Despite What You Hear, There Are Serious Questions About the MMA

Maria Schneider: An Open Letter to David Israelite of the NMPA, and Anyone Interested in the Music Modernization Act

Dear Mr. Israelite,

I received your point-by-point response that you apparently shared with legislators and interested persons in response to my 10-point critique of the MMA. Thank you for your perspective. Perspective is important. But in my opinion, your letter contains misdirection, many important omissions, and inaccuracies. I explain this below, and in much greater detail in this downloadable PDF point-by-point response to your letter. I’m just giving my perspective, but I think it’s an opinion educated by years in the real trenches of the actual music business.

The letter below is long – I know. But THAT’S how many things are problematic with this bill in my opinion. I hope we all agree, expediency shouldn’t supersede getting things right for music creators and industry sustainability. I ask creators, industry people and lawmakers to read this entire letter with a mindset of getting this bill drafted right. I believe these points aren’t only optimal for achieving success, I believe they’re mandatory for achieving success.

Mr. Israelite, you used the word “confused” several times in referencing my open letter. I’m not confused. But, my perspective is very different than yours. I’m asking you to read my perspective which I know I share with countless musicians and songwriters in this country. I’m asking you to advocate for nine simple “fixes” that will ensure the MMA is a success for music creators, and ultimately, everyone.

We both respect and are deeply grateful for the amazing support we have received from our Congress. That’s wonderful. But the MMA, as currently written, is not yet wonderful. Congress is expecting the MMA to directly help music creators who have been severely damaged from the current streaming market, and I’m throwing out my ideas to get us to that goal.

Here’s a new sobering statistic: This recent article points out how 99% of all streaming on Spotify involves only 10% of all songs. If true, that means 90% of music is splitting only 1% of the financial pie. Who is living on molecules of pie? Musicians and composers I revere: Pulitzer Prize winners, MacArthur winners, NEA Jazz Masters, Grammy-nominees and winners (those you don’t see on the telecast), musical icons, contributors to American and world culture, masterful musicians and songwriters revered in local communities but that aren’t widely known, leaders of orchestras and bands, teachers at conservatories and colleges, and selfless mentors. We are in niche genres: jazz, classical, Latin, world music, as well as hip-hop, folk, gospel, blues, electronic, rock, indie, etc. It’s a massive and diverse group, the vast majority of songwriters in the U.S.

We, the 90%, are the collateral damage in the digital economy as presently structured. And much of it has come at the hands of the very same corporations that you trying to make sure will run this next MMA show. While the MMA has some strong ideas, it vests WAY too much power in the hands of the biggest publishers and streaming companies. Why am I so concerned? Because I and countless colleagues in these niche genres have learned painful lessons we’re not keen on repeating.

Lesson 1: The three major music companies that are locked and loaded to run the music licensing collective (let’s call it Corporation A) are the same companies that allowed themselves to be enticed by the self-serving Svengali, Daniel Ek, whose beginnings were built on infringement (uTorrent). The day Warner, Universal, and Sony bit a huge chunk of poison apple in the form of equity in Ek’s Spotify, they traded their contracted musicians’ and songwriters’ valuable creations for ads. That tectonic shift gave Ek most of the world’s music, it legitimized “free,” and it created a gaping conflict of interest for the Big 3.

Songwriters and attorneys argue if it was a “fiduciary breach.” In my opinion it is a massive breach of trust and ongoing conflict of interest. And as the 90% have suffered a huge collapse in income, inversely, we watch these companies celebrate their earnings from 10% of songs. That conflict of interest and breach of trust are very relevant to the MMA, and this history absolutely must not be ignored in writing the governance sections of the MMA. And, if that reality is painful or upsetting for industry to read, I can only answer that they themselves created it.

Lesson 2: There’s something else occurring as a result of streaming that’s critical to understanding the niche musician’s and songwriter’s perspective. It’s that many, if not the vast majority of record companies, are no longer advancing money for a lot of music on their labels. It’s now the artists and creators, in countless numbers, who are each sinking tens of thousands of dollars into making their own records. Many still go with a label despite having to front the costs themselves just to be part of a distinguished label roster. There are many fine small labels doing everything they can to make that a worthwhile trade, and some still struggle to front budgets. The point is, those niche labels and independent musicians face either a zero, or statistically insignificant, chance of a return on their investment through streaming. Many report barely paying for a sandwich with their royalties.

