The Vergecast - Public Knowledge’s Meredith Rose explains the Music Modernization Act

Episode Date: October 2, 2018

The Music Modernization Act has passed Congress and now sits on President Trump’s desk, awaiting his signature. The bill is years in the making, a much needed solution to the complicated collision of music streaming services, licensing issues, and copyright law. For this week’s interview episode of The Vergecast, Nilay sat down with Meredith Rose, Policy Counsel at Public Knowledge, a consumer advocacy group. They talked about how the Music Modernization Act will help artists get paid, companies license music, and how new streaming services might compete with giants like Spotify. Learn more about your ad choices. Visit podcastchoices.com/adchoices

This episode of The Vergecast brought to you by Hilton. Restaurant or room service. What would the boss do? Either way, the boss would choose Hilton hotels and resorts to get down to business and a little pleasure. Check out Hilton, hotels and resorts. Travel like the boss. Hey, everybody, it's Neil Life from the Vergecast. This week on our interview episode, I talked to Meredith Rose, who is policy council at public knowledge.

It's a consumer advocacy group. They just participated in passing a bill with Congress called the Music Modernization Act. It's sitting on President Trump's desk right now. going to sign it. It's a really big deal. So I was a lawyer before. We've had other lawyers work at the verge over the years. And the one thing that is consistently the most confusing about how digital platforms the internet work is music law. It's just baffling layers of inscrutability and laws about player pianos and sending physical notices in the mail that doesn't line up with how the internet works at all or how you would think it should work.

The Music Modernization Act is years in the making. It simplifies a bunch of things about how digital music works, how artists might get paid, how companies like Spotify can license music to be in their catalogs, and a bunch of other things. I'm going to tell you, I had Meredith on the show to explain it to me because I personally find it so confusing. We got into the weeds, but just stick with it. It's such a complicated part of something we all take for granted, and I think you might learn a lot by listening what Meredith has to say. So check it out. All right.

We are here with Meredith Rose, who is policy counsel at public knowledge. Welcome, Meredith. Thanks for having me. Yeah. Thank you for coming on to talk about this very, very wonky thing that is super complicated, but I think incredibly important. Yeah, absolutely. You are definitely not alone in both judgments.

So, Virchcast listeners might know public knowledge in general because we cover net neutrality a lot. You have some colleagues who work on net neutrality. Just give us the overview of what public knowledge is and why you're involved in music law at this moment in time. Yeah, so public knowledge is a consumer rights advocacy group, and we focus primarily on consumer rights in the digital age. So that ranges on everything from intellectual property, policy, which includes copyright and music licensing in this case, all the way down to infrastructure issues, things like net neutrality, competition, antitrust, kind of the whole gamut. If it's consumer interest related and tech related, we've probably worked on it. So you worked on the Music Modernization Act. A thing that struck me about it is everyone seems to be happy about it. No one's really unhappy about it. The labels are happy about it.

Songwriters, salty activists, consumer rights activists. Everyone seems very pleased with this law. What is it? And why is bizarrely, why is everyone happy about it? Usually the first question you ask with copyright policy when you see everyone is happy is what's wrong with it? So really, to get sort of back on the history of it, what we know now is, I guess, the Goodlat Hatch Music Modernization Act. I'll recall what its final title was. Started off as three base pieces of legislation. There was the original Music Modernization Act, which mostly had to deal with

songwriters and how songwriters' rights are licensed out. Then there was a portion called the Classics Act, which had to do with legacy sound recordings. So sound recordings made prior to 1972, which is a significant date for a bunch of reasons that I'm sure we'll get into later. And then a third portion, the AMP Act, which had to deal with how music revenues are apportioned out to music producers. Each of these individual parts, primarily the original MMA having to deal with the songwriters portion, was the product of a very, very long negotiation between industry stakeholders. And copyright policy in the United States generally, historically has been one of industry horse trading. It's all compromised concessions. You know, all the major stakeholders get together at a table and they sort of barter out how they want to divide rights and responsibilities.

