.

Splits are just a matter of who owns what portion of any newly created song. But it’s the one thing that all the writers involved in a song have to agree on, other than the melody and the lyric, and ultimately it’s the one thing that no amount of legislation, blockchain technology, intervention from publishers, labels, or managers can solve. Sooner or later, all of the writers on the song have to speak to each other and come to some sort of agreement. Sooner would be good.

The problem is that no song can be properly licensed or fully registered until everyone agrees on what share they own. Incomplete registrations that show only a portion of the ownership, changes in the ownership shares after a release, conflicting claims of ownership, and songs with uncleared samples or interpolations all clog the systems of ASCAP, BMI and HFA as well as the digital service providers that rely on those organizations, creating a nightmare of paperwork and confusion for everyone in the entire music ecosystem. In a business filled with worthy adversaries, songwriters turn out to be their own worst enemies.

Any songwriter who claims to have never had a split issue with a collaborator is probably just telling you that they’ve never addressed the subject at all. Don’t be one of them.

2. Try to Get Organized

The Mechanical Licensing Collective can only help you if your songs are actually in its system. If you have a sizable catalog of songs, that could mean a daunting task of data entry come 2021. Given that publishers, not individual songwriters, are the primary clients of the MLC, the technology will be built for bulk registrations, so that publishers can deposit data files containing the information for thousands of songs.

In light of that, it might be time for a songwriter with a catalog of songs that stretches into the triple digits to think about investing in some kind of administrative software package common to the industry. If you can start getting your songs set up in something like Counterpoint now, you’ll be able to deliver all of those files, in a format that the MLC can accept, and deposit all your songs in one quick delivery once the MLC opens for business. While Counterpoint is the system most often used by the industry, you could also look into copyright management systems like DISCO, Songspace, and Auddly, or even just a simple spreadsheet. Whatever you use, prepare for a fair amount of information gathering and a descent into acronym hell. Even an Excel spreadsheet should include the International Standard Musical Work Code (ISWC) for each song (you can find that on the registration for the song at ASCAP, BMI or SESAC and it begins with the letter T), the names of all of the songwriters and their IPI/CAE numbers (if you can find them), all of the publishers and their IPI numbers (if you know them) and the International Standard Recording Code (ISRC) for any recordings of the songs that you’re aware of (you can sometimes look those up at SoundExchange).

I know— it might be a good time to think about hiring an intern.

3. Get Registered

Once you’ve gone through the grief of settling song splits and organizing your database of songs, you might as well go the next step and actually get those songs registered at the performing rights organization to which you belong (ASCAP, BMI or SESAC in the United States). If you haven’t yet joined one of those organizations, then you should do that first. These organizations are not only about the money they collect for songwriters, they are also the most powerful and active advocates for the songwriting community. In these times of significant change in the industry, they need your support and you definitely need theirs.

You may also want to consider joining Harry Fox Agency (HFA), which is the largest company committed to collecting mechanical royalties and the one that will be most affected by the introduction of the Mechanical Licensing Collective. Not only does HFA represent most songwriters and publishers for at least portions of their catalog, HFA is also the agency used by Spotify and YouTube to process its payment of mechanical royalties. If you or your publishing entity are not affiliated with HFA, it’s likely that you are not receiving the “mechanical royalty” portion of your income generated at Spotify or YouTube. Similarly, you may also want to consider creating an account with Music Reports and Medianet who provide administrative royalty services to some of the other digital service providers.

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When the Mechanical Licensing Collective actually takes shape, they will undoubtedly work closely with HFA to absorb the millions of registrations that HFA already has in place. I expect it will probably be far easier for those songwriters and publishers whose registrations are already in place at HFA, than for those who have to input all of them from scratch into the Mechanical Licensing Collective system …

IF THOSE REGISTRATIONS ARE CORRECT. That’s a big if. The one thing that you can count on in the music publishing industry is that one small mistake in a registration anywhere in the world will outweigh all of the correct ones everywhere else. One missing letter in a writer’s name (yes, I’ve seen this happen), a mistake in the IPI, a failure to provide an ISRC, will somehow have worldwide repercussions and suddenly the flow of income from around the globe will inexplicably be reduced to the drips and drops of a leaking faucet. Whether you plan to enter the registrations on your songs at the PROs and HFA yourself, or a publisher or other representative has already entered them your behalf, the most important thing you can do between now and 2022 is check them regularly.

If all of this sounds daunting, and suddenly the grand prospect of music modernization sounds more like being asked to do your own plumbing, I have one other idea you might want to consider:

4. Get Smart

The moment when you’re 20,000 feet in the air is not the best time to learn to fly an airplane. Similarly, I wouldn’t recommend waiting until the Music Modernization Act starts to take effect before you try to wrap your head around how music publishing actually works. Even for industry insiders with a lifetime of experience, the conversations about the new mechanical licensing system, the new rules governing the royalty rate hearings, and the ongoing battles over streaming rates can be hard to decipher, especially for those of us more interested in choruses and chord progressions than CRBs and MLCs. Without a solid knowledge of music publishing, it will be hard to engage in the discussions about the future of the industry, spot new opportunities, or understand where your money is coming from.

I urge you to check out my course, Music Publishing 101 for a 12-week study of all aspects of music publishing, from the basics of royalty collection and income distribution to the more creative aspects of pitching songs and negotiating sync deals.

Could some of the information that you learn in the class change after the implementation of the Mechanical Licensing Collective? Sure. But the understanding you’ll gain from the class about the industry and the fundamental structure of the writer-publisher relationship will give you the background you need to understand those changes. You’ll be able to sort through all the arguments and information coming at you and understand the impact that the structural changes wrought by the Music Modernization Act will bring.

Modernization is never easy. Just watch your grandparents trying to use their iPhone 11. But the Music Modernization Act is the result of the tireless efforts of music publishers, the National Music Publishers Association, and songwriters, especially through the Songwriters of North America (SONA), all working together to fix a system that was collapsing around us. Like any legislation, it doesn’t meet every need, and it will evolve as it begins to be applied in the real world. But it is a big step forward for songwriters and publishers. Make sure that you’re ready for it and well-positioned to take advantage of the changes it will bring.