If one only cares about the top 10% of songs and launching superstars to the stadium echelon, and keeps the blinders on for the rest, I suppose one can claim some successes with streaming. But if one values the wide array of music our country and the world has to offer, then our biggest music corporations have failed us, and failed our culture of music as a whole, by cashing in on Ek’s unsustainable business model. Spotify’s IPO papers confirm to me the streaming model’s income and wealth inequality as well as unsustainability. The 90% knew this years ago.

Lesson 3: As I see it, those set to run the show under the current draft MMA have a terrible track record in this arena: The NMPA owned the Harry Fox Agency themselves and was already once tasked with solving the Spotify mechanical issue. In my opinion, that effort failed miserably: the feuding, in-fighting and finger-pointing that occurred between the NMPA, Spotify, and HFA, and the ugly lawsuits brought by independent songwriters and small publishers resulting from what seems to me to be a collective failure to properly handle and respect mechanical royalties, left these companies acting like the Keystone Cops. Yet ironically, it is the NMPA and the Digital Media Association (DiMA – companies like Google, Spotify and Amazon) that, in my view, are steering all power under the MMA to the same cast of characters, while conspicuously avoiding objective oversight and reasonable checks and balances.

I have no problem with the NMPA or its members and Spotify being involved in the solution. But I have a HUGE problem with them controlling the solution, and controlling the entities that will be formed under the MMA.

These three lessons frame many of our perspectives on the MMA. It’s a grim reality that explains why I don’t trust certain entities to run the show.

Below are simple, specific proposals that I think are rooted fairness and common sense that will greatly will improve the MMA’s actual chances of ongoing success for all of us.

1. Songwriter. If you’ve not yet amended the definition of “songwriter,” will you agree to advocate for a rewrite that would requires a “songwriter” to be someone with a recognized and substantial professional career based on songwriting or composition? By the current definition, even an employee of a publisher who long ago wrote part of a lyric of one song would qualify as a “songwriter.” A definition that gives songwriters and composers that assurance is necessary.

2. Equality. Imagine that Congress passed an Act that would set up a private entity to tackle the issue of “Women’s Health in the United States.” Then imagine that the board of directors was crafted to have only TWO women on the board of TEN people. Pretty outrageous, right? Now, further imagine that women were offered the prospect of the board being expanded to 14 total members, and instead of 2 out of 10 being women, it was now going to be 4 out of 14 (an 8% increase, but still a very small minority). Finally, imagine that the 10 male members were all executives at big Pharma, earning big salaries and bonuses from expensive and very controversial women’s pharmaceuticals. We’d all find that horribly outrageous, right? Now, imagine how infuriated women (and men of conscience) would be if the trade association for Big-Pharma consoled women who advocated for a balanced board, with the following catchphrase: “don’t let the perfect be the enemy of the very very good.” (your words at the end of your letter)

I hope this spot on analogy offers you and others perspective. Therefore, can we agree that the “Collective,” (I call it Corporation A) should have governance that, as between publishers and songwriters, has at VERY LEAST, 50% songwriters – songwriters chosen by songwriters themselves? Independent songwriters deserve an equal presence with publishers on a board that will control OUR works and economic future. Who wouldn’t support a 50/50 board?

3. Board Diversity. Can we agree that the Board for the “Collective” (Corporation A) would be MUCH better if it also had several “outside” totally independent voting board members, especially members who have actual experience and success in leading the development of new software, database and cloud based systems? There are countless such all-stars and experts. Corporation A is really a technology company that will be based on system design, program management, and vision in the field of data management and cloud services. To achieve success with that tall order, technology expertise must be included on the governance board itself, not relegated to some “advisory” committee, or worse yet, to some downstream subcontractor (who could be a conflicted DiMA member like Google).

What on earth are 10 publishers doing at the helm of a technology company? If our company was tasked to design and build a new artificial heart, we’d want the worlds’ best surgeons and bioengineers on the board, not 10 big insurance company representatives and 4 sick patients. Independent objective technology experts (e.g., obviously not Google or anybody else from, or related to, Corporation B due to conflicts of interest) will bring more value to this board than the songwriters and publishers combined. I am confident our elected leaders would agree that this would markedly increase the chance for this “technology company” to be a success.

