[Congressional Record Volume 164, Number 17 (Wednesday, January 24, 2018)]
[Senate]
[Pages S501-S505]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. HATCH (for himself, Mr. Whitehouse, Mr. Alexander, Ms.
Harris, Mr. Corker, Mr. Durbin, Mr. Isakson, Mr. Coons, and Mr.
Jones):
S. 2334. A bill to amend title 17, United States Code, to provide
clarity with respect to, and to modernize, the licensing system for
musical works under section 115 of that title, to ensure fairness in
the establishment of certain rates and fees under sections 114 and 115
of that title, and for other purposes; to the Committee on the
Judiciary.
Mr. HATCH. Mr. President, I rise with my good friend from Tennessee
to discuss some truly landmark legislation we are introducing today
that is long overdue. It is called the Music Modernization Act, and it
will reshape the music licensing landscape to bring it into the 21st
century.
As a songwriter myself, I have a deep interest in music issues and in
ensuring we have a music licensing system that works. Unfortunately,
our music licensing laws have not kept pace with technological change.
We have an outdated, antiquated system that is designed for the era of
CDs and cassette tapes rather than the era of digital streamlining and
audio on demand.
Most of us rarely think about the complex laws that govern who can
listen to what music when and who gets paid when we purchase an MP3 or
listen to an interactive stream. We pay our money to iTunes or the
streaming service without thinking about how that money then gets
distributed to dozens or even hundreds of actors across the music
industry. You have songwriters and publishers and recording artists and
record labels. You have agents and broadcasters and streaming services
and performing rights organizations. You have multiple copyrights
across multiple individuals for the same song. It is a dense,
interconnected web of licenses, rights, and legal obligations that all
need and should be carefully calibrated, but our current regime is not
well calibrated--far from it.
To begin with, the process of ensuring that songwriters are paid when
the songs they have written are downloaded or played on the internet is
a complete mess. The problem lies in matching sound recordings to the
underlying musical work; that is, to the song performed in the sound
recording. When a person downloads or streams a song, there are
actually two sets of copyright holders whose interests come into play.
The first is the recording artist who owns a copyright in the sound
recording; that is, in the recorded version of the song. Often, the
recording artist will have assigned his or her copyright to a record
label.
The other relevant copyright holder is the songwriter--the person who
actually wrote the music and, in virtually every case, the lyrics that
the recording artist performed. The songwriter owns a copyright in the
song itself, in the actual words and music. Often, the songwriter will
have assigned his or her copyright to a music publisher.
When a sound recording is reproduced, whether by download,
interactive stream, or fixing the song on a CD or other physical
object, the recording artist and songwriter or their respective
assignees will both receive royalties. The recording artist receives a
royalty for the sound recording itself, and the songwriter receives a
royalty for the underlying song. These are called mechanical royalties
because, historically, the reproduction of sound recordings was done
through mechanical means. Think of a vinyl record and its grooves.
There is also a second type of royalty that comes into play when a
song is performed publicly, such as on the radio, at a concert, or over
a digital transmission service like Pandora. This type of royalty is
called, sensibly enough, a public performance royalty. Just like with
mechanical royalties, it is paid to both the recording artist and the
songwriter or their assignees.
As I said earlier, the problem lies in matching the sound recording
to the underlying musical work; that is, in determining who should get
paid when an individual downloads a song or listens to an interactive
stream.
Figuring out the recording artist is pretty easy. When digital music
services play music, they play sound recordings. They play a song
recorded by Taylor Swift or Jay-Z or Garth Brooks or they offer the
sound recording for download. In either case, determining who recorded
the song is straightforward. Figuring out who the songwriter is,
however, can be much more complicated.
A recording artist may play 10 different songs by 10 different
songwriters on a single album or 10 separate writers may have
contributed to a single song, with each being entitled to a cut. Unlike
with recording artists, it is usually not apparent from the sound
recording itself who the songwriter is.
Of course, the recording artist--or the record label, if the
recording artist has assigned his or her rights to a record label--may
know who the songwriter is, but not always, and it is simply not
feasible for digital music providers to independently track down
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every individual songwriter for the millions of songs they offer over
their services.
