The RightsTech Project is pleased to announce the RightsTech Roundtable, a weekly free webinar that will be part of the Digital Entertainment World Let’s DEW Lunch webinar series. Each Thursday we will highlight the important news of the week and a deep dive into a critical topic or issue for the RightsTech community featuring expert speakers and presenters. Click here for more information on Let’s DEW Lunch, and on speaking and sponsoring opportunities.
With final negotiations underway among the European Parliament, Council and Commission over the European Union’s proposed Copyright Directive, and lobbying for and against it at a fevered pitch, Article 13 of the directive, which could force online service providers to actively screen content uploaded to their platforms for copyright infringing material, remains at the center of the debate. This week, however, cracks began to appear in once solid wall of support for the measure among major rights owners.
In a letter to the negotiating parties, the Motion Picture Association, representing the major studios, along with the Independent Film & Television Alliance, the Association of Commercial Television in Europe, and several major European sports leagues, took issue with changes being considered in the “trilogue” to the version of Article 13 passed by the European Parliament in September, claiming they would further cement the dominance of major online players such as YouTube, and asked that their content be excluded from provision should those changes be adopted.
“Recent proposals would undermine current case law of the Court of Justice of the European Union (CJEU) which already makes it clear that online content sharing service providers (OCSSPs) communicate to the public and are not eligible for the liability privilege of Article 14 E-Commerce Directive,” the organizations wrote. “Recall that the initial goal of Article 13 was to codify the existing case-law in a way that would enable right holders to
better control the exploitation of their content vis a vis certain OCSSPs which currently wrongfully claim they benefit from the liability privilege of Article 14 E-Commerce Directive. However, unfortunately, the Value Gap provision has mutated in such a way that it now strengthens even further the role of OCSSPs to the direct detriment of right holders and completely undermines the status quo in terms of the EU liability regime.”
The purported “mutations” appears to be a reference to a proposal by the Council of Europe, made up of representatives from EU member governments to adopt certain existing copyright filtering systems, such as YouTube’s Content ID, as the standard to meet for all online platforms, which would leave it to rights owners to identify their content and instances of infringing uses on the platforms, rather than shifting the burden of identifying and filtering infringing content to platform providers.
“Some of the options proposed for discussion at trilogue level indeed wrongfully undermine current law and weaken right holders’ exclusive rights by, among others: creating a new liability privilege for certain platforms that have taken specific steps to avoid the availability of infringing copyright content on their services (but have failed to do so effectively), and conditioning protection of copyright online on right holders bearing the full burden of identifying and notifying copyright infringing content to platforms,” the letter said. “These would constitute gifts to already powerful platforms, and would de facto constitute the only real change to the current status quo in legal terms, thus improving the position of platforms, but not of right holders.”
The groups’ complaints come even as YouTube has continued its ferocious lobbying against Article 13 altogether, claiming it could still compel the Google-owned platform to remove huge swathes of legal content for fear of liability.
The music industry, meanwhile, largely continues to support the measure, pushing back forcefully against YouTube’s claims.
In their letter, the TV and sports organizations suggest narrowing the scope of Article 13 to single out music and exclude other types of content.
“If…any new safe harbour/”mitigation of liability” would be part of a final trilogue agreement, we would respectfully urge you to disapply the entire value gap provision to our respective sectors,” the letter said. “This could simply be achieved by making Article 13 specific to musical works and phonograms, as was the case, for example, in Title III of the Collective-Rights-Management-Directive of 20145.”
One more negotiating session is scheduled, currently for December 14. A final vote on the directive is tentatively slated for mid-January.
Sony Corporation, along with Sony Music Japan and Sony Global Education, this week issued an intriguing but rather vague press release announcing the development of “a rights management system for digital content that utilizes blockchain technology.”
According to the release, the new systems “is based on Sony and Sony Global Education’s previously developed system for authenticating, sharing, and rights management of educational data,” that Sony developed last year using IBM’s blockchain platform. The latest version, however, includes additional “features functionality (sic) for processing rights-related information.”
