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US music publishers propose new blanket licence for mechanical rights

By Chris Cooke | Published on Monday 23 October 2017

The boss of the National Music Publishers Association in the US was last week talking up plans for an overhaul of the mechanical royalties system in America, so to overcome the high profile issues that streaming companies have had in this domain that have resulted in numerous multi-million dollar lawsuits. The grand plan could be summarised as follows: “let’s do what happens in every other fucking country already”.

As much previously reported, the streaming companies have run into major problems in the US when it comes to paying royalties to songwriters and music publishers for the songs that they stream. And as a result various streaming firms have found themselves on the receiving end of litigation, though Spotify’s lawsuits have grabbed the most headlines.

Most people agree that a stream exploits both the so called mechanical rights and the performing rights of a song, and in the US – as in some other countries – those two elements of the song copyright have traditionally been licensed separately.

For the performing rights, a streaming service can get blanket licences from America’s four performing rights organisations: BMI, ASCAP, SESAC and GMR. But there is no blanket licence available for mechanicals. US law provides a compulsory licence – so permission is granted and rates set by statute – but the streaming service must inform every copyright owner that their songs are being exploited and then arrange to pay the statutory royalties.

The big issue for streaming firms that have tens of millions of tracks on their servers is finding all those copyright owners. Labels upload the tracks and control the accompanying recording copyrights, but they neither control the song rights nor tell the streaming platforms what songs are being exploited and who wrote or published them. Meanwhile there is no one-stop database telling digital firms what songs are in what recordings, and who owns them.

There are various companies who can help streaming companies identify what songs they are using and who needs to be paid. Many digital companies have used The Harry Fox Agency – which used to be owned by the NMPA – to do that work for them. But many songwriters and music publishers have nevertheless gone unnotified and unpaid. Which means the streaming firms have violated the terms of the compulsory licence and are therefore liable for copyright infringement. Hence all the lawsuits.

A simple fix would be to have a collecting society that collects mechanical right royalties in the same way you have a collecting society (or societies) that collects performing right royalties. This is how it works in most other countries, where you either have both mechanical and performing rights organisations, or one society doing both.

That’s basically what NMPA boss David Israelite has been talking up at various events for music publishers and songwriters Stateside – ie a new mechanical rights society that issues blanket licences.

His proposals would require a change to the compulsory licence, so US Congress will need to be involved. But unlike with other copyright reform proposals being put forward in Washington, Israelite is confident that he can get both the music industry and the tech sector behind this overhaul, meaning it has a much better chance of getting through in a speedy fashion.

Under the proposals, streaming firms would get a much simpler way to pay mechanicals while – in theory at least – more writers and publishers would be paid.

It is also hoped that the system for setting the rate for mechanical royalties would also be amended, most likely to the benefit of the music community. That’s a change licensees might normally oppose, but hopefully not if it means they get a much simpler system for paying royalties and a whole lot less lawsuits.

According to Billboard, Israelite said of his plans to get a speedy revamp of the mechanical rights compulsory licence in Washington, including the establishment of an industry-wide collecting society and blanket licence: “I want a consensus bill, one that is negotiated by our community, including publishers and songwriters, the record labels and artists, the Digital Media Association and the broadcasters”.

On the music community side, ongoing talks about this new system are also involving organisations like the Songwriters Of North America, the Council Of Music Creators, and PROs BMI and ASCAP.

The outcome of the reform, if it went ahead, would be the creation of a new industry-wide collecting society, possibly to be called SongExchange, akin to the US record industry’s SoundExchange society that administers digital performing rights for artists and labels, and is also the result of a compulsory licence. The new organisation would be paid for by those digital platforms utilising its services, but would be owned by the music publishers and the songwriters.

The music publishing sector would pool its data into the new organisation which would then seek to get all the publishers and writers whose songs have been streamed paid. Quite how good a job the new organisation would do in that domain, we’d have to wait and see. Elsewhere in the world the efficiency and accuracy of the collecting societies in the way they process and distribute the royalties they collect varies enormously.

Negotiations as to how this all-new US mechanical royalties system would work are ongoing, and there are still some issues to be addressed. But Israelite says that most key stakeholders are on board with the basic principles and he hopes legislative proposals could be finalised as soon as next month. If, as he also hopes, those proposals were a “consensus bill”, then it could become law next year.