4. Open Competition. Can we agree that a) the publishers should not have a veto power over who is selected to be Corporation A; and b) the members of DiMA should not have a veto power over who is selected to be Corporation B? The language in the MMA, “endorsed by, and … substantial support of,” (used for both Corporations A and B, pages 17, line 21, and page 58, line 8 of the Government PDF of the MMA) basically gives outright veto power to the big players. I am willing to bet that Congress would be more comfortable if the selection of these two entities was done in an open, competitive process, where creative and talented teams of people: small business, minority-owned, women-owned, technology-based collaborative teamscould freely assemble and compete, and would be assured of a fair shot at winning this great opportunity.

The Register of Copyrights should be able to pick these two entities through an open market, not have her choice restrained by a closed back room. Replace the language, “endorsed and supported” with language requiring that each entity: “will be chosen by the CO through an open and competitive process, where selection is based on the strength and merits of each applicant, and where conflicts of interest are disclosed and addressed.” Our government mandates that same process even for choosing a vendor for toilet paper! Surely we’d expect just as much when entrusting an entity to guard the economic future of music creators. Wouldn’t we?

5. Business Continuity. Can we agree that if either Corporation A or B goes belly up, and/or the CO needs to pull the plug, the MMA should clearly state to everyone that none of the software, data analytics, or algorithms, belongs to the entity? We can all fairly agree that Spotify would not exist if not for the music, right? So then, considering that this whole investment is basically underwritten by revenue generated by the music that songwriters have written, we need to be assured of “business continuity” should things go sour.

The MMA is NOT intended as an opportunity for a private entity to build trade secret assets that could further cripple the industry. We cannot allow this huge investment in technology to be usurped by any party should Corporation A fail in living up to its expectations. It’s Business Continuity 101 stuff. So rather than assure us that somewhere downstream, there MAY be regulations that might clarify this as you suggest, let’s build that HUGE point right in the section of the MMA (page 31, line 16) that addresses the Database. Something simple, like: “All data submitted to the Collective will be owned by those parties submitting the data, and is licensed to the Collective for the sole purpose of fulfilling its duties under the MMA, and will not be assigned to any other party. All data analytics, algorithms, software, APIs, software tools, resultant data, and aggregated data developed by [the Collective] or its subcontractors will be held in trust by the U.S. Government, and will not be exploited or encumbered by [the Collective] for any purpose other than as authorized under this Act, and will not be encumbered or sold or assigned to any other party.” Should something unforeseen happen, we’ll all need to be protected.

6. Meaningful Audit Rights. Can we agree that meaningful audit rights for independent music creators are necessary? After all, the MMA IS stripping away our rights to bring a suit for infringement, so let’s look at the tradeoff: The current provisions (page 42, line 5, through page 45, line 20 of the government PDF) are great, if we’re talking about Sony, Universal, and Warner, that can afford Deloitte. But if I want to audit a $25 payment I received from Spotify, I can’t be expected to hire Deloitte for the impossibly complex multi-step process laid out in the MMA. Two simple requirements wouldn’t hurt anyone: 1) a streamlined audit right for small amounts (details could be ironed out through regulation), and 2) spot audits every six months of random independent music creators’ accounts, just so the CO is exercising some ongoing QA/QC on the Collective’s systems and performance. Both create great incentives for the Collective to do a good job, saving money in the long run, and increasing everyone’s confidence.

But there’s something else lurking in those audit rights: Today, if I sue someone for infringing my copyright, I have the right to recover attorney’s fees in certain cases. But under the MMA, not only is that absent, but I’d be required to hire a CPA and pay for my own legal and audit fees, even if I win. That’s not fair in light of what we’re giving up. We deserve the right to recover our reasonable costs if we’ve been wronged by Corporation A or B. It’s fair, and keeps entities on the up and up. That’s the purpose of the attorneys fees provision in the current copyright law. Why should we give that up?