The problem of unmatched works--that is, works for which the sound
recording has not been matched to the underlying songwriter--creates
significant difficulties for both digital music providers and
songwriters.
Start with digital music providers. By law, these services are
required to pay mechanical royalties to songwriters for interactive
streams and digital downloads. But if they don't know who the relevant
songwriter or publisher is, they can't pay the royalty. This exposes
digital music providers to significant liability if a songwriter or
publisher later appears and asserts their rights. At the same time,
songwriters get short shrift because they don't get paid when they are
supposed to be. Streaming services play their songs and digital
platforms offer their songs for download without paying the required
royalties. As you can see, this is a complicated system. It is a bad
situation all around.
That is where the legislation Senator Alexander and I are introducing
today comes into play. Our bill, the Music Modernization Act, creates a
blanket mechanical license for digital music providers. This license,
which will be administered by a mechanical licensing collective, will
enable digital music providers to obtain a single mechanical license
for the music they play rather than having to individually seek out
songwriters and publishers. Services that obtain the license will
receive liability protection.
Songwriters and publishers, in turn, will benefit from increased
royalty payments. Among the mechanical licensing collective's duties
will be establishing and maintaining a public database that identifies
musical works and their owners. This will help reduce the number of
unmatched works.
In addition, the Music Modernization Act provides that royalties for
unmatched works will be distributed after a holding period of 3 years
to known copyright holders on a market-share basis. This means that
rather than going unpaid, royalties for unmatched works will go to
existing copyright holders according to how active each copyright
holder is in the marketplace.
Our bill also contains a critical update to the rate standard for
mechanical royalties for songwriters. Current law requires the
Copyright Royalty Board to consider a variety of statutory factors in
setting mechanical royalties. These factors, however, do not accurately
reflect market demand, with the result that songwriters are paid a
below-market rate. Our bill revises this standard to instruct the Board
to establish rates that reflect what a willing buyer and willing seller
would agree to in the marketplace.
Lastly, the bill makes two changes related to public performance
royalties for songwriters. As I explained earlier, this type of royalty
comes into play when a song is performed publicly, such as on the
radio, at a concert, or over a digital transmission service like
Pandora.
Public performance royalties for songwriters and publishers are
administered through performing rights organizations, or PROs, the best
known of which are ASCAP and BMI. ASCAP and BMI offer blanket licenses
to radio stations, restaurants, digital transmission services, and
others that allow licensees to play all songs in the PRO's catalogue.
These blanket licenses are governed by 1940s-era consent decrees that
require all rates under the licenses to be set or approved by a Federal
judge in the Southern District of New York.
The Music Modernization Act makes two changes relevant to these
consent decrees. First, it says that any judge in the Southern District
of New York may hear a rate-setting case involving ASCAP's or BMI's
license fees, not just the particular judge who oversees the consent
decree.
Second, the bill revises current law to allow judges in these rate-
setting proceedings to consider evidence of public performance
royalties paid for sound recordings in setting public performance
royalties for songwriters. The purpose of this provision is to better
align public performance royalties for sound recordings with public
performance royalties for the underlying musical work and to ensure
that songwriters are properly rewarded when a song they write becomes a
hit.
As I mentioned earlier, music licensing is an incredibly complicated
subject. I have endeavored today to explain the Music Modernization Act
in a straightforward way that individuals not steeped in this subject
can understand. The key points are as follows. First, the bill will
have to solve the problem of unmatched works so that digital music
providers are protected from liability and songwriters receive the
royalties they are due. Second, the bill will better align royalties
for songwriters with royalties for recording artists and with market
demand. It will also bring much needed transparency to our music
licensing system by creating a public database that identifies musical
works and their owners.
I am pleased to report that our bill has broad support across the
music industry, which is a tremendous thing. One of the things that
makes this legislation such a breakthrough is that we have been able to
get the songwriting side of the industry--the songwriters and their
representatives in all these matters in the publishing and PRO
community--on board with the recording and distribution side of the
industry--the record labels and digital music providers. Indeed, I
don't think I have ever seen a music bill that has had such broad
support across the industry. All sides have a stake in this, and they
have come together in support of a commonsense, consensus bill that
addresses challenges throughout the music industry.