And so I think that's part of why everyone's happy with it. You know, artist groups were very involved in this. Artists who are sort of famously very difficult to organize because there's a lot of diverging opinions. And so I think the reason everyone is very happy about it is one, there was a very long negotiation process that went into it. when public interest groups like public knowledge and EFF and American Library Association came out and said, hey, there are provisions of this that we're not happy about that could really be damaging. We were lucky enough to, we had a champion in Senator Ron Wyden, and he was able to open the discussion up on these issues and to negotiate back and forth to try to get those concerns addressed. And I think had those concerns not been addressed, you would have seen far less universal happiness about it.

it, to put it mildly. But no, it was, you know, it is a big deal. It's one of the only pieces of copyright legislation did get through in a very long time. And so I think everyone's kind of floating on cloud nine. I mean, the ink is not drawn to signature yet, so I'm trying not to jinx anything. But, you know, I think people are rightfully very proud of the achievement of getting the legislation passed. And pretty much everyone has, it's not perfect for anyone, but I think everyone's sort of gotten what they really need out of it. So let's, let's talk about that. Let's start with songwriters. So right before this legislation passed, there was like a flood of lawsuits from songwriters' groups against, like, Spotify.

Because they were complaining about how royalties were apportioned. We wrote a really hilarious story where, you know, we discovered that really what they were mad about is Spotify wasn't sending physical letters to songwriters to tell them that they were owed royalties. It was like crazy. So what about this law changes that? Is that the thing that's getting modernized? Yeah. So that is a big portion of it. And that's what the original MMA 1.0, I guess.

is the original way it called, the one that just dealt specifically with songwriters. So generally, if you are a Spotify or you are a music delivery service, you have to pay what are called mechanical rights. This is a historic term, but essentially those are the copyrights held by the songwriters that allowed them to control for the reproduction and distribution of their work. I don't think most listeners understand kind of the weeds. Yeah. A song has like multiple bundles of copyright inside it.

So there's the songwriter, and sometimes there's dozens of songwriters on a song, and then there's a person who performs it, and then there's multiple kinds of rights that are associated with both things. So I think most people assume the artists and the songwriter are the same person all the time, but they're often different, and there's literally dozens of songwriters. They have historically not gotten all the credit that they've deserved inside of this process. So keep going. I just want to make sure that was clear to the listener. I think that's actually probably a better pace to start. So two big things you need to keep. keep in mind is, as you said, point one is that there are really two different copyrights in a song. There's a copyright in the composition and lyrics, which is the technical term of art for that is

the musical work, but that's really confusing, so I'm just going to call it the composition. And then there's the copyright in the sound recording, so the actual track. And so if you think about, for example, Jimmy Hendrix's cover of all along the watchtower, that's a Dylan song. Dylan composed the song and wrote lyrics for it. So he has the copyright as the songwriter in the composition. And Hendricks, and this is a bit of a counterfactual, but if Hendricks performed it post-1972, Hendricks would have the copyright in the sound recording version of it. So the other thing to keep in mind is that when we say copyright, we really mean a bundle of related rights.

Copyright's like a bundle of sticks. This is the way one law professor I heard put it. Or a bundle of matches if you're not feeling charitable. But essentially, copyright has a whole bunch of different. related rights. And so copyright allows you to control within certain bounds. The three big ones for the purposes of music are the public performance of a work, the reproduction of a work, and the distribution of a work. Now, basically, the MMA dealt with all portions of this ecosystem in a way that was really unique. But what the original bill for songwriters started out for is to

address this problem in the marketplace that cropped up when you were talking about songwriters and how they licensed out their reproduction and distribution rights. And for historical reasons, those are called mechanicals, which is just a term that dates back to the days of player pianos, when it was literally you were mechanically reproducing the music by sticking it on a player piano. The way that those are licensed, hypothetically, in the grand design of the free market,

what is supposed to happen is if I am Spotify and I want to get the rights for the underlying composition of a song that I want to play. I have to go and find the songwriter, of whom there may be one, there may be four, there may be a dozen. More modern songs tend

to have more songwriter credits on them. But I have to go find those people. And if they're older songs, who knows where the songwriters are in a lot of cases? If the songwriter has died, they may not have left a clear line on their estate

as to who owns these things. Even if they're alive, if they're not a particularly big-name songwriter, their publisher might not know where they are. they're, you know, if they're a member of ASCEP or BMI, they might not know where they are. And so essentially, Congress a while ago designed this sort of backup system saying, okay, well, this is the Wild West. No one can really find anyone sometimes. And so we're just going to allow people to, you know, if you want to license a song, you can file a notice of the

copyright office. It says, I'm going to use this song. Consider this public notice. If you are a songwriter and it's yours, please come forward. And obviously everyone in the music industry is reading the copyright notices every day closely to see if their name is. Every day, right. And there's batch submissions, so you can submit thousands of them at a time. And so it was this just sort of crazy wild west, and no one was really, the money wasn't getting where it needed to go, and the songwriters weren't even aware if their work was being used,

and it was just a mess. So what MMA does is it creates this licensing body. It's called the Mechanical Licensing Collective. What a name. Yeah, it's very sexy. The only thing not modernized by the music modernization app is that. Yeah, the MLC. But what it does is it has the ability and the authority to take a check from anyone who wants to license any song and then grant a blanket license.

