by Michael Huppe, President and CEO, SoundExchange
The Music Modernization Act (MMA) now has the support of 76 Senators. As it nears the finish line, SiriusXM is going door-to-door in the Senate in a last-ditch effort to block the MMA, a bill backed by an historic coalition of thousands of music creators, songwriters, producers, labels, publishers and digital music services—all of whom have been working for years to get Congress to reform music licensing laws.
For longtime advocates, it will come as no surprise that SiriusXM is trying to scuttle the MMA at the last minute. This is, after all, precisely what they did 20+ years ago when Congress first enacted legislation giving performers the right to be compensated when digital services use their music. Back then, Sirius stepped in during the final throes of the legislative process to argue that having to pay for music—their primary product—could “disrupt” their nascent business plans. They argued for a special royalty rate–one that effectively forced artists to subsidize their business and gave them a competitive advantage against other companies. That special treatment has gone on for over two decades ago now. We don’t think such a sweetheart deal was justified back then; but it’s indefensible now.
Once separate companies, SiriusXM is now the sole satellite radio company in the U.S. It generates revenue well over $5 billion annually, the huge majority of which comes from its more than 32 million subscribers. To put that into context, U.S. wholesale revenue for the entire record industry was $5.9 billion in 2017. Yes, a single company, SiriusXM, makes nearly as much from subscribers in the United States as all record labels and artists combined make from all sources.
Make no mistake about it: SiriusXM would not have a business without recorded music. And yet, SiriusXM has profited for decades by getting music at a special market distorting rate set under a different standard than all its thousands of internet radio competitors. Specifically, the rates set for internet radio are established under a “willing-buyer/willing seller” standard – another way of saying artists and labels are supposed to be paid a fair market rate for their recordings. When setting satellite radio rates, by contrast, the government can – and has – set rates lower than fair market value based on four amorphous policy factors. The impact is not academic: the lower rate standard has cost creators billions of dollars over the last 20 years.
Multi-billion dollar companies should not be subsidized by musicians – and all competing streaming platforms should play by the same rules.
Seems obvious right? It is, and that’s one of the reasons the Music Modernization Act passed the House of Representatives unanimously (as in 415-0; think on that for minute) and is on the verge of passage in the Senate.
The music community is united around the MMA because it ensures fair treatment for music creators and a level playing field for digital radio services. It is a win-win, and the compromises SiriusXM has proposed are inconsistent with the principles upon which the bill is centered. We look forward to the Senate moving this bill — and with it all of music — forward.
SoundExchange’s CEO says it’s time radio starts paying all music creators fairly for their work.
On Monday, a group of radio broadcasters penned a letter in support of the National Association of Broadcasters’ (NAB) push for deregulation of the $14 billion radio industry. Their letter was based on the NAB’s petition to the FCC this past June, in which the NAB sought to allow expanded broadcaster ownership of radio stations (i.e., increased consolidation) throughout the country. The NAB’s justification: broadcasters must adjust their business model to the realities of the new streaming world.
As a representative of the many creative parties who help craft music, we are frequently on the opposite side of issues from the NAB. And while I can’t comment on NAB’s specific requests, I was delighted to find so much common ground in their FCC filing in June….
I agree with the NAB that the law should “finally adopt rules reflecting competitive reality in today’s audio marketplace” and should “level the playing field” for all entities in the music economy.
If radio truly wants to modernize, it can start by taking a giant leap into the 21st century and paying all music creators fairly for their work. Stop treating artists like 17th century indentured servants, just so radio can reap bigger profits. If radio wants to have rules that reflect the music industry of today, then that should apply across the board.
We should resolve this gaping unfairness to artists before we begin talking about allowing radio to consolidate even further.
Over the last four years, SoundExchange members have sent many thousands of letters to Congress asking for reform of our music licensing laws. When Congress held hearings at the start of its lengthy copyright review in 2014, it was my honor to represent music creators as a witness before the House Judiciary Committee asking that they modernize our laws by requiring fair pay for all music creators whenever their music is played.
Today, I’m happy to report that our work together is paying off.
Last week, the U.S. House of Representatives passed the comprehensive
Music Modernization Act (H.R. 5447) by a unanimous vote, 415-0. This is
an historic victory that happened because of our collective efforts. It happened because of the industry- wide unity and legislative consensus we worked so hard to achieve. And it happened because of our efforts to help lawmakers understand how important music reform is to you — the music creators who are the lifeblood of our industry.
In 2017 alone, our artist partners and advocates utilized our letter writing campaign to send thousands of constituent letters. United States Senators from all 50 states and Members of Congress from 419 out of 435 districts across the country received letters asking them to support music creators by supporting music licensing reform legislation.
Because of your hard work, we’re on the cusp of success. The fight isn’t over though, and our focus now shifts to the U.S. Senate.
While several pieces of music legislation have been introduced in the Senate, there is not a single comprehensive package yet. We are encouraging our Senate allies to bring these many issues together into a single, comprehensive Music Modernization Act, like the bill passed in the House, to include:
**The CLASSICS Act (S. 2393) to ensure equal treatment for legacy artists who recorded music before 1972;
**The AMP Act (S. 2625), which builds on SoundExchange’s existing process for honoring letters of directions for producers and sound engineers; and
**The mechanical licensing reform bill (also called the Music Modernization Act). Lawmakers need to hear your voice to make this happen.