7. Black Box. Independent creators will most likely be the ones who won’t know to sign up with the Collective, or who won’t have filed a registration with the CO. Their money, largely, will end up in the black box. I meet countless musicians and songwriters who know nothing about mechanical rights or copyright.

My opening statistic showed that 90% of the music on Spotify shares 1% of the pie. The black box money will most assuredly be out of that group. If Corporation A can’t control their budget, why should these unpaid creators unknowingly foot the bill? Shouldn’t the money be “borrowed” from those that MOST benefit from the MMA? (If it’s even legal for trustees to “borrow” money held in trust.) This bill needs to create meaningful incentives like this for the Collective to not overspend. (Not to mention this “borrowing” right of the Collective seems to be contradicted by the obligation to hold those royalties in a black box for 3 years.)

Secondly, the idea that this black box money should be distributed (after 3 years) to songwriters and publishers according to market share is absolutely abhorrent. I don’t often bet my life, but I’d bet my life that Kendrick Lamar, Taylor Swift, Bruno Mars, Lady Gaga – name any bigtime music creator – would not want to receive black box money belonging to independent music creators who haven’t received it because they didn’t yet know how to get it, or whose song had a wrong spelling, wasn’t filed at the CO, or whatever. No music creator would knowingly endorse something so skeevy. That money should be held until it is claimed, and if after many, many years, it’s still unclaimed, perhaps it could go to scholarships or something else worthy.

8. Immunity. Some legal commentators have given “just cause” to be concerned whether parts of the MMA are unconstitutional. Today, many creators don’t file copyrights: it’s expensive, and it’s not required under international laws. I have that right under the Berne Convention that the U.S. has signed. If a band of young kids in Peru, Canada, Nigeria, the UK, you name the country, records 10 of their songs, they submit them to Spotify, and it goes viral, are you telling me that they won’t get paid until they figure out that they need to first file the papers and possibly pay hundreds of dollars in fees to the U.S. CO to register the songs in the U.S.? That’s the way I read the bill. Can it be that we’d require the entire world to pay registration fees to the U.S. Copyright Office before they are allowed to get their first dime from Spotify? In addition to possibly being unconstitutional and in violation of rights under the Berne convention, it smacks of musical colonialism. I suggest the MMA be fixed so creators aren’t left with the short stick.

9. Immunity for the “Collective” (Corporation A). If you hired a financial planner for your mother, and that planner gave you a contract saying, “Even if I am negligent, sloppy or incompetent, and/or even if my services deviate from the standard of reasonable care, you and your mother can’t come after me when I lose all of your money,” you’d be shocked at their nerve. The same goes for surgeons, accountants, or anyone else in society that owes us a duty of care. So, I was shocked to read the fine print (page 93, lines 9-24) about the Collective’s lack of liability, should it screw up.

The MMA basically says that the Collective “shall not be liable to any person or entity” for negligence, sloppiness, or incompetence, but can only be liable if proven “grossly negligent.” “Gross negligence” is nearly impossible to prove. In fact, “gross negligence” basically requires conduct to be intentionally reckless – conduct so bad, and so rare, insurance companies won’t even insure against it.

As I read the MMA, the “Collective” (and its board) are basically immune from liability, even if they completely screw up the whole system through incompetence and negligence, and even if there are millions lost. In my opinion, that’s extremely irresponsible.

Let’s change the tricky phrase “in a manner that is not grossly negligent” to “in a manner that uses reasonable care, and is not otherwise negligent, or grossly negligent.” Let’s make sure Corporation A would be liable if it acted with incompetence, or negligence.
None of these points are unreasonable or illogical. Each directly reduces risk of failure. I would hope we’d all advocate for these common sense, simple language changes to the MMA.

Let’s create a new version of the bill that maximizes the chances of success, minimizes the chances of conflicts of interest and/or failure, and fulfills the fundamental goal of Congress to directly help the music creators.

And for anyone who received David Israelite’s letter and would like to read my point-by-point response, you may download it here.

You can read my original open letter, “The Music Modernization Act – The Devil is in the Details,” here.

Maria Schneider


Maria Schneider: The Devil Is in the Details

When it comes to the newly introduced bill called the Music Modernization Act (the “MMA”), there’s good news and bad news.

