The Music Modernization Act: a perfect problem for blockchain to solve

John Mackey has a trust problem.

The Juilliard-trained, Cambridge-based composer/food blogger has made a career for himself writing exciting, contemporary classical music you’ll hear played by the Dallas Wind Symphony, set to dance by the Alvin Ailey American Dance Theater, or featured in your kid’s school marching band show. He’s a rare success: writing music that receives thousands of performances in an age where classical music is said to have less and less of a profitable trajectory. But, part of John’s ability to make a living is his ability now to self-publish his music. His distrust for music publishers and its top-heavy business model, plus increasing cases of copyright infringement, led John to take control of his art and publish his own music. It’s a grind, but at least John knows he’s receiving the correct royalty for his music, rather than trusting a record label or other entity to pay him.

Thankfully, a new law may help John, and all artists, producers, songwriters, and others playing a role in the rights of music ownership. A law to streamline the process, improve the ownership data, and oversee payouts.

That law is the Music Modernization Act. 

 The MMA is the first law of the 21st Century addressing the world of compensating rightsholders for the music we listen to each day. This matters now, because since the last real piece of significant legislation, 1998’s Digital Millennium Copyright Act, the way we consume music has undergone a wholesale change.  In 1998, Napster was in its infancy. Peer to peer sharing was a blip on the horizon. I listened to music on the radio and spent all my allowance money on recordings. This was the norm for decades: Duke Ellington and Frank Sinatra shellac records in the 30s and 40s, Elvis, and Beatles vinyls in the 50s and 60s, Stevie Wonder and ABBA 8 tracks in the 70s and 80s, Tupac and Britney CDs in the 90s and early 00s.

Then came the internet.

Napster opened my desktop to thousands of songs, unreleased and rare recordings, and all the tracks my parents would never allow me to listen to. Soon after, Metallica was filing suit, Steve Jobs got in the game, we all bought iPods, then we threw away our iPods to start streaming, and the music industry as we knew it crumbled. RIP to the teenage Shangri-Las that were Tower Records, Sam Goody, and so many mom and pop record stores. The massive album collections and hi-fi stereos that were the centerpiece of my parents’ home have been replaced by a sleek, minimalist smart speaker setup pumping out any given Spotify playlist. My bachelors is in music, and I can’t even think of the last time I paid for a recording.

Think the law saw that coming?

That’s why the MMA came to fruition. The law combined three different bills that address several problems in the industry, such as overhauling the judicial process for disputes over royalty rates, paying songwriters a portion of mechanical license royalties for either physical or digital reproduction of a song with their lyrics, giving producers and engineers the right to a portion of royalties from sound recordings, and compensating performers for pre-1972 sound recordings (as seen with Aretha Franklin being paid nothing for the times her version of Otis Redding’s Respect was played on radio). Each have been problems resulting from the quirks that come from quantifying something as intangible as a song. However, the big hallmark of the MMA is creating a blanket mechanical license for digital streaming of music compositions and setting up a Mechanical Licensing Commission (MLC) to track rights ownership and handle royalty payouts for music composition, as opposed to sound recordings (which is a key difference in copyright law and who gets paid when for what use of rightsholder’s intellectual property). The Fried Firm, a NYC/LA boutique firm catering to the entertainment and creative industries, does a great job clarifying the digital royalties songwriters are entitled to in its firm’s blog. Not just for major artists like Bruno Mars or Beyoncé, this improvement to the royalty process stands to benefit the everyday producer or songwriter: everyday people like you and me looking to make their way in the world by doing something they’re good at and that we as a society values.

While there is a supposed divide between the rightsholders and the platforms streaming or broadcasting music, this legislation brought almost all sides of the issue together (although SiriusXM threatened to derail the bill’s progress based on a royalty distinction between satellite and terrestrial radio). Streaming services spend significant overhead finding rightsholders and sending paper trails to the Copyright Office whenever they stream a song and can’t track down the copyright owner. Streaming services have had the responsibility to match a music composition with the recording they stream and pay royalties to the publishers and songwriters. This mess has led to suits for unpaid royalties against the streaming giants. The idea is the MMA and its MLC will take tracking the ownership data off the shoulders of streaming services, ensure the rightsholders are paid, and keep everyone out of court. As Jordan Bromley, partner at Manatt, Phelps & Phillips put it in his Billboard op-ed, “nothing is perfect. There will be meaningful criticism of this bill. But at the end of the day, this is a good thing for [the music] business.”

However, handling such a massive amount of data is no small feat. It’s not uncommon for any given song to have multiple rightsholders, some who may own differing portions of the rights in the US vs. other jurisdictions (rights are registered differently in each country), or who may be an artist’s family member and difficult to reach. Existing data is not always complete or accurate. Outside agencies like the Harry Fox Agency or Music Reports Inc. have carved out business as middlemen navigating these waters, and it is possible the MLC can opt not to subcontract with these entities. The form and structure of the MLC is still being shaped, albeit what is known about its current form arguable stops short of creating a process that improves the data process and collection in the music industry.

I know this world. Having myself secured mechanical licenses from Harry Fox in my days in the music industry and working on licensing agreements with various rightsholders during my time in the legal department at Jazz at Lincoln Center, I can offer firsthand confirmation that the data is an absolute mess. My prediction is the MLC will be an evolution of existing organizations like DiMA and ASCAP and entities like Harry Fox, but won’t quite be a FINRA for music licensing. The people involved and existing infrastructure trend that way.

However, if asked my opinion, I’d advise instead that this sounds like a great problem for blockchain to solve. 

At the risk of being simplistic, blockchain at its best allows a user to transfer a unique piece of digital property to another via the internet, safely and securely. After all, blockchain is heralded for solving the trust problem in transactions between entities. So it seems a natural solution to the problems that come from tracking the rights of songs and paying royalties from licenses. Compiling data in a distributed ledger that all have access to, with each transaction hashed, sounds immediately like the solution the MLC would want and was created to provide. As publishing catalogs get sold to different owners, and rights agreements change by country, all of that can be stored via a distributed ledger and available for everyone, from streaming services to rightsholders to the government. Everyone would have the same information. It’s the type of accurate, up to date data compilation the MMA wants to realize.

Startups like BitTunes have already taken a stab at leveraging blockchain technology for licensing purposes. It’s a blockchain solution putting the control in the hands of the creators and rightsholders, the John Mackeys of the world. As part of its Global Entertainment & Media Outlook following the MMA and EU counterpart directives, PwC published a whitepaper outlining a vision for a blockchain-based rights tracking system that seems a logical fit for the MLC.

This would be boldly innovative, even for an entity serving creative types like songwriters and producers. An MLC blockchain or distributed ledger of rights may be too gutsy a step many won’t want to take for carrying out one of the few bipartisan achievements of this Congress. Proactive thinking and the tech expertise to implement DLT are still in short supply in the music industry and in Washington. Hopefully, this doesn’t stay true for long.

Ultimately, like any new law and commission, time will tell the tale. And this law is not a cure-all to every problem around licensing music. It doesn’t offer recourse the next time a dance company uses John Mackey’s music without permission. But it’s a good first block, and I think taking advantageous of blockchain technology would make it even better.