So now if I'm a service like Spotify, I can now walk up to this mechanical licensing collective and say, I would like one of everything. It will say, okay, here's your bill. You write them a check. You walk away and you are now legally indemnified. Now the mechanical licensing collective is the one who's responsible for turning around and then finding all the people that need to get paid. And so that was a way to smooth the market out a little bit so that you didn't have Spotify getting jumped with lawsuits from people they couldn't find. And songwriters weren't missing out on royalties that they were entitled to. How does this collective find the songwriters?

Do they employ like detectives? What is the mechanism by which they go pay people? So there's a committee. always a committee A committee within a committee I think it's left a little open-ended I mean there are So there's a group called

The Harry Fox Agency That has been doing something like this It was more of a voluntary association Like you had to sign up To be represented by Harry Fox I don't know what the specific procedures are For finding folks But there is a mandate that says

Well you only have so many years To come forward and collect the money That's owed to you Otherwise it just sort of goes into this box And then it's just given back To the Mechanical Licensing Collective You know and it wasn't perfect There were some questions about the representation on the governing boards of this organization were disproportionately music publishers who are intermediaries and not songwriters.

So I think the split ended up being eight publishers and four songwriters or something like that, or 10 and four. And it's important to keep in mind that much like record labels don't technically represent the interests of artists, publishers don't technically represent the interests of songwriters. They are a Venn diagram, which overlaps sometimes, but is also very divergent sometimes. And so there was a lot of back and forth in the songwriter community about what that balance should be. But overall, I think everyone managed to hash out something that they weren't super enthusiastic about but could live with on all sides. And that's where that half of the bill ended up. So just to zoom all the way out, we've modernized music by forming a handful of committees. Yeah, basically.

That's definitely one way to look at it. I think the important thing is fundamentally copyright in the American system is structured as an economic right. And a lot of copyright is designed to ease the market to let the market operate efficiently, which is why we have things like compulsory licenses, which are licenses where the law says you cannot refuse someone the right to use your work, but you do have the right to get paid for it. And so there are provisions within American law that basically just are designed to lower the transaction costs of using these copyrighted works. And so in that sense, this is a big deal because it allows major players, you know, and potentially competitive players, though that's always tied up in rate setting. And, you know, if something is a very expensive business like music is, you might not get a lot of competition. But theoretically, now the information cost of starting up a competitor like to the new Spotify is much, much lower.

and it will allow, in theory, more competition to kind of come into the market. In addition to making the lives of service like Spotify and Apple Music a lot easier. Yeah, I mean, we've talked a lot, actually, on the Vergecast about just how difficult it is to start a competitor to Spotify because of the enormous thicket of copyright trivia you have to know, and then everyone's mad at you and then Neil Young sues you because you didn't send a letter in the mail. And so you think that's going to be reduced by this? I think it is. I mean, so if you kind of look at it, the two examples I like to use are prior to the MMA getting passed, you had really two options if you wanted to start a music service. You could do what I understand Amazon did, which is you go and clear every song manually before you put it online, which is why Amazon music for a very long time had a very spotty catalog. Or if you could do what Spotify did, which is just roll up, set aside a slush fund and say, we're just going to get sued and just go forward and do it anyway.

and end up with a deeper catalog. But those were your options. You either had to be extremely careful in your steps to get to market, or you could just move fast, break things and get sued. And hopefully this will ease that ability. It also does a thing which you couldn't really do with these kinds of licenses before, which is obtain a blanket license, which, you know, we sort of joke it's your,

I'll take one of your finest everything, where you can license the whole corpus of musical compositions. and that is not something, you know, before you had an entity that was allowed to license all these things, if you had to go find every single songwriter, that was just impossible. So now if Spotify was starting today, they'd be able to jump in and say, okay, I want all of it, write one check and then just kind of go about their business. This episode of the Vergecast brought to you by Smartwater, not satisfied being like other brands, Smartwater looked up at the clouds and said,

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Check out Hilton hotels and resorts. travel like the boss. So are people going to get paid more? I mean, that's kind of the fundamental question. When I play a track on Spotify, there are a lot of musicians, famously Taylor Swift once upon a time, which appears to have gotten over it, who say, Spotify doesn't pay me enough, and I don't want to be there. So is this going to help people get paid more?