I should also note that introduction is just the start of the
process. Bills change as they move through markup and floor
consideration, and there are some outstanding issues in the latter part
of the bill that remain to be resolved with broadcasters. I am
committed to working through these issues as the bill moves forward so
that we have the broadest consensus possible.
I said at the outset that I am a songwriter myself. I have a deep and
abiding interest in these issues. These matters are personal to me.
They are also an important part of my legacy. I am relatively unknown,
and I don't expect to make a lot of money out of the music industry,
but I am deeply interested in this, in making sure that those who do
create these wonderful musical subjects will be treated more fairly
than they are today.
I have fought long and hard for strong copyright protections my
entire time in the Senate. I have passed a number of landmark copyright
bills, from the Copyright Term Extension Act to the Digital Millennium
Copyright Act to the Family Movie Act.
The Music Modernization Act is another in that long line of landmark
legislation. In fact, I view it as the capstone of my work on
copyright. I say that because I want my colleagues to know how
important this bill is, not just to me but to my friends, and I want my
friends in the industry to know how important this bill is to me as
well. I have less than a year left in this body, and one thing that I
am dead set on is enacting this bill into law before I leave.
I hope my colleagues will join me in supporting and sponsoring this
bill. The music we create in our country is an important part of our
culture and of the message we carry to the rest of the world. Let's do
everything we can to ensure we have a music licensing system that is
fair, that rewards creativity, and that creates the right incentives to
write, perform, and sell music. That is exactly what the Music
Modernization Act will do.
I have a partner in this business of trying to get this bill through,
the great Senator from the State of Tennessee, Lamar Alexander, who
himself is a very accomplished musician. He is a great piano player,
and he is a great friend, and he understands these issues as much as if
not more than anyone else I know in the Congress of the United States.
I just feel very indebted to him and blessed to have him as one of the
people who will be working with me on this matter.
With that, I yield the floor.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. ALEXANDER. Mr. President, I want to thank the Senator from Utah
for his leadership. He is not only the senior Republican Senator and
former chair of the Judiciary Committee, which will hear this
legislation, and chairman of the Finance Committee, he is a songwriter
himself. He is not
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just a songwriter; he has a platinum record, he has a gold record, and
he has another one that might become gold. So he knows what he is
talking about.
I think, for all of us in the Senate, when Orrin Hatch says that in
his 40 years or so here--more than any other Republican Senator--this
is the capstone of his career in his work on copyright and it is
personally important to him, that means something to the rest of us
here. I think that means--among all of the other issues here--we are
going to pay more attention to this, and we are going to work hard to
pass it. I hope it also means something to those outside this Chamber--
the songwriters themselves, the digital music companies, the music
publishers, the broadcasters. This is something we intend to do. We
intend to make this a law because it is right thing to do, because the
songwriters aren't being treated fairly, and because it is important to
Senator Hatch, whom we respect.
When Senator Hatch stands up on the floor and says: I have been
working since 1977 on copyright issues--and we know how many important
issues he has dealt with--and he says this is a capstone of all those
issues, we should pay attention to that, and we should deal with it. I
think we will be able to deal with it because we start off with very
strong bipartisan support.
This afternoon, Senator Hatch and I will file the Music Modernization
Act. We will begin with eight Members of the Senate, including Senator
Hatch, as the lead sponsor; I will be there, in addition to Senator
Whitehouse, a Senator from Rhode Island, a Democrat; Senator Corker, a
Senator from Tennessee; and Senator Dick Durbin, the Senator from
Illinois.
Dick Durbin is in Nashville nearly as much as Orrin Hatch is in
Nashville. He is not a songwriter, but he loves country music, and he
loves songwriting and music, and he is the No. 2 Senator in the Senate,
the Democratic whip. To begin to have that sort of cosponsorship, in
addition to Senator Isakson, Senator Coons of Delaware, and our newest
Senator, Mr. Jones of Alabama--those are the eight of us in the Senate
who are starting this bill. We hope others on both sides of the aisle
will see the wisdom of it.