First, I want to offer some good news.  Many lawmakers from both sides of the aisle appear to be finally waking up to the fact that, in the absence of updated copyright laws, present-day technologies are destroying the livelihoods of music creators, especially workaday creators.  Our elected leaders recognize that changes in the law need to be made.  I think I speak for most music creators in saying, we are very grateful for that.  We are grateful, because the big data companies (like Spotify and YouTube) and the big publishing/record companies (like Sony/Warner/Universal, who have equity in Spotify) have been systematically destroying the ability of most workaday music creators/musicians to make a living.  So, there’s a new bill in the works, that on its face, might seem good – good enough that many are touting it.  It would insure that a stream pays a mechanical.  In theory, that would indeed be great news, and many of our lawmakers, and many in our industry have initially backed this bill.

But now, I need to report the bad news.  The MMA was drafted primarily by lobbyists for the huge corporations that control the music industry.  The MMA is over 100 pages long, and is “Exhibit A” for why people hate lobbyists and lawyers so much.  When you dig into the carefully worded text (which I now have), it becomes very clear that the MMA is the result of cunning drafting that even further protects and insulates the all-powerful publishers and the big data companies.  They’ve paved their own 4-lane highway to drive their Mack trucks over music creators yet again.

Let’s not forget that the copyright rights of all creators, workaday and hugely successful, are so important, that the drafters of the Constitution protected them right in the Constitution itself.  But as I’ll explain in detail below, the MMA basically “outsources” the management of music copyright rights to two separate, “to-be-created” private corporations that will be entirely controlled by these very all-powerful industry players.  That’s like outsourcing the environmental protection from oil spills to a private corporation controlled by BP and Exxon.

Here’s the outsourcing scheme the lobbyists driving the MMA have created: a newly-formed Corporation A will administer the payment of a streaming mechanical royalty that will be implemented, and Corporation B will essentially serve as the tax collector, seeking “assessments” from industry to pay for Corporation A’s activities.  Even if it’s high time for a streaming mechanical, and if the outsourcing of something so important as the management of music copyright must be done, it should be done in a “bullet proof” manner, where the public’s interests, and music creators’ rights, are fully and carefully protected.

The need for that “bullet-proof” structure is made even more critical by the fact that the MMA offers these multi-billion dollar companies (some of the most powerful companies in the world) virtual immunity from copyright infringement.  The MMA bargains away the right of any music creator to seek damages from these companies.  But rather than it being bullet-proof, I see the current draft of the MMA as Swiss cheese in this regard.  It seems pretty clear who has controlled this drafting process, as they have set aside the public’s interests and the independent music creators’ interests.

I want to highlight ten examples of gaping holes in the current version of the MMA.  And for each hole, I suggest a common-sense solution that would not water down the purported purpose of the MMA.  So consider the list below as a litmus test of sorts:  If the bigshot lobbyists who have drafted this MMA throw a hissy fit over any of the following solutions, then that exposes ulterior motives behind the MMA.  In other words, all I am asking for below is that the MMA respect the two main pillars of good government: accountability and transparency.  If these big powerful companies are afraid of these important pillars on which we all depend, then they shouldn’t be signing up to take on the government’s responsibilities.

Here are just TEN BIG HOLES in this outsourcing scheme, along with my proposed solutions:

Hole 1.  No Business Plans. The MMA requires no projected budgets or staffing needs for either corporation, or any requirements about who will actually manage these corporations.  There’s no requirement for a business plan or budget (e.g., salary caps, etc.)  to be approved or to receive independent and objective scrutiny.

Solution:  At a minimum, the MMA should require the Copyright Office (“CO”) to build those requirements into a RFP (Request for Proposal), so that possible entities have to compete for the position.  The RFP should be created with input from all interested parties, not behind closed doors.  The manner in which the CO selects each of these two outsourcing corporations should be based on real and well-thought-through business planning, not on a hope and a prayer.

Hole 2.   No Requirement for Competitive Bidding.  The MMA contains no requirement that either of these corporations be selected through a competitive process.  And there is absolutely no justification for this sort of “sole source” government contract.  The outsourcing scheme in the MMA would never pass muster under regular government procurement regulations that prohibit such insider conflicts.  Actually, the vague “designation of an appropriate entity” language, is unclear, but I’m assuming there would be a government contract.  If the drafters would suggest that no contract is needed, then that would open up many more serious issues way beyond those I’ve addressed here.

