So we have gone into some detail about how the music licensing provisions (formerly SIRA) of the Copyright Modernization Act could harm consumers and innovation. This post analyzes a number of provisions in the Act that sacrifice the betterment of individual musicians at the altar of the big music publishers and record companies.
Key to understanding these provisions is knowing what “designated agents” are under the proposed law. The “General Designated Agent” grants and administers licenses and collects and distributes royalties for the use of musical works governed by the CMA. It is operated by the largest music publishing entity (measured by the amount of royalties collected during the preceding three years) and governed by a board of directors consisting of five members, three from music publishing entities, and two from the ranks of professional songwriters. Other designated agents may be appointed by the Register of Copyrights if they represent “at least a 15 percent share of the music publishing market.”
Got it? If so, you may proceed. Here are the provisions of the bill that should give artists pause:
1. Pre-emption of laws that have been used to force labels and publishers to pay tens of millions of dollars.
The CMA sets out in great detail what happens to any unclaimed royalties from the new online licensing scheme. But the final provision of this section adds that “this subparagraph preempts any State claim to unclaimed funds.” This provision appears to be aimed directly at the $50 million settlement that the record labels and music publishers reached in 2004 with the New York AG's office concerning payment of back royalties to artists. The AG's press release is here. The settlement sought to recompense artists after the publishers and labels hoarded of millions of dollars of funds by the publishers/labels because they claimed they could not find artists such as David Bowie, Dolly Parton, Harry Belafonte, Liza Minnelli, Dave Matthews, Sean Combs and Gloria Estefan.
One of the provisions of the settlement between Spitzer and the publishers/labels, required the companies to agree to comply with New York State's Abandoned Property Law, which requires that if an artist or his or her family cannot be found, unclaimed royalties be “escheated” or turned over to the state, not kept by the companies. The state then holds these monies until a claim is made. The SIRA provisions of the CMA would preempt this law and would have the industry-appointed designated agents disburse the money. In other words, it would remove the state from overseeing the very process that led to the Spitzer investigation and settlement in the first place.
2. Record Companies are given power to divert publishing royalties from artists and songwriters, overturning long-held industry norms.
A provision in CMA entitled “Letter of Direction” provides an unprecedented new right to the record companies: they can direct the designated agent to divert mechanical (publishing) royalties from the artist/songwriter to the record label. Because most new artists survive on their publishing royalties, rather than income from selling records or touring (because they have to repay advances for cd production and tour support to the record companies), this is a harmful back-door act against artists.
3. Designated agents can charge songwriters a fee to engage in lobbying.
The CMA states that a designated agent may
i) engage in activities pursuant to this subsection;
(ii)engage in such additional activities in the interest of music publishers and songwriters as the designated agent considers appropriate, including industry negotiations, ratesetting proceedings, litigation, and legislative efforts and
(iii) apply any administrative fee or other funds it collects to support the activities in claues (i) and (ii) above. (emphasis added)
Thus, the bill allows designated agents to charge songwriters a rather heavy administrative fee, which would pay for, among other things, lobbying.
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As Alex said, the CMA is due to move forward tomorrow. We urge artists and their representatives to weigh in with Chairman Sensenbrenner and the House Judiciary Committee.