Let’s Not Miss An Opportunity to Include Startups in the Music Modernization Act

If you’re one of the small group that has actually read the Music Modernization Act, I think you’d have to come away with the idea that this is legislation by the big boys for the big boys.  Nowhere is this unfortunate flaw more apparent than in the way that digital media companies are treated.  No wonder Digital Media Association (Amazon, Apple, Google, Spotify) and the Internet Association (Amazon, Facebook, Google, Spotify) love it so much.

The Music Modernization Act creates two main bodies around the new government-mandated blanket license:  The “collective” which is to represent those with songs to be licensed and the “digital licensee coordinator”.  Both these bodies are supposedly designated by the Register of Copyrights (the head of the U.S. Copyright Office), but the Register is constrained by statute to appoint certain types of entities or people.

One of those criteria is very majoritarian–and I would suggest that in both cases the math alone limits the choice to one entity.  Here’s the relevant language for the collective:

“is endorsed by and enjoys substantial support from copyright owners of musical works that together represent the greatest share of the licensor market for uses of such works in covered activities, as measured over the preceding 3 full calendar years;”

And here’s the relevant language for the “digital licensee coordinator”:

“is endorsed by and enjoys substantial support from digital music providers and significant nonblanket licensees that together represent the greatest share of the licensee market for uses of musical works in covered activities, as measured over the preceding 3 full calendar years”

So one thing seems true for both the collective and the coordinator:  they can only be entities designated by at least a plurality if not a majority of their respective markets on either side of the same coin.  I’m not quite sure how that definition presents a choice to the Register–more like it dictates the choice to the Register.  (How can there be two pluralities much less two or more?)

Others have and are writing about the conflict ridden aspects of the collective, so I will focus here on the digital licensee coordinator which is equally, if not more, conflict ridden than the collective.

This is one of the many, many examples of why the Music Modernization Act is really not about modernizing anything, particularly for the digital media companies.  By definition, startups–who are potential licensees most in need of flexible licensing–are excluded from any possibility of becoming the coordinator.  Startups need to be front and center in this process and new legislation is an excellent opportunity to level the playing field for these companies that are no doubt afraid to challenge the incumbents like Google (known for being specially vindictive to any startup that challenges them–see Foundem and the European Union’s antitrust litigation against Google).

The Music Modernization Act is a great opportunity to do something positive for the market rather than continue to reenforce the dominance of the very, very dominant incumbents on the technology side of the house.  Here’s some free advice to Congress:

Go wild.  Require appointing a startup or two or three to the coordinator role.  And if you really want to go truly off the reservation, require one of those startups to be from some place like Austin, Athens, Northern Virginia or Salt Lake.

I know, I know.  Scary things happen when you open the floodgates to new ideas.  But wouldn’t that be real modernization rather than further entrenching encumbents?

As a wise old Member of the Texas Congressional delegation once told me, they get to climb the ladder to the American Dream like everyone else.  What they don’t get to do is pull the ladder up behind them once they get to the top.

EU Songwriters Say Show Me the Plan on Music Modernization Act

The European Composer & Songwriter Alliance has raised an interesting question to Congressman Doug Collins in a recent letter regarding the Music Modernization Act:

A few other questions that are of concern to songwriters: Where is the business plan for the collective? A century of practice is to be changed without even a business plan that the governed have a chance to review?

This is, of course, an excellent point.  The controversial Music Modernization Act creates a new mechanical royalty collective in the U.S. that follows the curious approach of essentially codifying a chunk of what would normally be found in a combination of organizational formation documents, by-laws or a voting agreement.   The bill mandates a fixed number of governing boards and even designates the category of person who can fill board seats, both voting and nonvoting.  (And any change in those boards would literally require an Act of Congress.)

There is considerable detail in the bill about the new collective with two major exceptions:  No one is tasked with creating a business plan for the collective’s operation as the ECSA officers note in their letter to Rep. Collins.  Neither is there any hint at what the initial operating budget would be or what it would cover.

Good news–this is an easy fix.  I would worry that given that it’s government work, a business plan for the collective will come from one of the big consulting firms at a high cost–guaranteeing that no one who is both unconflicted and who has actually done work in the area will come within a county mile of the project.  I am not the right person to ask about the big consulting firms as I’ve found their work product to be consistently worthless over the years.  That brings the joy of consistency, but the disappointment of overpaying for useless work.

The budget should also be established for the first few years, if for no other reason than the digital services are supposed to pay for the collective under the MMA.  If the cost is $100,000,000, you don’t want to find out that the services will only pay $500,000 once the bill is passed and it’s too late.  If there is a meeting of the minds on the operating costs, it’s being kept pretty quiet inside the smoke filled rooms.  If there isn’t a meeting of the minds, DiMA could shut down the collective as fast as a stop payment.

But still, it’s better to have a plan than to have no plan at all which seems to be the current state of affairs–abandoning a “century of practice” as our European friends remind us.