Italy has its art, Egypt has its pyramids, Napa Valley has its wine,
and Nashville has its songwriters. Songwriters are the lifeblood of
Music City. The mayor of Nashville was in my office today and we talked
about that. We have thousands of songwriters in Nashville. We have a
lot in Memphis too. We have many in Bristol and Knoxville in East
Tennessee, where country music really started. They are waiters, they
are bus drivers, they are teachers. They have other jobs as they build
their songwriting careers. Their paychecks ought to be based on the
fair market value of the work they create. Songwriters are paid when
their songs are played. We want to make sure that their hits that are
heard around the world are felt in their pocketbook.
The arrival of the internet has transformed the music industry, but
it has also meant that many songwriters simply aren't paid their
royalties when their songs are played online. This is the first
problem--the arrival of the internet.
The second problem is, when the songwriters are paid, they are not
paid a fair market value for their work. Senator Hatch, as I have
mentioned, has long been an advocate for musicians. He understands
this.
We have worked together for over a year with Representative Doug
Collins in the House of Representatives on the Music Modernization Act,
which eight of us will introduce this afternoon. It is bipartisan. It
represents the first major consensus legislation that has the support
of songwriters, music publishers, digital music companies, and the
record labels. Senator Hatch and I are going to continue to work
together to make sure it has the support of broadcasters as well.
More importantly, the legislation will have a real impact on
songwriters in Tennessee and elsewhere. First, it creates a simple
licensing system for direct music services, like Pandora and Amazon to
reflect a changing music industry. Second, it will make it easier for
the songwriters to be paid when their music is played or someone buys a
song that they wrote. Third, it will allow them to be paid for the fair
market value of their work.
Now, to give you an idea of what this really means, let me tell you a
story about songwriting. I do not have the experience that the Senator
from Utah has. He has written more than a hundred songs over the years
and cowritten some of them with a number of Nashville songwriters, as a
matter of fact, and he even has a song that is a platinum record. But a
few years ago, I was in East Tennessee, in my hometown of Maryville. I
walked out of the pharmacy, and I saw an older couple sitting in a
pickup truck, and I asked them how they were doing. The woman said of
her and her husband: ``We're just falling apart together.''
Well, that weekend my son Drew was having a songwriters' retreat at
our home in East Tennessee. He is in the music business. So I told one
of them, Lee Brice, about what the woman said to me: ``falling apart
together.'' Lee Brice said: I think I can do something with that. So
he, Billy Montana, and Jon Stone, the songwriters, wrote a song called
``Falling Apart Together.'' Lee Brice put that on one of his albums,
and I got one fourth of the song rights. That is the way it works in
Nashville. If you contribute anything, including just the song name to
a song, you get a part of the royalty. Well, Lee Brice is a pretty
well-known singer, as well as a songwriter, and he put the song on his
album. You would think the royalty would add up to a lot of money, but
in 2016, on my Senate financial disclosure, I reported receiving
$101.75 in royalties from my one-fourth of the song ``Falling Apart
Together.'' If you are a songwriter living in Nashville, Memphis, Los
Angeles, New York, or anywhere--or Provo or Salt Lake City--you can't
make a living on $101.75.
The other problem facing songwriters is that music is increasingly
played online. Companies like Spotify, Pandora, Amazon, and Apple offer
listeners virtually unlimited access to digital music libraries that
they can play using the internet whenever they want. According to
Nielsen, there are nearly 86 million paying subscribers to these types
of digital music streaming services--86 million paying subscribers. In
2016, these subscribers listened to more than 252 billion music
streams, including repeated songs. So in 2016, for the first time in
history, streaming music services--songs played online--generated more
than half the music industry's revenues. Digital music services such as
Spotify, Pandora, and Apple Music generated the majority, or 51.4
percent, of the music industry's revenues.
So we know that the internet has changed our world. It has changed
politics. It has changed newspapers. It has changed retail. We have
seen the effect of it. It has changed the music industry too. One half
of the music industry's revenues come from online songs that are played
and, as Senator Hatch has said, our laws have not kept up with that
and, as a result, our songwriters--the creators who have a right under
our Constitution to be paid for their work a fair market value--aren't
being paid. In many cases, when they are paid, they are not being paid
a fair market value. Sales of compact discs fell below $100 million in
2016, a 17-percent decline from 2015. This means that it is getting
much more difficult for songwriters to make a living and Congress can't
change the fact that the internet and other new technologies have
changed the music industry, but we do have a responsibility to update
our laws to keep up with what has happened.