That last part appears to point to a system that could accommodate user-generated, or at least third-party content not created or owned by Sony, as the release kinda, sorta spells out:
Today, advances in technologies for digital content creation allow anyone to broadcast and share content, but the rights management of that content is still carried out conventionally by industry organizations or the creators themselves, necessitating a more efficient way of managing and demonstrating ownership of copyright-related information for written works. This newly-developed system is specialized for managing rights-related information of written works, with features for demonstrating the date and time that electronic data was created, leveraging the properties of blockchains to record verifiable information in a difficult to falsify way, and identifying previously recorded works, allowing participants to share and verify when a piece of electronic data was created and by whom. In addition to the creation of electronic data, booting up this system will automatically verify the rights generation of a piece of written works, which has conventionally proven difficult.
The most intriguing part of the announcement, however, is Sony’s claim that the system, “lends itself to the rights management of various types of digital content including electronic textbooks and other educational content, music, films, VR content, and e-books.”
That suggests Sony could have big plans for the system, and indeed, the release states the company “is contemplating possible uses in a wide range of fields.”
Just how big those plans might be, however, is hard to tell from the announcement. The system is still in prototype, and according to the announcement, plans to commercialize it are still under discussion.
Sony wouldn’t be the first major media company to dabble in blockchain only to let it go, should nothing come of this week’s announcement. Disney developed its Dragonchain private blockchain platform back in 2015 and 2016, only to spin it off as an open-source project under the auspices of a non-profit foundation.
But the Sony release contains additional hints that blockchain is a genuine priority for the Japanese conglomerate.
“Sony Group is also considering innovative ways to make use of blockchain technology for information management and data distribution in a host of different fields,” the release said. “Through the technological development and commercialization of blockchains, including with this new system, Sony will continue exploring the possibilities that blockchain technology holds for Sony Group’s diverse and wide-ranging business domains.”
Earlier this year, Sony applied for two blockchain-related U.S. patents that may contain clues as to what sort of information management and data distribution applications it has in mind.
One filing, 20180218027, describes a new type of crypto-mining hardware that includes additional circuitry to compress the data that goes into a new block before adding it to the chain, reducing the storage requirements of the chain. Further, the blockchain supported by the new hardware would incorporate the compression processing into its proof-of-work consensus mechanism.
“As mentioned, the mining process of a block which shall be added to the distributed ledger includes compressing data of the block,” the filing says. “In some embodiments, the mining process is won by the electronic node which provides the smallest block which is to be added, i.e. the block having the best compression may win.”
Each block could also consist of multiple sub-blocks “wherein a sub-block may include at least one of: transaction data, video data, image data, audio data, document data or the like.”
The other filing, 20180219686, describes a type of distributed ledger maintained in part by a number of “virtual nodes” that could continue to maintain the ledger “when the number of [physical] nodes is small, and consensus may be maintained when some devices go offline.”
Together, the filings could point to some sort of restricted, or perhaps permissioned, blockchain-based, peer-to-peer content distribution platform that could accommodate large data payloads by compressing them before adding the data to the chain.
Whether all of those threads ultimately tie together is unclear at this point. What is clear is that Sony is looking hard at potential blockchain use cases.
One of our goals in launching the RightsTech Project was to help draw attention to the growing amount of, as well as the growing need for, investment in the business-to-business layer of the media value chain.
That’s the layer that connects the creative end of the pipeline with the consumer or market-facing end of the chain. It’s the layer where intangible rights are supposed to get translated into tangible forms of commerce so that market demand can be met and authors and rights owners can capture the monetary value of their work, or at least a portion of it.
Over the past two decades, both the creative and market-facing ends of the value chain have been utterly transformed, in scale and velocity, by digital technology. But the middle layer, the B2B layer, until recently remained stubbornly analog, opaque and slow. The result was a highly and increasingly inefficient system for translating market transactions into remuneration for creators.
There are many reasons for that inertia. Unlike the creative and market-facing ends of the pipeline, the B2B layers is not governed by ordinary supply and demand but by a complex web of contracts, business arrangements, statute, legal precedence, treaty, and tradition, all of which are difficult and resistant to change.
