Last week, Taylor Swift’s master recordings were sold to music entrepreneur Scooter Braun, reigniting uproar surrounding artists’ rights in the age of streaming. 

Music streaming services like Spotify and Apple Music have long been criticized for skimpy payouts to artists. Moreover, music has become a core piece of major social platforms, including Instagram, YouTube, TikTok, Snapchat, Facebook and SoundCloud, making rights management nearly impossible. 

However, in the last two years — during which Spotify has shot from a $16 billion private company to an almost $27 billion public tech giant — ownership rights and compensation in the music industry have become a hot topic in Washington, D.C. 

Last week, the U.S. government took a step toward fixing some of the problems and creating a fairer modern music industry. The need for a fairer industry is one of the few points on which streaming services and artists agree.

As part of the Music Modernization Act of 2018, the U.S. Copyright Office created a team to oversee licensing music to digital services and ensure songwriters are paid.

From the Studio to Capitol Hill

Over the last few years, different legislation seeking to modernize the music industry has made its way to Capitol Hill. 

In 2017, former U.S. Rep. Bob Goodlatte (R-Va.) introduced the Music Modernization Act to improve how artists receive payment from streaming services. The act was later combined with two others to form the current legislation. 

Today’s Music Modernization Act is composed of: 

  • Music Modernization Act of 2017, which creates a blanket license allowing streaming services to distribute music without negotiating rights for individual recordings. The act  also authorizes a nonprofit governing body to maintain the blanket license, establish a database of license owners and help match musical works with their sound recordings. 
  • Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (CLASSICS) Act, which extends federal copyright protection to Feb. 15, 2067 for works created prior to Feb. 15, 1972. Prior to this, recordings made before 1972 were only protected by state law, not federal copyright law, meaning they were not guaranteed royalties for plays on services and digital radio.
  • Allocation for Music Producers (AMP) Act, which designates that SoundExchange, a Congressional nonprofit organization that distributes royalties, also allocate a portion of royalties to producers, mixers and sound engineers that helped create a recording.

The omnibus Music Modernization Act unanimously passed in the House of Representatives on April 25, 2018, after which, Senator Orrin Hatch (R-Ut.), a songwriter himself, introduced the bill to the Senate. Despite pushback from satellite radio giant SiriusXM, the Senate also unanimously passed the legislation on Sept. 18. President Donald Trump signed the Music Modernization Act into law the following month.

The honeymoon between streaming platforms and musicians was short-lived. 

On January 27, the Copyright Royalty Board ruled that the revenue percentage for songwriters be increased 44%. Songwriters will receive a 15.1% cut by 2023, up from the 10.5% level of 2012.

Spotify, Amazon, Pandora and Google all filed notices of intent to appeal the ruling, much to the chagrin of different music industry groups.

“No amount of insincere and hollow public relations gestures…can hide the fact that these big tech bullies do not respect or value the songwriters who make their businesses possible,” David Israelite, president and CEO of the National Music Publishers’ Association (NMPA) wrote in response.

Despite the hurt feelings, streaming services and musicians are trying again to reach an agreement.

On July 5, the U.S. Copyright Office chose a group led by the NMPA, the Nashville Songwriters Association International (NSAI) and the Songwriters of North America (SONA) to create and operate the Mechanical Licensing Collective, the group mandated by the Music Modernization Act to manage the new blanket license.

The Mechanical Licensing Committee will launch a portal for publishers and artists to track and manage royalties. It will also negotiate a budget with streaming services, which are required by the Music Modernization Act to fund the collective. 

That will likely be the next fight, as the sides, who have rarely agreed, once again discuss money.

The Modern Music Industry: A Dysfunctional Family

Today’s artists need streaming services to find audiences and stay relevant. But the services  have yet to prove their worth for smaller artists. 

In today’s digital-first industry, it’s difficult for artists who aren’t on Top 40 radio to make a living from royalty payouts. According to Digital Music News, an artist’s song would have to be played around 337,000 times on Spotify to take home the U.S. monthly minimum wage of $1,472. On YouTube, a song would need around 2.1 million plays. 

Why couldn’t the deep-pocketed giants like Spotify, Amazon, Apple and Google behind leading music streaming services pay artists more? After all, without musicians, labels, songwriters and publishers, these services would have nothing to offer music-loving audiences. 

It’s not that simple. Despite their popularity, streaming services still struggle to profit. In fact, Spotify turned its first profit ever in February 2019. 

The answer for both parties could be, as media industry research firm MIDiA’s Mark Mulligan outlined recently, to increase prices for subscriptions. This would allow services to pay higher percentages to artists while adding to their bottom line. 

But, unlike entertainment services like Netflix, music streaming services don’t offer an exclusive hook to keep consumers paying (See: Netflix Originals). If they raised their prices, consumers would likely leave for more affordable alternatives.

Because of this conundrum, the two parties would have likely ended in a stalemate without a push from Congress. Thanks to the Music Modernization Act, streaming services will have to improve their management of ownership rights and properly pay artists. In turn, artists will be able to more clearly define fair licensing on these services.

Despite the unresolved issues, streaming services and musicians agreement about the value of  the Music Modernization Act should not be ignored. It shows that there are core principles that can move the industry forward.

Current developments have the potential to create a fairer industry for streaming services, music tech startups and musicians. They could also help more artists carve out sustainable careers in the digital age.