NMPA calls on Congress to overhaul copyright law amid Spotify fight over bundling

The National Music Publishers' Association (NMPA) has written to the leadership of the Judiciary Committee in both the House of Representatives and the Senate, calling for revision of the statutory license in Section 115 of the Copyright Act, which “prevents private negotiations in free market' for mechanical royalty rates for US songwriters and music publishers

On May 20, David the Israelitethe organization's president and CEO, teased that announcement in a guest column for Advertising sign, saying: “We will soon unveil a legislative proposal to once and for all redress the power imbalance faced by songwriters by subjecting them to compulsory licensing of their songs.”

In his new letter, the NMPA's Israelite writes that scrapping the 100-year-old price-setting system for songwriting and publishing rights (specifically, engineering rights) and negotiating rates in a free market would prevent songwriters and publishers from profiting from “Big Tech”: “Those operating in a free market, such as record labels, have negotiated protections against bad faith tactics. However, music publishers and songwriters have no such lever under it [Copyright Royalty Board] to do.”

For years, music publishers and songwriters have lamented that they cannot privately negotiate their royalty rate for US engineering rights because of the language in Section 115 of the Copyright Act, which puts “non-dramatic musical works” such as songs, under a compulsory license , dating back to 1909. The rate for this license is determined by a panel of Copyright Board judges, who weigh the interests of the music business against technology companies such as Spotify, Apple Music , Amazon Music and others to determine what they feel is a fair price for music.

Record companies, which operate under “recording” copyrights, not “musical works,” can freely negotiate their prices, as can music publishers and songwriters outside the U.S. Because of the difference between how copyrights are treated music publishers and songwriters in the US compared to Others, publishers believe they are being prevented from getting the best possible prices.

The letter comes just a week after music publishers NMPA and the Mechanical Licensing Collective (The MLC) — which collects and distributes mechanical royalties for US publishers and songwriters — launched a war against Spotify for paying a lower rate of mechanical royalties to US for premium , duo and family plans, starting in March 2024. Spotify believes that adding audiobooks to premium, duo and family plans qualifies those tiers as bundles, a subscription type that pays a lower royalty rate.

For days after this information was first shared, various music organizations have spoken out against Spotify, often calling its reclassification “cynical” and a “loophole” to underpay songwriters and take advantage of the deal struck between music publishers, songwriters and streamers. to agree. a rate structure for the period 2023-2027 (known as “Phonorecords IV”), which was approved by the Copyright Board judges.

In the NMPA letter — addressed to Sen. Richard Durbin (D-Ill.), Sen. Lindsey Graham (R-SC), Rep. Jim Jordan (R-OH), and Rep. Jerrold Nadler (D-NY) — Israelite calls Spotify's move “manipulation.”[ion] [of] the mandatory licensing rules” and the latest in what he believes is the “continued abuse of the statutory system by digital services… [which] made it clear that additional action by Congress is required.”

On May 15, the NMPA sent a cease and desist letter to the streamer for hosting lyrics, music videos and podcast content containing their copyrighted musical works without proper permission. The next day, on May 16, MLC got involved, filing a lawsuit against Spotify for “improperly” reclassifying its premium, duo, and family plans and sought a discount, which would have resulted in Advertising sign The estimates are a $150 million annual reduction in US engineer royalties compared to what they would pay if these levels never changed.

In his new letter, the NMPA's Israelite proposes a solution to repeal the current system, saying, “Congress should allow rights holders to selection be licensed through the MLC using the statutory royalty rates, or leave the MLC and operate on a free market if certain conditions are met.'

It continues, “if copyright holders choose to withdraw their copyright from the general license, which is currently managed by the MLC, they would have to do the following:

Read the full letter below:

Dear Chairman Durbin, Ranking Member Graham, Chairman Jordan, and Ranking Member Nadler:

The Music Modernization Act (MMA) has brought unprecedented benefits not only to songwriters and music publishers, but also to digital service providers. However, the bill reinforced the need for fixes to the century-old compulsory license that governs their work.

Big foreign-owned companies like Spotify shouldn't enjoy unfair advantages over American songwriters because of outdated federal policy. By making a simple change, Congress can undo a mistake over 100 years old in compulsory licensing and ensure that songwriters and music creators continue to benefit from their creative efforts.

How did we get here? Almost six years ago, members of the House and Senate Judiciary committees came together to pass the MMA, a landmark piece of copyright legislation for the age of digital music streaming. The MMA has taken significant steps forward in improving the compulsory license imposed on songwriters and music publishers by creating the Mechanical Licensing Collective (MLC) to administer a blanket license under section 115 of the Copyright Act, which taken from digital music services.

The MLC increased transparency through a public database, enhanced the efficiency of licensing through a central administrator, and improved the process of distributing rights to a musical work. However, the benefits were not extended, nor were the current issues facing beneficiaries subject to the government's rate-setting process resolved.

Continued abuse of the statutory system by digital services, most recently Spotify, has made it clear that additional action by Congress is needed. The royalty rates payable to copyright owners of musical works for uses of those works under the Section 115 general license are set in a proceeding before the Copyright Rights Board (CRB), within the Library of Congress, once every five years. In these proceedings, music publishers and songwriters have to deal with some of the biggest technology companies in the world: Spotify, Apple, Amazon, Google, among others, to set prices for the use of musical works.

Because the law prevents private negotiations in a free market, publishers and songwriters have seen constant abuse of the statutory system and CRB rate setting process with little recourse. More recently, Spotify found a new way to game the legal rate system to underpay rights holders hundreds of millions in royalties.

In March, Spotify began manipulating compulsory licensing rules and reclassified its premium subscription music service, along with nearly 50 million subscribers, into what it calls a “bundle.” The benefit of taking this action is that, within the mandated royalty rates, bundles generate less revenue – and therefore pay less royalties – on the music than a premium music subscription service. Spotify has taken a part of its music service that was previously offered to consumers for free, audiobooks, and now calls audiobooks a bundle with its music service to significantly reduce royalties owed on musical works.

Those operating in a free market, such as record labels, have negotiated protections against these malicious tactics. However, music publishers and songwriters have no such leverage under the CRB to do so.

Fortunately, there are solutions Congress can enact that will preserve the benefits of MMA and MLC while giving songwriters and publishers a better chance to compete on a level playing field with Big Tech companies like Spotify. Instead of picking who wins and who loses, Congress should allow rights holders the option to license through the MLC using statutorily set royalty rates, or to opt out of the MLC and operate in a free market if they meet certain conditions.

If copyright owners choose to withdraw their copyright from the General License, which is currently managed by the MLC, they should do the following:

This would give rights holders the option to remain within the current compulsory system or operate in a free market. It will also restore basic principles of market fairness by requiring streaming platforms to deal with music creators as partners. Finally, it would provide a necessary point of leverage for songwriters and music publishers to negotiate with streamers, such as Spotify, who can otherwise use their power to bend government regulations to their advantage. All of this could be achieved by leveraging the successful infrastructure created by MMA and MLC.”