Even where there has been a will to change, however, the means were often not available, due to a significant under-investment in B2B systems, from both a technological and financial perspective. You can’t simply make old systems run faster; you need new systems, which takes both money and imagination.
More recently, though, that investment has started to come, particularly on the technological side. The gradual construction of a large-scale, cloud-based computing and storage infrastructure has made it economically feasible to develop and deploy the sort of secure, enterprise-scale rights management and payment systems media companies need to cope with the scale and velocity of transactions generated by new modes of content creation and consumption.
The emergence of new technologies such as blockchain and artificial intelligence has also attracted entrepreneurs and developers bent on disrupting — or at least improving upon — legacy systems.
Now, the financial side is starting to catch up. In June, the Hipgnosis Songs Fund successfully raised $260 million through an initial public offering to invest in acquiring song catalogs. The capital raise represents a clear bet not just on the future growth of the subscription streaming business and other new revenue sources for music, but on the capability and capacity to translate those revenue streams into value for rights owners and investors.
This fall is expected to bring an announcement regarding what may be the first rightstech-focused VC fund, led by long-time music industry executive and consultant Göran Andersson and former Armonia Online CEO Virginie Berger. The pair are looking to raise a $50 million war chest, with half to be earmarked for musictech startups and half for non-music focused rightstech ventures.
This week brought the announcement of a deal by City National Bank to acquire artist payment platform Exactuals, which recently expanded from its base in managing film and television residuals payments into managing music rights and payments.
Exactuals has plans to target additional media businesses with its payments platform in the future as well, according to CEO Mike Hurst, who also foresees increased financial investment in the rights and rights-management space.
“I think you’re going to see increased in investment in the sector for a couple of reasons,” Hurst said in an interview with RightsTech. “Number one is scale. The volume of uses has just exploded and there’s a real need for automation” of business systems to keep up. “Ten or 15 years ago, in the TV business, you had maybe 20 cable channels that wanted four or five movies a year from any given studio and that was your residuals business. It was almost all in the U.S. and the number of deals was very manageable. Today, every country has 100 channels looking for content, and you have global players like Netflix who don’t just want to buy four or five movies, they want everything you’ve made for the past 11 years. So you need systems that are agile and scalable in a way they weren’t before.”
A second factor, Hurst said, has been the emergence of rights as an asset class in themselves.
“These rights have become tradeable commodities and there’s just a huge amount of rights changing hands now,” he said. “Moving these assets around is very difficult, because of the scale and because there are a lot of moving parts.”
Hurst also sees several factors likely to attract financial investors to the sector as well.
“The returns [for investors] can be very good, it’s a more interesting business than 10-year treasury notes, and the streaming business is exploding,” he said. “So, even if you think you’re paying a high multiple [for rights] today, in five years it could turn into a really tremendous investment.”
That’s certainly the view of the founders of the Hipgnosis Songs Fund, which last month paid $23 million for a 75 percent stake in the 302-song catalog previously owned by composer Terius Nash.
“When we talk about gold, oil or diamonds, we talk about things that the financial world feels are priceless and investable. My ambition is that in the future they will feel the same way about songs,” Hipgnsos CEO Merck Mercuriadis told RightsTech last week. “Today 90 percent of the artists that are being signed are singing someone else’s song. So the song and the songwriter is clearly the most important component of today’s music industry,”
That growing investor interest in rights-based assets can also translate into demand for rightstech investments as well, according to Hurst.
“In our case, we make money when we make payments. And we make payments when uses happen,” he said. “As the market grows, we will make more payments, which will generate more revenue on a relatively fixed cost base. So from an investment perspective, you’re getting the underlying value of the company plus the value of the growth in the market. So it’s sort of a double dip in terms of ROI.”
Mercuriadis will be featured in a special fireside chat at the RightsTech Summit on Oct. 5, along with Hipgnosis advisory board member and Grammy-winning artist and producer Nile Rodgers.
Click here for information on how to register for the summit.
The European Union’s controversial Copyright Reform Directive took a major step toward becoming law across the continent Wednesday as the European Parliament’s Legal Affairs Committee voted narrowly to approve the measure. The vote establishes the Parliament’s official position on the proposed new rules ahead of final negotiations with the European Commission and the member states, although opponents of the measure on the committee could still force a vote by the full Parliament before those negotiations could begin.
