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Music Modernization Act to Reform Copyright Law with Regard to Streaming Music Services

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By Rachael Peters Pugel and David G. Barker

Last week, President Trump signed into law the Orrin G. Hatch–Bob Goodlatte Music Modernization Act. The Act modifies existing law under the Copyright Act, and largely affects only those who deliver digital music content or collect royalty payments from it.

The Act, which was passed unanimously by the Senate and the House—an occurrence which has become seemingly more rare—modernizes copyright law, specifically with regard to how royalties are paid, to account for the rise in popularity of streaming services like Spotify, Apple Music, and Amazon Music. The Act creates a newly established entity called a mechanical licensing collective (“MLC”), comprised mainly of publishers and songwriters, which will grant a blanket license to streaming services for digitally distributed music, while also identifying and paying publishers and songwriters for the royalties they are owed.  In exchange, digital music providers, who have been sued regarding licensing and royalties in the past, will receive limited liability.

Another major change is that songs recorded before 1972, which were not previously covered by the Copyright Act, will now be partially protected, permitting songwriters and artists to receive royalties when those songs are digitally streamed.  In addition, the Act changes how mechanical royalties are determined by Copyright Royalty Judges, who will now establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.  This new standard means that judges will have to consider what a song’s fair market value is, possibly leading to higher royalties for publishers and songwriters.