So how did we get in this mess, and what laws are we talking about
updating? In 1909, more than a century ago, Congress gave copyright
owners of musical works the exclusive right to make, reproduce, and
distribute their own musical work. At the time, the works were
primarily piano rolls. So we are talking about laws that were created
for player pianos. Congress sets a royalty to be paid to the owners of
those piano rolls at $0.02 per copy. The Copyright Royalty Board, a
three-judge panel at the Library of Congress, still sets those royalty
rates today. The current rate is 9.1 cents, and it is based on a below-
market standard.
Another problem, as Senator Hatch mentioned, is that ASCAP and BMI,
the two largest performance rights organizations, are subject to a 76-
year-
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old consent decree with the Department of Justice--that means an
agreement agreed upon in 1940 or so--and ever since then, it has been
governing these performance rights rates. These consent decrees never
contemplated the internet, and today they are harming national
songwriters. The biggest problem with these outdated consent decrees is
that songwriters don't get paid the fair market value for their work.
Songwriters negotiate with radio stations for the right to play their
music in exchange for ``reasonable'' performance royalty. If
songwriters and the radio stations can't agree on the reasonable
royalty, the songwriters have to go to a Federal rate court, which
means their case is heard by district judges in the Southern District
of New York. Under current law, the judge is not allowed to consider
what the song's performer earns when he sets a reasonable royalty. The
Music Modernization Act changes that by allowing ASCAP and BMI to
present new evidence about the fair market value of the songwriter's
work, like what a performer might earn, to a Federal rate court judge
when there is a dispute about royalty rates.
The legislation also allows more Federal district judges to hear
these types of cases. The music industry has changed dramatically in
the past 109 years. It is time to update our music licensing laws to
ensure that songwriters can continue to make a living.
Now, what the Music Modernization Act does to solve the problem is
this. It creates a new simplified licensing entity to make it easier
for the digital music companies--this is Spotify, Pandora--to obtain a
license to play songs and ensure songwriters are paid when their music
is played. Instead of Spotify and Pandora tracking down each songwriter
or a songwriter's publisher to get permission to play his song, they
will be able to submit one license and start playing a song right away.
Transitioning to a blanket license for reproductions was recommended by
the Copyright Office of the Library of Congress. In a February 2015
report on music licensing reforms, the Copyright Office recommended
this blanket licensing approach that is included in the Music
Modernization Act. The Copyright Office report concluded that ``song-
by-song licensing is widely perceived as a daunting requirement for new
services and as an administrative drag on the licensing system as a
whole.'' The move to a blanket system would allow marketplace entrants
to launch their services--and begin paying royalties--more quickly.
Another important point is that the new licensing entity will not be
a new government agency, and the digital music companies will pay to
set it up and keep it running, not songwriters. The new entity will be
governed by songwriters and music publishers, giving songwriters a say
in how their work is used for the first time. The new entity helps
songwriters because it will collect royalties each time a song is
played, look for the songwriter, and hold on to the royalties for 3
years until they can be found. This helps songwriters because it
ensures they are paid royalties for their work, whether they have a
publisher or not. This helps digital music companies because it makes
sure songwriters are paid and that means fewer lawsuits.
The legislation also improves transparency by creating a publicly
accessible database for all music works, and it requires digital music
companies to pay songwriters their royalties every month. Songwriters
will receive usage reports on music that is played to make sure the
money is all there. The new database is important because maybe a young
aspiring songwriter co-wrote a song under an alias or moved or simply
can't be located. The legislation allows songwriters to audit the
licensing entity once a year, if the songwriter chooses.
Finally, the legislation requires the Copyright Royalty Board at the
Library of Congress to use a fair market standard of what a ``willing
buyer'' would pay a ``willing seller'' when the Board sets royalty
rates. This helps songwriters receive a fair market royalty when their
song is played online.
The Music Modernization Act, as Senator Hatch said, has broad
support--unprecedented support. It is a consensus piece of legislation.