The proposal has been the object of intense lobbying over the past two years both by copyright owners and technology companies, particularly regarding the directive’s Article 13, Article 11, and Article 3.
Article 13 requires “online content sharing service provider[s]” to obtain a license for any copyrighted material uploaded by their users or face liability for copyright infringement. As a practical matter, critics of the measure argue, online platforms would be forced to implement sophisticated and expensive content recognition and filtering technologies, similar to YouTube’s Content ID system, as it would be impossible to obtain all of the licenses they might potentially need.
Supporters counter that the provision is tailored to target platforms such as YouTube and Facebook, whose business models are based in part on profiting directly from the presence of unlicensed copyright content, such as by selling advertising against it. Online services operating in a non-commercial capacity, “such as online encyclopaedia, and providers of online services where the content is uploaded with the authorisation of all concerned rightholders, such as educational or scientific repositories,” are exempt from the new requirements, as are services providing cloud-based hosting of content that is not made directly available to the public.
Article 11 creates a new neighboring right for news publishers that would require search engines and aggregators to obtain a license before displaying snippets of articles. Unlike similar “link tax” laws in Germany and Spain, which failed to boost the profits of publishers, the new rules would apply EU-wide, making it difficult for aggregators to circumvent them by obtaining the content from other countries.
Article 3 would put limits on the use of text and data-mining software where the content being mined is not owned or licensed by whoever is doing the mining (The Next Web has a useful summary of the arguments for and against the three provisions).
This week’s vote comes on the heels of the EU’s General Data Protection Regulation (GDPR) taking effect, which was similarly targeted at reigning in the power of major online platforms. Although GDPR rules legally apply only within the EU, their imposition has had a global effect since many non-EU based services collect data on and from EU citizens, forcing millions of websites around the world to retrofit their data collection and privacy policies or face exclusion from EU countries, making the EU the de facto global standard-setter for data collection and privacy practices (see our updated policy here).
The new Copyright Directive, if fully enacted, could have a similar global effect. The new EU rules could give impetus to investment in and development of more sophisticated content recognition technologies, as well as more efficient, automated systems for obtaining licenses and paying rights owners.
In addition to being a boon for rights-tech companies, the development and successful deployment of such technologies could give rights owners outside the EU much stronger grounds to argue that the means to effectively police user-uploaded content and obtain licenses are available and should be deployed globally.
That could shift the terms of the debates currently underway in the U.S. and elsewhere over the proper scope of the copyright safe harbors afforded online services and platforms.
The potential impact of the EU Copyright Reform Directive, as well as the Music Modernization and Copyright Alternative in Small-Claims Enforcement (CASE) acts in the U.S. will be among the topics of discussion at the RightsTech Summit on October 5th in New York. Click here for information on to register for the conference.
Digital technology has given rise to a host of novel questions concerning the authorship, ownership, and exploitation of creative works, from the right to re-sell digital copies to the copyright status of works produced by artificial-intelligence agents. But a new legislative skirmish in New York State could take the debate beyond the realm of copyright into the realm of privacy and the right of publicity.
Assembly bill A.8155B would create a new right of publicity for individuals concerning the use of their likeness in a “digital replica.” In what is believed to be the first such legislative effort by a state, the bill is meant to prohibit the use of “face-swapping” artificial intelligence technology to overlay an individual’s face onto another actor’s body without the individual’s consent, particularly for pornographic purposes.
According to the bill, “Use of a digital replica of an individual shall constitute a violation if done without the consent of the individual if the use is in an audiovisual pornographic work in a manner that is intended to create and that does create the impression that the individual represented by the digital replica is performing.”
The bill is strongly backed by the Screen Actors Guild-American Federation of TV and Radio Actors (SAG-AFTRA), which claims it is necessary to combat the growing scourge of “deep fake” videos, in which well-known individual are made to appear to be performing pornographic scenes.
