Optimism for Music Modernization Act's Prospects Tempered by Hurdles Ahead

Collins told us he's “looking to have a hearing and markup” of HR-4706 “as soon after the first of the year as possible,” possibly in January. Sens. Lamar Alexander, R-Tenn., and Orrin Hatch, R-Utah, plan to file a Senate companion early this month, Collins and several industry lobbyists told us. Spokesmen for Alexander and Hatch didn't comment. A late January House Judiciary Committee hearing on HR-4706 might be feasible, but Collins probably “can't get a markup in January or maybe even February” amid other committee priorities, a tech sector lobbyist said.

Collins said he's aiming for HR-4706 to get through Congress separate from any other copyright and music licensing legislation since it's already a “very thought-out” bill targeting specific issues. “Could we add in some friendly amendments later in the process? Possibly so,” he said. “But those are all things that have already been talked about,” while the existing language “is the bulk piece.” Collins is unlikely to agree to the attachment of any other legislation's language to bill “unless it's truly noncontroversial,” a music industry lobbyist said.

Legislators and lobbyists are eyeing possible additions from legislation to create a copyright small claims process and the Transparency in Music Licensing and Ownership Act (HR-3350), which would direct the Copyright Office to create and maintain a searchable database of sound recordings (see 1707260009), several lobbyists said. But “there is so much concern that Congress is so dysfunctional they may not be capable” of passing a larger copyright and music licensing legislative package, one tech lobbyist said. Stakeholders are particularly hoping to avoid marrying HR-4706 and the controversial House-passed Register of Copyrights Selection and Accountability Act (HR-1695/S-1010), which remains stuck in the Senate Rules Committee (see 1706090050), the lobbyist said.

“This bill has already gone through hundreds of hours of negotiation and work,” Collins said. “Having the publishers and songwriters sit down” with digital music services to reach a deal is “something you've never seen before in this space.” Collins' optimism about HR-4706 is justified, but opposition from some in the music licensing ecosystem could make it difficult to move in 2018, several lobbyists said. NAB, a critic of other past music licensing bills, opposed HR-4706 almost immediately after its introduction. The Songwriters Guild of America also is an opponent of the legislation, while other songwriter groups like the Nashville Songwriters Association International (NSAI) and Songwriters of North America (SONA) have been prominent supporters.

Songwriter Opposition

SGA President Rick Carnes wrote Collins about “very serious problems” in HR-4706, including language in the bill that would create the Mechanical Licensing Collective, which the digital services voluntarily agreed to fund as a self-governing body using a free-market standard for determining digital music royalty rates. The proposed collective's board would include 10 voting members and three nonvoting members -- eight of the voting members would be music publishers, two would be professional songwriters. Carnes also noted concerns about other provisions in the bill, including “vague” language on the collective's auditing and opt-out mechanisms, “the granting of relief from statutory damages liability to prior willful infringers” and “the absence of direct distribution of royalties by the collective to songwriters and composers.”

SGA was “not invited into any of this discussion” about HR-4706 beyond the bill's early stages of development and an advance view of the text the night before its introduction, Carnes told us. “We were somewhat marginally informed,” far different from the major role NSAI and SONA played in shaping the legislation. SGA earlier told Collins' office about its “concerns about the representation of songwriters” in the proposed licensing collective, “that if there was going to be a board of governance over anything that collected our royalties that was mandated by the government, that it should at bare minimum” draw half of its representation from songwriters, Carnes said. “In most of the world” such boards include majority-songwriter representation.

“We stated our opinion and they just went on without that,” Carnes said. “The positive and overwhelming support with which American songwriters have welcomed this bill speaks volumes, and I look forward to continuing the productive dialogues we've begun with the [SGA] and industry leaders as we move forward in the legislative process,” Collins said in a statement.

Carnes said his group plans to meet with Alexander and Hatch this week, before introduction of HR-4706's Senate companion, “to let them know we have these concerns” and possibly get them “fixed.” Alexander and Hatch have been favorable to songwriters in the past “so we couldn't have two better people to take a look at this on the Senate side,” Carnes said. The current “hodgepodge solution” envisioned in HR-4706's language means “the publishers get something, the digital services get something,” Carnes said. “The songwriters aren't really getting anything.”

Other music industry stakeholders disputed Carnes' assessment of HR-4706. “None of us are really concerned” by SGA's opposition to the bill, said SONA legal adviser Dina LaPolt. “Most importantly it is endorsed” by NSAI and SONA, which she called “the two biggest songwriter groups” in the U.S. Both groups “will be publicly advocating for” HR-4706 in the “coming weeks and months,” as will “many other smaller songwriter groups” like the Council of Music Creators and MusicAnswers, LaPolt said. “The bottom line is it’s better for songwriters than what is currently in place.”

A music industry lobbyist characterized SGA as “an amazing outlier” in opposing the legislation because “while you have them out there trying to make what they think is a perfect bill,” others are more willing to compromise. “I think this is a grand compromise, and a great one because it brings in the ASCAP/BMI issues and solves the issues that music publishers had with CRB on ratesetting,” the lobbyist said. Collins has “gone to incredible lengths to bring in all of the stakeholders and particularly the digital services because they would have been the ones who were most opposed to it.”

Broadcaster Concerns

NAB's concerns with HR-4706 are more minimal when compared with SGA's, but the group remains a hurdle for the bill because broadcasters are “such an important lobby” on Capitol Hill, said a tech industry lobbyist. NAB's main concerns are with language affecting the ASCAP/BMI ratesetting process, including repeal of Section 114 language that bars the district court judges who oversee DOJ's consent decrees governing the two PROs from considering sound recording royalty rates as a relevant benchmark when setting performance royalty rates. NAB also opposes language that would allow ASCAP and BMI rate-setting disputes to be heard on a rotating basis by any U.S. District Court for the Southern District of New York judge rather than requiring all cases to go before the PROs' assigned rate court judges -- Denise Cote for ASCAP and Louis Stanton for BMI.

NAB “likes the status quo” on the PROs' ratesetting process because “that gives them a little more certainty,” the tech lobbyist said. The group believes allowing sound recording rates as a factor in the PROs' ratesettings could allow ASCAP and BMI to argue that because broadcasters don't pay for terrestrial performance rights, they should “pay more” to the songwriters, the lobbyist said. Collins emphasized that HR-4706 doesn't include terrestrial performance right language, and he's “working with” NAB to address the group's other concerns with the legislation.

“We've always reached out to them” on music licensing issues, but “whether they actually endorse” HR-4706 doesn't matter “so much” given the support from groups more directly affected by the legislation, Collins said. “If they want to stand in opposition, we understand that.” NAB isn't expected to oppose HR-4706 with the same vehemence that it and other broadcasting stakeholders devoted to criticizing the Fair Play Fair Pay Act (HR-1836), several lobbyists said. HR-4706 deals only tangentially with broadcasters' interests, while HR-1836 would fundamentally affect the industry, the lobbyists said. HR-1836 would require most terrestrial radio stations to begin paying performance royalties. NAB didn't comment.

NAB “doesn't want to appear to be obstructionist” against HR-4706 since it “only indirectly affects them,” a tech lobbyist said. “They have said they are going to have a few meetings on Capitol Hill and try to get changes, but they aren't going to be aggressive about it. They don't plan to actively try to take down the bill,” as they did with HR-1836 and its predecessors via lobbying on behalf of the Local Radio Freedom Act (H. Con. Res. 13/S. Con. Res. 6). Music licensing stakeholders viewed that resolution as aimed at scuttling attempts to advance a terrestrial performance right (see 1504160050 and 1605110059).