It is going to help people get paid who weren't getting paid beforehand, certainly. There are things in the Music Modernization Act, so the rates that services pay for most of the licenses that they use in the context of streaming. There's a bunch of different kinds of licenses you can get kind of depending on what you're doing with the composition. Most of the licenses that Spotify gets have their rates set elsewhere, either in a rate setting court or something like that. Now, there's like the copyright royalty board. The way people structure what the price is for a license is wildly different depending on

specifically what kind of right you're talking about, who's using it, and who's trying to get it. Those are all going to give you totally different processes in a lot of cases. And so one of the things that MMA does, which we are not super fond of, is it tweaks some under the hood settings about how those rates are set at the copyright royalty board, which is this group of, I think, three administrative law judges sitting in the copyright office that get to adjudicate what the correct rate should be for these things. And one of the things that the bill does is there used to be a standard called the 801B standard. And the 801B, Section 801B of the Copyright Act, it's like, I love this. I know, this is how eyeball deep I've been for the last few months. Section 801B basically said, okay, when judges set rates, they have to consider what the free market rate for this would look like in a hypothetical free market, which of course doesn't exist.

There is no hypothetical free market for a lot of these things. But they can take into consideration some other factors, like the benefit of licensees, so the benefit of people who want to access the music, the availability of these works to others. You know, just kind of a small laundry list of things that they could consider to adjust the rights up or down. Now, functionally, the way these copyright royalty judges

had been actually using this A-O-N-B standard was to say, well, what do like, you know, similar enough services in the wild pay for these things? And then do we see any really compelling reason to bump that number up or knock it down a little bit? And the answer was always no. They basically just took, you know, the sort of in the wild example of a contract and used whatever rate was in there. The problem is that, you know, as I mentioned earlier, there really is no competitive free market in these. And that's partly as, you know, and part of that has to do with the fact that there are rate setting courts. but it also has to do with the fact that it's an incredibly concentrated business.

And part of that is artificially imposed by the law because copyright law, for example, cares about whether you can click the next button to skip a song. That will get you different results, you know, in what kind of rate you have to pay sometimes. Spotify pays a different rate than Pandora, because Pandora doesn't let you pick what track you want to listen to. They both pay different rates from SiriusXM because that's a satellite service. And so basically you have this sort of hyper concentration on the delivery side. And so if you're just looking at contracts in the wild, who's in the wild? You have Google, you have Amazon, you have Apple Music.

And if those are the rates that we're using as the standard now, what does that say to any new entrant? Basically, that says if you can't pay what Amazon is paying or what Spotify is paying, maybe you just shouldn't have a business. Yeah. You know, it becomes a sort of self-fulfilling prophecy where we just ratchet up what the baseline is for these rates. And it's amazing. If you really think about it, Apple subsidizes Apple music.

Google has a big business that can subsidize YouTube music or whatever it is called now. Yeah. And it's a loss leader for, you know, I mean, it's not necessarily a loss leader because it's not drawing people into the rest of their ecosystem. But you're right. You have to have this huge corporate slush fund to subsidize. In fact, you're going to lose money on a music business. Yeah.

The only one I can think of it, like, truly stands alone at scale, is Spotify. and they're a public company and they're obviously scrutinized. And like you said, they just have a slush fund to get sued. Okay, so that is songwriters in extreme detail. But fundamentally, the Music Monetization Act, one piece of it, if I'm getting this right, creates a mechanical licensing collective that makes it easier for music services to get those licenses and for songwriters to get paid. Yes. Do you think publishers and streaming companies have too much power in that process?

