Progress in copyright law and the music industry has been a slow, uphill climb for decades. But those who desire change are getting closer to the summit, with new laws and regulations recently passed worldwide. As the music industry grows increasingly more digital and stream-based, the way royalties are rewarded—and sometimes traded as commodities—continues to evolve daily.
Music Royalties in 2021
The current state of the music industry after the Music Modernization Act went into effect on January 1.
In 2018, the Music Modernization Act was signed into law, paving the way for sweeping change in the music industry. The legislation’s main goal was to streamline the process for license holders to get paid when their music is streamed online. As streaming services have become the primary way consumers listen to music, new copyright law was necessary to serve the industry moving forward.
One of the Act’s primary ambitions was to lessen the gap between royalty payouts for the music industry’s biggest stars and the artists still trying to make a living. Although streaming services such as Spotify have shown increasing user growth and countless streams, the mechanical royalty for a stream is much less than it is for a download or a sale.
MMA Legislation
Revamping Section 115 of the U.S. Copyright Act brought with it three pieces of legislation:
- Music Modernization Act. Aimed at modernizing music royalties for a streaming world.
- CLASSICS Act. Compensation for legacy artists (pre-1972 recordings).
- AMP Act. Allocation for Music Producers to improve royalty payments.
Previously, pre-1972 recordings were not protected by copyright law but will be covered under the new legislation. The new copyright law was also a boon for producers and engineers who can now opt to receive royalties through SoundExchange, which offers a higher pay rate.
What Will the Music Modernization Act Change?
The MMA established a new agency to govern licensing, the Mechanical Licensing Collective (MLC).
How Does The Mechanical Licensing Collective Work?
The MLC will administer the new blanket license as established by the MMA. Here’s how that will look:
- Music platforms send monthly usage reports and mechanical royalty payments to the MLC.
- The MLC checks the usage activity, matches it to the rights owners, and distributes royalties.
An additional benefit is The MLC Portal, which allows members to review their existing registrations, submit new works, and access royalty statements.
European Union Reforms Copyright Law
As the MMA is taking hold in the United States, the European Union has recently reformed its copyright law. One of the most significant issues in Europe is copyright infringement on user-generated content platforms such as Dailymotion and YouTube.
Part of the new regulations set forth by the European Parliament requires users to install content recognition software to curtail infringement. The new law also requires the platforms to negotiate new licenses with rights holders.
How COVID-19 Has Impacted Royalties
The impact of COVID-19 was devastating to the music industry in 2020. Globally, the music publishing business fell by nearly 35% and lost an estimated $4.11 billion in 2020.
Although the industry took a financial hit that will take some time to recover from, in some ways, the pandemic had a positive effect, opening new opportunities for artists and producers to collaborate. And while live performances have been completely wiped out, content creators have also discovered new avenues to monetize live music.
Live Streaming Concert Royalties
One of those new opportunities is live-streaming concerts and the royalties that go with them. Concert streams are a new type of music royalty that must be moderated to ensure that creators receive their fair share.
The most prominent players in the live-streaming space are Twitch, YouTube, Facebook Live, and Zoom. To carry the rights to a live stream, these platforms should be obtaining at least one of two licenses: a synchronization license (which allows for syncing audio with video) in addition to a performance license.
Performance licenses are necessary for typical real-life concerts with live audiences and are meant for one-time events. However, if the live stream is saved and later synced with music on a platform such as Twitch or Facebook Live, a synchronization license is necessary. While performance licenses are heavily regulated, it is the synchronization license that provides real negotiating power to content creators.
These streaming platforms are an essential avenue for established artists to promote themselves and continue to profit from live music. However, even artists that are just beginning can take advantage of royalties from live streaming. On platforms such as Patreon and Twitch, donation links can be included within streams. Even platforms such as TikTok and newer player Maestro allow creators to earn royalties from high volumes of viewers.
Music Royalties are Becoming a Tradable Commodity
Royalty Exchange is an open marketplace for music royalties attempting to be a disrupter to the long-established norms of the music industry. The framework is that artists earning a royalty can list the royalty as an asset on the exchange for investors willing to pay a fair price. Rights owners can re-list their assets or hold them and collect royalties.
Royalty Exchange believes that an open market redirects the distribution of royalties toward creators and increases the value of those creations.
The benefit to investors is access to a previously unavailable asset, while the benefit to the creators is leveraging demand for their product. Wall Street agrees. According to edm.com, “It should be no surprise that investing in music publishing is one of the hottest commodities on Wall Street and across the venture capital landscape.”
Earning Music Royalties in 2021
With the new laws set forth by the MMA, the challenges of earning a living as a songwriter or music producer have been lessened. However, the most profitable mediums for creators are yet to be determined.
The MLC distributions should make royalty reporting more transparent and more equitable for creators. But alternative streaming services could offer the most lucrative terms to new artists. As new platforms emerge and existing platforms modernize, earning royalties on music will continue to evolve further.