I encourage you to read this special advocacy edition of SoundByte to learn more and to find out how you can get engaged.
Thanks to our SoundExchange family for everything you have done to support our advocacy efforts on Capitol Hill. Let’s continue our work together to make history.
Yours in Music,
President & CEO
SoundExchange’s CEO talks licensing reform and the CLASSICS Act.
A promising occurrence is unfolding in the U.S. Congress: bipartisan agreement on meaningful legislation. Republicans and Democrats on Capitol Hill are working on a broad and impactful measure to modernize and improve many of the rules that govern how music is used in the digital era. This bipartisan consensus will benefit music creators, digital services and fans.
This situation has progressed in large measure because the music industry and digital service providers — often divided — similarly worked together to craft a unified package of reforms. More than 20 organizations representing artists, songwriters, composers, record labels, music publishers, performance rights organizations and streaming services (such as Pandora) support these bills and are asking Congress to pass them as part of a unified piece of music legislation in 2018. SoundExchange endorses this package, in line with our ongoing efforts to make our country’s music licensing system more just for everyone.
There is, unfortunately, one significant naysayer: SiriusXM. In advertisements and recent statements by the company, SiriusXM says that the legislation should be rejected because it fails to address a glaring inequity in our public policy: that broadcast radio does not pay performers for the use of their sound recordings, while SiriusXM does.
SiriusXM is right about broadcast radio. This system is unfair. Broadcast radio should absolutely compensate creators of sound recordings. For far too long, terrestrial (FM) radio has used the music of hard working artists to attract listeners to their stations, while paying those artists nothing for their work.
But this is not a reason to abandon an industry wide agreement on legislation addressing other important issues.
Radio’s relationship with the music industry has changed dramatically in a few short years.
In its prime, radio was the dominant medium for music discovery – both new hits and back catalog. Today, radio exists in a sea of options and online alternatives for music enjoyment.
For many people, radio is no longer the primary source for listening to music. Indeed, radio’s most frequent listeners are 20% to 30% less valuable to the music industry (in terms of per capita expenditures) than less frequent listeners.
“RATHER THAN RESIST THE DIGITAL AGE, RADIO MUST EITHER RIDE THE DIGITAL WAVE OR HAVE IT CRASH ON TOP OF THEM.”
We urge radio to adapt to the new digital reality because the global music ecosystem is better off with a vibrant, innovative broadcast radio industry.
But time is running out for broadcasters to change the way they do business.
New “CLASSICS” act is one of several before the 115th Congress seeking to fix laws hurting music creators
The music industry is on the road to recovery. Dramatic revenue declines, which plagued the business for more than a decade, have begun to turn around, driven by streaming and other digital formats. This development has been hard fought and is the result of a concerted multi-year industry effort to embrace new monetization opportunities. This road to recovery, however, is long and our journey is far from complete. Revenues are still significantly below the industry’s peak, and our public policy is far from where it should be.
In Washington, D.C., we have been working with the entire music industry, service providers and lawmakers on both sides of the aisle to reform public policy and fix antiquated laws that harm America’s music creators.
This effort is starting to bear fruit. Several bills have been introduced in the 115th Congress that seek to fix problems with the way our laws treat music creators. We hope that these bills are emblematic of a positive change in the policy environment. Each bill is a step along the way, fitting into a larger vision of reform to repair our laws’ historical mistreatment of music creators.
[Editor Charlie sez: This is why audits are important.]
In 2015, SoundExchange filed suit against Muzak, a wholly-owned subsidiary of Canada’s Mood Media Corporation, for underpayment. The lawsuit arose from Mood Media’s attempt to acquire new music services and pay for the use of sound recordings on these services at grandfathered, below market rates which were intended for a very limited set of companies. On April 25, 2017, the D.C. Circuit ruled in favor of SoundExchange.
Commenting on the ruling, SoundExchange President and CEO Michael Huppe said:
“On behalf of music creators, we are gratified by the D.C. Circuit’s ruling in our favor today. This important decision rejects Muzak’s effort to expand its limited grandfathered eligibility for below-market rates. As the Court properly recognized, Muzak’s position ‘threatens the very purpose of the [Digital Millennium Copyright] Act.’ Looking ahead, the decision will help SoundExchange continue its efforts to ensure that recording artists and rights owners receive proper compensation when their creative work is used.”
Technical background on the case
The passage of the Digital Millennium Copyright Act of 1998 (DMCA) set forth under the law that most subscription services (e.g. those services that deliver music content to cable and satellite television providers) would have their statutory rates set by a fair market value standard (i.e. willing buyer, willing seller). When the DMCA was passed, a small handful of “pre-existing” services, including Muzak and their provision of music to Dish Network, were grandfathered into an outdated standard for setting royalty rates – a standard that frequently results in artists and labels being paid less than a fair rate.
In 2011, Muzak was purchased by Mood Media who, in turn, also purchased DMX, a Texas-based company that also provided music for cable and satellite television networks, including DirecTV. DMX had previously been licensing music under the regular fair market standard. In 2014, Mood Media moved DMX’s cable and satellite music service contracts (including DirecTV) to Muzak, thereby converting a large part of DMX’s former business into a faux “pre-existing” service and dramatically slashing what it paid for the use of the music it was providing.