Yeah. I mean, as a general rule, yes. I mean, a person to ask on that would be songwriters really rather than me as a public interest person because I'm sort of setting from 30,000 feet. Again, I know there was some concern about the oversight of this process via the structure of this collective. You know, part of it was, you know, who's in charge of reaching out to find these new artists or these older artists who have sort of dropped off the map? Because if it's publishers, then there's a conflict of interest because there's this sort of statute of limitations. and how long you have to come forward and collect the money. And so there's a conflict of interest if a publisher on this board would say,

well, you know, we want to find this songwriter, but also if we don't find them in three years, I get to keep the money. You know, so there's really kind of, there were healthy debates about this, you know, and I think it's not, again, it's not perfect, and I think that the publishers tend to be generally overrepresented in this board. At the same time, it is a little reflective of kind of the market sure that they have now. and there's a separate debate about whether they have too much market share right now, you know, whether the market as it is currently structured is not ideal,

and maybe we should make this look something different. But again, it's a huge rabbit hole of an argument that I'm not deeply familiar with. So I think it's safe to say it's been hotly debated. Got it. Okay, so that's bucket one. Bucket two, you said pre-1972 works are really important. Yes. Why are they really important?

The preface to this is that song recordings made in the United States prior to the year 1972, specifically prior to February 15, 1972, do not have a federal copyright protection. This is just a weird historic quirk and a couple of bad decisions by Congress. Essentially, they gave copyright protection to sound recordings for the first time starting in 1972. Prior to that, sound recordings were protected by state copyright law, which, if you can imagine a dumpster fire and then drop a nuclear bomb into it, you would get something close to the mess that is state copyright law. So essentially, these pre-1972 recordings were protected under this huge mishmash,

and that kind of worked okay for some years because the availability of copyright at the state level and the availability of copyright at the federal level, like the copyrights that a sound recording got at a federal level were usually reproduction and distribution rights, which were available in almost all the states. The real complicating factor came in 1998, which is when Congress created a digital public performance right for sound recordings. And this only applied to post-1972 recordings and not to pre-1972 recordings because pre-1972s are still under the states. And so this led to a whole bunch of lawsuits in the last couple of years trying to figure out, does California's state copyright law maybe envision a digital public performance right even though the law was passed in the 1950s?

Wait, can you just back at, what is a digital public performing rate? So a digital public performance right is this idea that you have to pay to perform a sound recording when that performance is done via webcaster or via digital stream. Okay, so Spotify plays a Beatles song. Right. Pretty nice and 72. And they don't have to pay the Beatles because there's no digital public performing right? Technically, illegally, they do not have to.

And this is important because there has never been a public performance. right for terrestrial radio for sound recordings. Over the air radio you catch in your car, they've never had to pay for the sound recordings. They pay for the compositions underlying it, but they don't have to be the sound recording licenses. And the idea was for a long time that this was a mutually beneficial arrangement

because radio stations were free advertising. You hear a song on the radio, you're more likely to go by the album. Right, or go to a concert. Yeah, that was the sort of the conceit behind it. But once webcasting started up, record labels went to Congress, and they said, this is garbage.

We've always hated this terrestrial radio exemption to begin with. We want a special right that just applies to these webcasters, because we don't think we can get it from the terrestrial radio guys because they have a very powerful lobby. So we're just going to attack the newbie, which, you know, in a lot of ways it mounted just attacks on being a webcaster and just on being a webcaster. That was where all of a sudden you had an income stream from a special right

that you only had at the federal level, but you didn't have at the state level, which meant post-72 works, had this new shiny, very valuable right, and pre-72 works did not. So that's when they started to diverge. This definitely means I should have started a classic rock webcast station and just made bank. Right. And that's the thing is there's been a lot of fighting about this, about whether streaming

implicates just this performance right or whether it also involves a reproduction and a distribution, in which case the record labels should be paid anyway. this spawned multi-state litigation by the flow-in eddy cases, which are the two guys from the turtles who sang happy together, sued in a bunch of different states. New York, I think there was one at Florida. There's one in California that's still technically pending to see whether each of these states' state copyrights theoretically covered a public performance right that the state legislature probably didn't never think of existing back when they passed the law.

So it's just being this gigantic mess. and fundamentally webcasting is an interstate affair. So there has been, you know, there's been talk about potentially what they call federalizing these pre-72 recordings. And so bringing them into the same copyright schema as everything else and just simplifying it and fixing the problem. The trick with that, what ended up being a sticking point, is that when Congress passed this law in 1972, they looked at the world and they thought, well, it's not terribly fair of us. if we give this new shiny federal right to a song that is recorded on February 15th, 1972, and we don't give anything to something

that's recorded on February 14th, 1972. That's just screwing someone. And so what they did was they said, well, we're not going to give you federal rights. But you are allowed to enjoy your state rights, and we will not preempt these beautiful state rights that you happen to exist under until the end of what at that point

was one full term of copyright. So it's like we're going to kind of give you a full copyright term functionally under the state law before we come in and say, no, no, you're ours now. And so it was a practical matter that meant none of these things were going to go into the public domain until this end date. And that was, at the time, it was 75 years. So in 1972, that end date was 2047.

