The stage is set for a brutal tug-of-war over tens of millions of dollars between individual songwriters and their publishers. H.R. 4706, also known as the Music Modernization Act, provides many benefits and updates to the arcane royalty structure of US copyright law. However, there are some provisions concerning unclaimed and unmatched monies which, as currently drafted, could lead to a myriad of problems for creators.
One potential pitfall stems from the bill directing the mechanical licensing collective (the entity designated to collect and distribute funds) to distribute unmatched royalties on a market share basis to music publishers. However, most songwriter publishing contracts (other than superstar artist/writer contracts) include a clause which excludes writer participation in monies collected by publishers unless specifically identified as tied to titles created by such writer and administered by the publisher. Although the bill specifically directs publishers to distribute the unmatched royalties it receives pursuant to writer contracts, the actual result would be that the unmatched royalties would only be required to be distributed by a publisher to those superstar writers that do not have such an exclusion clause.
The bill does attempt to balance this discrepancy with a clause that requires publishers to distribute no less than 50% of the unmatched royalties to songwriters, allocated on a “use basis” during the time period in which the unmatched royalties were accrued. However, this sets up a scenario whereby a publisher or administrator with a 90-10 deal in favor of the songwriter could claim the writer should receive no portion of the unmatched royalties under his or her 90-10 contract, and is entitled only to a pro-rated share of the 50% of the unmatched monies received by the publisher on a use basis as designated by the bill. This would provide an automatic windfall for the publisher contrary to both contractual and statutory intent, with tens of millions of dollars at stake.
All of this may sound as obtuse as those annoying word problems in math class during our school days, but they are real life concerns with actual consequences in the real world. These problems could be solved by having the mechanical licensing collective do the initial title-by-title allocations based upon the market uses reported by the users prior to delivering the formerly unmatched royalties to the publishers as now matched and allocated by title. Other simple fixes are also possible. So far, however, some of the other music industry parties involved in drafting the bill have balked at incorporating such solutions. The same goes for suggestions concerning implementation of more balanced representation of knowledgeable, unbiased professional songwriters and composers on the board of directors of the mechanical licensing collective, and the inclusion of songwriter and composer identifier numbers in the database set-up mandated under the bill.
The best course of action for most songwriters is to contact their performing rights organizations, their independent songwriter advocacy groups, and their publishers to let them know that they will actively support this bill only if these simple fairness issues are properly addressed. There appears absolutely no reason why these internal music community problems should not addressed and fixed right now, so that the bill may then move forward with full and unanimous music community support.
There is no doubt that the Music Modernization does move the ball down the field for songwriters and publishers in a way that is long past due. Songwriters just need to be more vigilant in making sure they get their fair share.
Wallace Collins is a New York lawyer specializing in entertainment, copyright, trademark and internet law. He was a recording artist for Epic Records before attending Fordham Law School. T: (212)661-3656 / www.wallacecollins.com