Christian L. Castle, Attorneys -- Austin, Texas

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Congress Should Support Startups in the Music Modernization Act

[Published by Newsmax, August 20, 2018]

If you read the current version of the Music Modernization Act, you may find that it’s more about government mandates that entrench incumbents than a streamlined blanket compulsory license that helps startups climb the ladder. In the weeds of MMA, we find startups dealt out of governance by rule makers and forced as a rule taker to ante up payments by their competitors in a game that the bill makes into the only game in town.

Billboard reports that Republican Senators John Cornyn and Ted Cruz of Texas suggested a fix for this flaw—allow private market competition alongside the MMA’s government mandate.

Let’s review why this fix is necessary and how it could balance the roles of rule makers and takers.

It’s necessary because the problem doesn’t come from songwriters. It comes from the real rule makers—Amazon, Apple, Facebook, Google and Spotify. And startups know which side butters their bread.

Public discussion of MMA has focused on the song collective and the compulsory blanket license for songs, but the mandated digital services collective is more troubling given the size of the players involved. MMA calls the services’ collective the “digital licensee coordinator,” or the DLC. Rule taker startups are governed by the rule maker DLC, but have no say in the DLC’s selection.

Like Microsoft’s anonymous amici, startups know their place —especially against Google, Amazon, and Facebook, whose monopoly bear hug on startups includes hosting, advertising and driving traffic.

The MMA authorizes these aggressive incumbents to effectively decide the price to startups for the “modernized” blanket license. Why? Because the MMA requires users of the license to pay for the lion’s share of the “administrative assessment,” the licensees’ collectivized administrative cost payment that the CBO estimates will be over $222 million for eight years.

Senators Cruz and Cornyn object to MMA’s delegation of the government’s authority to one collective for songwriters and one collective for digital services—with an antitrust exemption.

Cruz and Cornyn's point is a valid one. Why should the government only permit one game in town? Rather than have the DLC run by the usual suspect monopolists, why not allow competition?

This is important–if startups can’t afford to buy-in to the license, it does them no good, and their biggest competitors decide the price of that license through the DLC.

Both collectives are to be approved by the Register of Copyrights, but MMA puts the Register in the unenviable position of being constrained to appoint certain types of entities by statutory mandate.

Here’s the mirror image language from the MMA instructing the Register on selecting both the song collective and the DLC:

“[The Register must choose an entity that] is endorsed by and enjoys substantial support from [digital music providers/copyright owners of musical works] that together represent the greatest share of the [licensee/licensor] market for uses of [musical/such] works in covered activities, as measured over the preceding 3 full calendar years;”

In other words, startups, who are most in need of the statutory blanket license, need not apply to be the DLC.

That clause alone justifies the Cornyn/Cruz solution.

“Modernization” should make licensing easier: level the playing field for startups and protect them from famously predatory competitor incumbents, as well as copyright infringement lawsuits from the rule takers.

These are all good reasons for the private market solution. Competition at least gives startups hope for the pursuit of fair treatment.

A wise member of the Texas Congressional delegation once told me Big Tech gets to climb the ladder to the American Dream like everyone else. What they don’t get to do is pull the ladder up behind them after getting to the top.

Expanding competition rather than mandating an exclusive collective could keep that ladder available to everyone.

Chris Castle is the founder of the Austin, Texas-based Christian L. Castle Attorneys in Austin, Texas. Chris has testified on artist rights issues at the UK Parliament, spoken at Congressional seminars and lectures at law schools and business schools in the US and Canada on music-tech issues and artist rights.

 
 

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