I said, basically, none of these state protected works will be public domain nationally until 2047. And then in 1998, they came through and they did the Sunny Bono Copyright term extension Act, and they kicked that down another 20 years, so 2067. And so the sticking point in classics, or which is now Title II of the Music Modernization Act that just passed, the dispute was record labels wanted to create this new streaming right, and they wanted it to last until 2067, even for the oldest sound recordings.

Now, there's no public domain in sound recordings in the United States. It doesn't exist. Technically, even the Edison recordings are still under some state copyright somewhere, because a lot of state copyrights are indefinite. So until the federal government comes in and preempts them, they're just going to keep going. And so you had a situation where, you know, sound recordings from the 1880s are going to get protected until 2067, which is bonkers. And aside from just being rhetorically bonkers has a huge amount of implications for preservation of really old sound recordings, which are on very fragile media in a lot of cases. And so we got in there. And Senator Ron Wyden came in and said, look, there's no reason these.

recording should get sort of extra special treatment. This largely ended up being, I think in a lot of ways, an accounting thing for record labels is because a lot of record labels don't even know what they own. I think this is important to kind of put out there. The consolidation in the music industry has been so vast and has been going on for so long that labels have been buying up labels, have been buying up labels, and they do not track the chain of ownership. And so they legitimately cannot tell you.

I think Sony has the biggest catalog of pre-World War II recordings. In most cases, they just can't tell you what they own. They have no idea. But at the same time, they own something, and that's valuable, and that's on their balance sheet. And so then they also have things like Benny Goodman, and there are also some very famous ones that are in there, like Sanatra at the Sands a little bit later and sort of on and on. And so the back and forth ended up being, well, what do we do about this? Should we just apply a regular copyright term to these things, or should we let them continue to be protected with? this shiny new right that doesn't clean up the mess.

It just tax a new federal right on top of everything else. Yeah. And so it really got into the weeds. And that was a sticking point for quite a long time. And what the bill ended up doing was, for one thing, bringing the fully into the federal system because nothing is ever simple. It's not technically a copyright. It's a sort of copyright clone type right.

Oh, my God. For a bunch of very technical reasons, it is a new right that mimics copyright for all intents and purposes, including things like fair use and various limitations of exceptions. Oh, this isn't going to be complicated at all. No. We're not going to be litigating this for a long time. But yeah, so it creates a sort of parallel track copyright for these works,

and it gives them a term that is close to but not quite what other things get. So I think the earliest works, the first batch are going to go in the public domain in 2022. It's three years after the date of the bill's passage. So January 1, 2022. and then, yeah, it's like 98 years, and then there's a trunch that gets 100 years, and then there's a trunch that gets 110 or something like that. Wow.

But they will start hitting the public domain, and they will hit the public domain unequivocally, nationally, and completely, once they do hit it, which is huge for preservationists, because that means you no longer have any legal cloud over what you can and cannot do with these things, which is a huge deal. I have to say, listen, this part of this conversation

is giving me nightmare flashbacks to law school. So just for the listener, we've been saying the word preemption a lot. If you take a copyright class in law school and it's like exam time, there is always a question about a pre-1972 sound recording and federal law preempting the state law. Because one of the things that the 1970s you copyright acted was it said this is now the copyright law and the states can't make any of their own copyright law, except for this one category of things. And it's basically a math problem that you have to do before you answer this like law school exam question. I remember taking those exams and just staring at it and literally like, oh, fuck. Like this is the most complicated thing. It's up there with term calculation in terms of just like, I have flowcharts on my wall.

It's that bad. And I have a lot of them too. It's like now who sets the rates for these various. They're all music related. Who sets the rates? How are they licensed? Who gets paid? And it's just all flow charts everywhere.