It is supported by the National Music Publishers Association; the
Digital Media Association; the American Society for Composers, Authors
and Publishers, or ASCAP; Broadcast Music, Inc. or BMA; the National
Songwriters Association International; and the Songwriters of North
America. On January 8, these groups joined the Recording Industry
Association of America, the Recording Academy, and more than a dozen
music industry groups in endorsing the Music Modernization Act. It will
help thousands of songwriters in Nashville, across Tennessee, and
across this country.
Songwriters, music publishers, and digital music companies have
reached a consensus. Now it is up to Congress to provide a result. That
is why I am working in such a bipartisan way and am so glad to be
working with such imminent leaders as Senator Hatch, Senator Durbin,
and others to pass the Music Modernization Act and give Tennessee and
our Nation's songwriters the fair pay they have earned.
I want to thank Senator Hatch's staff, as well as my own staff, once
again, because they have been working on this issue for some time.
Senator Hatch was the original cosponsor of legislation in the 114th
Congress, titled the Songwriter Equity Act. I am proud to work with
him.
I want to thank Representative Doug Collins and Representative Hakeem
Jeffries, who are the sponsors of the bill in the House of
Representatives. They are leading the effort to get the bill through
the House Judiciary Committee so it can be considered by the full
House.
Finally, I wish to thank Bart Herbison, with the National Songwriters
Association; David Israelite, with the National Music Publishers
Association; Beth Matthews, with ASCAP; Mike O'Neil, with BMI; and Greg
Barnes and Chris Harrison, with the Digital Media Association. These
individuals have all worked together and negotiated for months to try
to produce consensus legislation to help songwriters and modernize the
music licensing laws.
So let me end where I began. This is a bill to help songwriters. This
is a bill to modernize a copyright system. This is a bill to help our
laws keep up with the digital age, the internet world. This is a bill
that has consensus among digital companies and songwriters and
publishers for the first time. This is a bill to honor Orrin Hatch, who
has served in this body since 1977, who is a songwriter himself, and
who has been our leader on modernizing copyright laws from the very
beginning. I intend to work as hard as I can in a bipartisan way, both
in the Senate and the House, to pass this bill for the good of our
country and as a capstone of the career of our senior Senator, Mr.
Hatch.
I yield the floor.
The PRESIDING OFFICER. The President pro tempore.
Mr. HATCH. Mr. President, I can't express my appreciation well enough
to thank the Senator from Tennessee for this wonderful set of remarks
he has just given. He has outlined it as well as it could be done.
Tennessee has always been very well represented, but Lamar Alexander is
one of the great Senators here, and I am just grateful that he is
standing side by side with me on this.
The songwriters of America have been mistreated for years and years
and years, and it is time to change it. It is time to get some equity
and some fairness into this system, and I think Lamar has outlined that
about as well as it could be outlined. I want to personally express my
appreciation to the Senator from Tennessee for what he has said here
today.
Mr. COONS. Mr. President, I would like to thank Senator Hatch for his
leadership on intellectual property issues throughout his distinguished
career in the Senate. I was pleased to join him in securing the passage
of the Defend Trade Secrets Act in the last Congress, which established
a Federal civil right of action to protect this valuable form of
intellectual property.
Likewise, I am pleased to join Senator Hatch as a cosponsor on the
Music Modernization Act. This important piece of legislation will bring
much-needed transparency and efficiency to the music marketplace and
more fairly compensate songwriters for their valuable creative work. I
note that there are some outstanding issues in the latter part of the
bill that remain to be resolved with broadcasters and other
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music licensees. Senator Hatch has indicated to me that he intends to
work through these issues as the bill moves from introduction to markup
so that we can have the broadest consensus possible for this
legislation. I thank Senator Hatch for this commitment and commend him
for his leadership on ensuring that the copyright laws stay apace with
evolving technology.
Mr. HATCH. Mr. President, I thank my good friend, Senator Coons, for
co-sponsoring the Music Modernization Act and for his engagement on
this critically important subject. Like Senator Coons, I want this bill
to achieve broad support so that it can move forward in a consensus
manner. To that end, I intend to work with broadcasters to address
their concerns as the bill moves from introduction to markup and look
forward to a productive, successful dialogue on these issues.
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