“Individuals turn to image rights to sue corporations that use social media accounts or publicly available images to promote products or services without consent or compensation. These rights will also provide individuals, often women, relief if they are inserted into commercialized Deepfake sex scenes.,” SAG-AFTRA said in a statement supporting the measure.
With time in the legislative session running out, however, the major studios and the Motion Picture Association of America (MPAA) have mounted an all-hands effort to block the bill, according to the Hollywood Reporter, claiming the bill’s imprecise language could limit the production of biographical films of real-life individuals and chill technology innovation.
“If adopted, this legislation would interfere with the right and ability of companies like ours to tell stories about real people and events,” the Walt Disney Co. wrote in a letter the bill’s author. “Unfortunately, the proposed bill would transform New York from a jurisdiction that is friendly to and protective of such expressive endeavors to one in which they become encumbered by uncertainty and risk.”
In a separate memorandum, NBCUniversal warned, “The bill creates an unprecedented new category of protection for “digital replicas” of
living or deceased individuals. These provisions have potentially far-reaching implications, yet there is scant time left in the session for New York’s legislators to explore and consider them.”
The bill is still pending and it’s fate is uncertain at this point. Either way, though, it’s unlikely to be the last word in the debate over the uses (and misuses) of face-swapping technology and other forms of artificial intelligence in the creation of media content.
We’ll tackle some of those questions at the upcoming RightsTech Summit , at a panel titled What to Make of Machine-Made Art? Click here for more information on the summit, and for information on how to register.
Sony Corp. this week announced it will purchase an additional 60 percent stake in EMI Music Publishing from Mubadala Investment Company for $2.3 billion in cash, giving the Japanese conglomerate a 90 percent share of EMI’s portfolio of music copyrights, which includes works by Kanye West, Alicia Keys, Drake, , Pharrell Williams, Queen, and much of the Motown catalog.
The move comes as part of a broader strategy mapped out by Sony CEO Kenichiro Yoshida to shift the venerable hardware maker’s focus away from low-margin consumer electronics toward building a stable of diverse and stable revenue streams.
“In the entertainment space, we are focusing on building a strong IP portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth,” Yoshida said in a statement announcing the EMI deal.
Beyond its strategic value to Sony, however, the deal also clearly has a clear financial predicate: As growth in paid streaming continues to revive the recorded music business, the value of music publishing rights is also growing. The $2.3 billion Sony is paying for 60 percent of EMI values the full EMI catalog at $4.75 billion, more than double its price in 2012 when Mubadala and Sony first invested in the company.
The deal will also make Sony ATV the world’s largest music publisher by far, with a roughly 30 percent share of the market
Number two publisher, Universal Music Group, with just under 20 percent of the market according to IFPI data, is also feeling bullish about the value of its portfolio. UMG’s parent company Vivendi has been teasing the possibility of a sale or spin-out of the music company, which includes a record label group in addition to its publishing assets to cash in on the growing value of its catalog.
EMI’s financial value to Sony, however, could be even larger than the raw calculation of its increased market share. The music industry’s still-chaotic data environment results in a vast but unaccounted pool of publishing royalties generated by streaming and other uses that are never attributed to the proper rights owners. Those moneys are eventually distributed by the performance rights organizations to music publishers based on the publishers’ market shares.
Since larger publishers are in the best position to negotiate with the PROs, they almost certainly end up collecting a disproportionate share of the kitty. For Sony, a bigger market share will likely mean an even bigger share of the unattributed royalties.
With the Music Modernization Act poised to pass the Senate and head to the president’s desk, moreover, a new pool of unattributed publishing royalties created by the MMA’s new blanket license for mechanical rights is also slated to be distributed on the basis of market share, yielding another windfall for the largest publishers.
The MMA itself, however, could contain the seeds of the unraveling of the “black box” premium currently enjoyed by the largest publishers. The bill calls for creation of a new open music rights database, to be maintained by the U.S. Copyright Office, intended to reduce the amount of unattributable royalty revenue collected by better matching sound recordings to the rights owners of the underlying compositions.