I feel like Charlie from It's Always Sunny with the Pepe's Sosa. All right. So we got the first bucket. We made it easier for songwriters to get paid, easier for services to get the licenses. Second bucket, a little less clean, but we've created a clone of copyright law for sound recordings pre-1972 that lets them go into the public domain and provide some revenue to those people. What's the third bucket? Actually, before we get to the third bucket, the one thing I did want to add on is that a really important part of that second bucket is that for sound recordings before the passage of this bill, so actually right now, as of recording, the way that money gets back to artists ostensibly is that for these pre-1972 recordings

is Spotify cuts a check and sends it to the record label. Some of that may or may not make a tone of the artists. Yeah. That is entirely a contractual issue between the label and the artist. And so, you know, a lot of what drove this is the fact that these contracts for these older recordings, you know, if they said you're entitled to any sort of residuals, it's you can get residuals from reproduction and distribution, but, you know, there was no performance right at the time. So they're not entitled to any of those by their contract. What this sort of second bucket in Music Modernization Act does is it kicks this over to another licensing collective, which already exists, called Sound Exchange. So we have been doing something like this for a little

while, and sound exchange basically takes the check and it divides it 50-50 between the record label and the artist, which is huge because unless you're a pretty highly regarded artist, I almost guarantee you're not negotiating 50% out of your contract with your record label. So it's a big deal because these legacy artists, you know, a lot of whom, especially artists of color, deeply exploited in the first run of their career, are now legally entitled to 50% of all of the royalties from the streaming, which is a big deal. That's a huge deal. Do not want to undersell that.

Yeah, so the third bucket is the AMP Act, which is the little sort of baby brother that no one really had any complaints about. And everyone sort of forgot to talk about as a result. The Amp Act is really short. Basically, what happens is, so I mentioned sound exchange. So Sound Exchange is this collective, which basically does, you know, what you're talking about earlier, if I'm a Spotify and I say, I want to write a check for all of the royalties or all the licensing fees that I owe for the sound recordings that I'm playing. I can just go to sound

exchange. They'll say, here's your bill. I say here's my check, and you'll walk away. And sound exchange then has to turn around to divvy up the money. One of the things that was common practice, or it has been common practice for some time, is that if you are an artist and you're entitled to royalties from sound exchange, you can write sound exchange a letter and say, I would like, you know, 5% of my royalties to be diverted to the producer on this track. And here's who that is. And that's just kind of been an informal system that they've been doing for a while. And all AMP does is now it gives it a legal provision that says this is exactly how you do it.

And it now has the force of law if you decide to do it. And is that driven by just how prominent producers have become in music? I think so. Like I said, this is a practice that was not super uncommon and it doesn't make any of it mandatory, which I know, you know, the Recording Academy, who runs the Grammys, I think would have preferred a world in which they had a legal, you know, sort of recognition that they are entitled to a portion of the royalties that are coming in. But, you know, this is, this does codify this practice as something that is now, like, legally set in stone and enforceable. So basically it is the standard

for, like, the form letter you send in to say, hey, I want you to do this. And then here, here's how the request works. Right. And who you send it to and how, how, they sort it out and like what kind of, I think there's some stuff in there about what kind of steps they need to take to honor it. But yeah, it's mostly just official legal recognition of this practice. I gotta say we've modernized music in this act. It still sounds like a nightmare or mess. Oh, yes. No, it's got a long way to go. And it's going to get more complicated. As soon as the dust is settled on this, which it hasn't even settled yet, you know, we're still waiting on a signature. You're waiting on the president's signature. Right, we're reading on the president's

signature. But there is... He's not distracted at all. Yeah. get him to focus for 30 seconds. Maybe we'll get something done. No, so the next big thing really is there are, if you really want to get into the legal weeds, the consent decrees governing ASCAP and BMI. So ASCAP and BMI are these two, they're called Performing Rights Organizations, which means that they administer for songwriters the performance right,

which is one of that sort of bundle of rights that I was talking about earlier. MMA deals with two of the three, which is the reproduction and distribution. The third one, performance for songwriters, is dealt with. by these collective ASCAP BMI. And there's two other CSAC and GMR, which is global music rights. But anyway, so that's between ASCAP and BMI, they controlled 90% basically of all the songs that are in sort of of the current catalog. And ASCAP and BMI were created in the very early 20th century because of your songwriter, especially in the early 20th century.

You as an individual have no way of monitoring when your song is being performed publicly. It could be performed in a honky tonk in Mesa, Arizona, and you're sitting in brink. And you have no way of monitoring that at all. So they created ASCAP and BMI, which are, you know, sort of, in some ways, they're kind of like unions. The idea being ASCAP would say, no, no, no, you sign up with us. We will collect your royalties and pay them out to you. And we will also enforce your public performance right. Yeah.

And so if you go to a bar nowadays, you'll still see them sometimes in the front window. They'll have little ASCAP and BMI stickers, which basically just says, I have paid my licensing fees. It's like we're on the jukebox, right? You're right. exactly. And so, as you can probably imagine, this went from, hooray, we are protecting artists' rights, pretty quickly devolved into breaking kneecaps territory, metaphorically speaking. I don't think anyone's kneecaps are actually broken. But, you know, all kinds of weird shenanigans started happening. Like, gas cap wouldn't disclose what was in its repertoire. They just

said, well, you better pay us and find out, be shame if something happened to your business, that kind of stuff. When I was a lawyer at one of my, one of my, cases was a bunch of firemen who owned a bar and they didn't pay their ASCAP license. Oh, God. And so it was really funny because their law firm would call me all the time. And I'd be like, well, I can't help you. I haven't gotten hold of them because they're fighting fires. Right.

And that excuse just like kept buying me time. Sorry, they're saving a kitten from a tree somewhere. Yeah, exactly. But yeah, so they got sued by, both ASC and BMI got sued by the Department of Justice for antitrust violations for basically the sort of collusive antitrust behavior. And so they've been since 1940 something, but for the relevant part since 1951, they've both been operating under practically identical consent decrees that govern what they can and cannot do.

And they're pretty short and relatively high level. But part of this is there's a rate court that if you can't agree with ASCAP or BMI for the rates, you can kick it over to a rate court to try to settle the dispute. They don't like that. They think it artificially deflates the rates that they can get. And so, you know, ASCAP BMI have been raising a statement. about this basically for the last 67 years. And then they actually got the Trump administration,

and they're kind of like the dog who caught the bus in a lot of ways, because there is at least one Supreme Court case, which explicitly says, oh, yeah, this stuff is totally anti-competitive antitrust violation. It's collusive price fixing. But there's a rate court, so it's fine. And if the consent decrees vanish, so does the rate court back on the antitrust problems. Oh, my God. Yeah, and so there's a big debate right now about the assistant attorney general,

Macon Delrahim, who's in charge of the antitrust division. He looks at consent decrees and says, you know, this is a lot like us acting like an agency. There's a lot of consent decrees. Like the DOJ, they were sort of the tool of choice for a long time. And there's a lot of them because in the early 20th century, they were entered as indefinite. And so there are a lot of consent decrees from like the 1920s and 30s, having to deal with movie theaters, and they're all just standing. They're all just there still on the books.

So the DOJ antitrust division has to employ this huge variety of specialists in each of these industries to be able to administer these things. And the music industry is, as we're talking about now, kind of a nightmare of complexity. And so the DOJ is basically saying, like, look, I get it, but can someone else please be taken care of this other than us? And so I think it's the beginnings of a hopefully healthy back and forth on what to do about these. And that's the next fight. That's the next big one.

Because the entire, it's not an overstatement to say the entire music industry is predicated upon the existence of ASCAP and BMI. If they were to vanish tomorrow, it would just be, it was a Ghostbusters line about like cats and dogs laying together mass hysteria. That is absolutely what it would be. Well, that sounds like a nightmare fight. It sounds like a good time to have you back on the show to explain it to us when it happens. Here's my last question. So Trump will presumably sign the Music Modernization Act. It will go into law.

If you're just like the indie musician, your kid with a YouTube channel, you're a songwriter. What happens to you? What changes about your life? I think if you're a modern indie songwriter, you're going to find that you are going to get paid more reliably for your work, which is a good thing. If you're Taylor Swift, what changes for you? Not a whole lot. Taylor Swift is, I don't doubt that Taylor Swift has been getting all the royalties due to her for some time. Maybe not by her estimation, but legally she's been, I would find it very hard to believe that someone has been pleading ignorance as to how to find her.

Yeah. Awesome. Well, Meredith, thank you so much for explaining that to me. It's wild that, like, I know it, but every time I talk to someone smart about it, I realize that I actually don't know anything. So I really appreciate your time today. It was really, really interesting. Well, thanks for letting me come on and geek out about it. Thank you so much to Meredith Rose from public knowledge for explaining it to us.

I know I got a little weedsy there, but I think it was super worth it, and she's super smart, so that was really fun. We are doing these interview episodes. I think they're going great. People seem to like them. But I want to hear from you. Tweet at me on Matt Rackless. Let me know what you like. Let me know what you don't like.

I'm really interested in that. And tell me who you'd like to see on the show next because the options are infinite.