In fact, the music industry is currently bubbling with similar initiatives, such as the pilot program recently launched by rights-tech startup JAAK in partnership with Warner/Chapel Music Publishing in BMG. Both Warner/Chapel and BMG are far smaller than Sony ATV and UMG and so benefit proportionately less from the market share based spoils system.
Both the efforts to tackle music’s “black box” problem, and the investment environment for rights portfolios and rights management generally will be hot topics at the 2018 RightsTech Summit in October. For information on how to register for the conference click here.
As a formal matter, the litigation in People for the Ethical Treatment of Animals v. David Slater, the “monkey-selfie case” is now over. Although the parties nominally settled the lawsuit last year, the U.S. Ninth Circuit Court of Appeals put an exclamation point on it last month by issuing a formal ruling and opinion anyway upholding the district court’s ruling in favor of the human photographer Slater that was under appeal at the time of the settlement.
While the court conceded that, under the Ninth Circuit’s peculiar precedent in Cetacean Community v. Bush, animals like Naruto, the crested macaque who took the famous photos and on whose behalf PETA nominally had brought the case, may have standing to bring a lawsuit in human courts, they do not have statutory standing under the Copyright Act to bring an action for infringement:
We must determine whether a monkey may sue humans, corporations, and companies for damages and injunctive relief arising from claims of copyright infringement…Our court’s precedent requires us to conclude that the monkey’s claim has standing under Article III of the United States Constitution. Nonetheless, we conclude that this monkey — and all animals, since they are not human — lacks statutory standing under the Copyright Act. We but therefore affirm the judgment of the district court.
So, case closed.
Yet as some legal experts have pointed out, the Ninth Circuit didn’t really settle the question of who does own the copyright in the photos at issue if not the monkey. Under the settlement between the parties, Slater, whose camera Naruto borrowed for his self-portrait, is free to license their use on the stipulation that he donate a portion of the earnings to a fund to protect crested macaque habitat — a sort of professional tip of the hat to Naruto — neither the district court nor the Ninth Circuit explicitly determined the copyright to be his. Each ruled on the issue of standing, but neither reached ruling reached the merits of the infringement claim.
Slater set up his equipment in the Indonesian forest where Naruto and his fellow macaques live and left it unattended to see how the monkeys might respond to it. But beyond that, he didn’t have any particular creative input to the photos they took. So on what basis would his copyright in them rest? Is mere ownership of the equipment sufficient? Was providing the opportunity for the monkeys to take the photos by leaving the camera unattended a necessary step? We don’t really know.
Another question not directly addressed by the litigation is what made the monkey selfie so compelling in the first place? Had Naruto managed merely to take a random photo of his foot, or the sky, it’s doubtful anyone would have bothered litigating its authorship.
What made the monkey selfie so compelling, I think, was its seemingly human-like intention. Serendipitously well-framed in the shot, Naruto seems to exhibit human-like self-awareness as he appears to smile into the camera, an effect Slater himself recognized in titling the book in which it first appear Wildlife Personalities.
The whole case, in effect, functioned as a sort of photographic Turing test: Was the photo a creative act of original expression if perceived that way by humans, even if the law does not recognize its proximate creator? If so, how should the law regard it? Who, if anyone, should have an exclusive right to exploit it commercially, and on what would that claim rest?
While the issue may appear abstract and theoretical, those questions are getting less theoretical by the day, as researchers develop ever more machine-based systems capable of producing Turing-sufficient works of expression. Like monkeys, machines would likely lack standing to bring a claim under copyright law. But that doesn’t mean they can’t produce works that humans perceive as expressive.
In a paper published last month, researchers from Microsoft and Kyoto University describe how they trained a neural net to produce original poems, one of which was accepted for publication by the human editors of a literary journal based on a blind, online submission.
Last year, researchers from Google published a paper describing how they taught a neural net to recognize the aesthetic elements of photography. The artificial intelligence system then produced original works of landscape photography that professional photographers had trouble distinguishing from similar works produced by humans (take that, Naruto!).
Computer scientists as Italy’s Politecnico di Milano, last month submitted a paper describing how they used a two-stage artificial intelligence system to create new levels of video game play on the fly that even other A.I. systems could not distinguish from human-created levels.
Copyright law is designed to incentive creativity by giving legal force to the author’s claim on its economic value. Our systems of commercial licensing of creative works rest on exploiting the exclusive rights of authors spelled out in the Copyright Act.
But as the monkey selfie case has shown, works can have considerable economic value even where there is no obvious or legally recognized author.
How that value is to be realized through our existing author-based licensing systems, and how disputes over that value are to be adjudicated within our author-centric copyright law are questions we’re only beginning to grapple with. We’ll be grappling with some of them at the 2018 RightsTech Summit in New York.
Anyone interested in addressing them can contact me at firstname.lastname@example.org.
The House Judiciary Committee on Wednesday unanimously approved the Music Modernization Act (MMA), an omnibus bill that would bring the biggest changes to how music is licensed and paid for in more than a generation. The vote was 32-0.
The bill incorporates components of four other bills that were originally introduced separately. They include the original Music Modernization Act, which for the first time creates a blanket license for mechanical rights in the U.S. and establishes a new organization to administer the license and collect the royalties; the CLASSICS Act, which requires digital radio services to pay performance royalties for previously exempt pre-1972 sound recordings; the AMP Act, which codifies current industry practice of honoring so-called Letters of Direction by artists who wish to share performance royalties with producers and engineers; and a provision taken from the Fair Play, Fair Pay Act that establishes a new, “willing buyer, willing seller” standard for setting statutory royalties.
Left out of the bill were other elements of the Fair Play, Fair Pay Act that would have required terrestrial radio stations to pay performance royalties for sound recordings. That provision was strongly opposed by broadcasters and their opposition could have derailed the omnibus bill had it been included.
Although supporters of performance royalties for radio play, primarily the record labels, vowed to push ahead on those provisions their exclusion from the MMA leaves their fate far from certain. The National Association of Broadcasters has successfully resisted similar legislative efforts over many years, and without the cover of the broad coalition backing the MMA the labels’ efforts could be thwarted again.
National Music Publishers Association CEO David Israelite, a principal architect of the MMA, praised today’s vote.
“The House Judiciary Committee’s approval of the Music Modernization Act (MMA) is a critical step towards finally fixing the system to pay songwriters what they deserve,” he said in a statement. “There is unprecedented consensus and momentum behind this bill, and we look forward to seeing it soon pass the full House.”
Although no date has been set for the bill to be taken up by the full House, it is expected to get a vote within the next several weeks.
The Senate has yet to take up the bill in its current form, although individual elements of it have been introduced there. The Senate is not obligated to follow the House’s lead in combining the four individual bills, but the broad support for the bill from disparate industry groups, and the rare display of unanimous, bi-partisan support for it from the House committee is likely to create strong pressure on the Senate to follow suit.
“After years of compromise and collaboration across the music, tech and policy sectors to reach this point, the Music Modernization Act of 2018 will help songwriters to be better compensated for their work and positively impact how their music is licensed,” Copyright Alliance CEO Keith Kupferschmid said of today’s action. “We commend Chairman Goodlatte (R-VA) and Ranking Member Nadler (D-NY), Representatives Collins (R-GA) and Jeffries (D-NY), and all who demonstrated vigorous backing for this critical piece of legislation, enabling it to be passed through committee with decisive and overwhelming bipartisan support.”
Kupferschmid will lead a panel discussion on copyright and licensing reform, including the Music Modernization Act, at the RightsTech Summit on Oct. 5 in New York.
The Music Modernization Act (MMA) has been scheduled for a vote in the House Judiciary Committee on April 9th, where it’s expected to pass with bipartisan support, committee chairman Bob Goodlatte’s (R-Va.) office confirmed Wednesday.
Still to be determined is whether it will go to the House floor as a standalone bill, or gets bundled into a package of music-related measures, including the CLASSICS Act, and the Allocation for Music Producers (AMP) Act. Either way, the MMA stands to be the most significant piece of legislation affecting music licensing in a generation.
“It’s also the only significant piece of legislation affecting music licensing in a generation,” quipped National Music Publishers Association CEO David Israelite during a panel discussion on Capitol Hill this week on music licensing issues.
In addition to being a rare example these days of genuine bipartisanship in congress, the MMA has proved an even more rare example of consensus among nearly all the (frequently warring) institutional voices within the music industry, including organizations representing digital service providers, publishers, songwriters, and record labels.
The bill is aimed at solving an enduring problem within the music industry that has grown more acute with the rise of streaming as the dominate mode of distribution for sound recordings: uncertainty and inefficiency in licensing mechanical reproduction rights for musical compositions.
Under U.S. copyright law, songs are subject to a compulsory mechanical license. Once a song is published, anyone can record it by notifying the songwriter or representative of their intent and paying the statutory royalty set by the Copyright Royalty Board. Unlike the performance right for songs, however, where a venue or service provider can obtain blanket licenses from ASCAP, BMI, SESAC, and GRD for their entire catalogs of works, covering nearly every song published in the U.S., and unlike other major territories, there is currently no blanket licensing facility here for mechanical rights. Instead, a service provider like Spotify or Apple Music, with upwards of 30 million or more sound recordings in their libraries, must locate, notify, and pay the songwriters or administrators for each of those recordings individually, many of which have complex, and often opaque fractional ownership structures.
Alleged failures to correctly locate and pay the appropriate rights owners have led to a raft of litigation against service providers for copyright infringement, including the $1.6 billion lawsuit currently pending against Spotify brought by Wixen Music Publishing.
The MMA would address that problem by creating a blanket license for mechanical rights and creating a new entity, selected by the Copyright Office, to administer it. Instead of having to pay each songwriters individually, service providers could write one check to the new entity, which would assume the burden of locating and paying the appropriate rights owners. The costs of operating the new entity would be paid by service providers, eliminating the need for the new entity to charge a commission to songwriters.
Songwriters and publishers would gain greater certainty of being paid, while service providers would be relieved of an enormous administrative burden and protected against the risk of litigation.
It is that alignment of interests that has led to the broad consensus in support of the MMA within the industry. But the MMA’s most important contribution could be to prove the case for open data and open protocols.
In addition to administering the blanket mechanical license, the new licensing entity envisioned by the MMA would, for the first time, create an open, publicly available database matching sound recordings to musical compositions and their authors and owners.
“We’re really changing the paradigm on data,” said NMPA’s Israelite, one of the MMA’s main architects. “Throughout the history of the music business databases have been regarded as proprietary. ..We want to encourage competition.”
By making critical ownership data public, MMA’s backers hope, entrepreneurs will be able to develop new applications and services beyond the current crop of streaming services, bringing new investment and new revenue into the music business.
“I don’t think streaming is the be-all and end-all in terms of business models,” Panos Panay, VP for innovation and strategy at Berklee College of Music and a leader of the Open Music Initiative, said during the same panel discussion. OMI is working to develop open protocols for the exchange of music rights data, which could achieve some of the same effects as the proposed MMA database.
“With open protocols you can build an ecosystem, you can have innovation” Panay said. “The MMA, hopefully, will let this industry finally move beyond its past. If we get this right, we won’t have to stop at streaming. All sorts of new applications could be developed to create all sorts of new revenue streams.”
If that pans out, it could provide a valuable proof of concept for other rights based industries. An open and verified database of authenticity and provenance for images and artworks, for instance, could help unlock new licensing and e-commerce opportunities that are today held back by high levels of uncertainty and fraud.
Likewise, the lack of an open, comprehensive database of rights to published works makes it difficult for would-be developers to learn what works are available for license in which territories, holding back the creation of potentially new, digital applications and revenue streams for authors and publishers.
Much will depend on how well the new music rights database is maintained. There are companies in the market today, such as Music Reports and Loudr, that have already compiled comprehensive databases matching sound recordings to compositions and their rights owners, and they invest significant money and effort to verify the data and keep it current. Whether the administrators of the new open, non-proprietary database will have the same incentive to maintain it at a high level of accuracy and currency remains to be seen.
“Everyone will benefit from having this, and everyone is hurt by not having it,” Panay said of envisioned new database. “I think the important thing is that puts a focus on the data, and the importance of good data.”