Solution:  The MMA should contain language requiring that the CO issue an RFP through an open process, and that each of the two Corporations be selected through competitive procurement that is governed by standard government rules and requirements.  There should be no fast track here for a sweetheart deal for those who happened to have an inside track.

Hole 3.  No Ongoing Government Oversight.  The MMA’s list of responsibilities for Corporation A is long, and will require a huge staff, and that runs the risk of ballooning into a massive enterprise with no real government oversight over a 5-year period.  In addition, under the MMA, if Corporation A runs over its budget because it plans poorly, it can “borrow” from unclaimed royalties–royalties due music creators–to make its budget whole.

Solution:  The MMA should require a greater degree of accountability and the need to report to the CO on at least an annual basis on its progress toward meeting the objectives and timelines in its contract.  If either corporation is failing to live up to the performance milestones stipulated in a real business plan (which are obviously necessary to protect the public), there should be termination rights.  Corporation A should not be allowed to have a magic slush fund to cover its own poor performance, and that compromises the rights of music creators or publishers.  There should be no assumption that “borrowed” funds will be paid back, since the entire business model is untested.

Hole 4.  Governance of These Outsourced Corporations Is Controlled by Those Who Stand to Benefit.  Even if it is a competitive procurement, the current MMA “requirements” for the board for each of Corporation A and B remove any possibility of real competition (e.g., fair competing proposals) for who this selected corporation will be.  For instance, Corporation A is required to have “the endorsement and support” of the majority of publishers, which obviously means Sony/Universal/Warner themselves.   Never mind, I guess, that those three own a huge chunk of equity in Spotify which creates a huge conflict given their responsibility.  Thus, whoever the Big 3 align with, that’s who will get selected to do this.  This is essentially an under-the-radar “sole source selection” – or in other words, a sham.  And of course, once selected, those three get to stack the deck of the corporation’s board itself, as the MMA gives them the vast majority of seats on the board.  As for the songwriter seats (only 2 allotted) – there might as well be zero, because the MMA’s “songwriters” don’t have to have contributed to any more than just a “part” of “a” composition or lyric to hold a songwriter seat.  Spend a ½-hour digging for the MMA’s definition of “songwriter” if you don’t believe me.  Wow!

The same situation exists with Corporation B: the MMA requires the “endorsement and support from majority market share.”  That, by definition, is Spotify and Apple.  It’s impossible for there to be any real competition the way the MMA has set up governance.  As it is, the MMA sets up two corporate boards where the fox is watching the chicken coop.  The dialed-in conflicts of interest are absolutely enormous.

Solution:  The MMA’s governance requirements for each Board need to be changed so that the industry groups with the direct financial interests do not control either entity.  Rather than requiring each corporation to have “the endorsement and support” of the massive corporations who already control the industry, there should be a requirement of real competition in the marketplace.  Additionally (and importantly), both entities should have: a) outside independent board members, b) CO representatives who serve as “ex officio” members of the board (their presence will help enforce the public interest at stake – sorta like having your mother come to your bachelor party), and c) legitimate, independent, full-time, musicians who have no affiliation with any interested party.  It is absolutely not enough for the lobbyists to offer one or two more board seats to their twisted definition of “songwriters,” while still holding the majority.  As between publishers and songwriters, it should be at least, 50/50, and both boards should also include independent board members and ex officio CO employees.

Hole 5. Conflicts of Interest Abound in Funding This Outsourcing Scheme.  The provisions of the MMA describing how Corporation B will be funded are rife with conflicts of interest.  The MMA says there will be an assessment on the digital music services (i.e. Spotify, Apple, et al), and there will also be “voluntary payments” by these same digital services.  This makes absolutely no business sense.  To have this whole unusually complex corporate outsourcing scheme premised upon the HOPE of “voluntary” payments is irresponsible.  It’s also a total conflict of interest, as the proposed governance of Corporation B would be controlled by these very companies that would be expected to make voluntary contributions.  The lobbyists drafting the MMA expect us to have blind faith in the ability of these huge companies to police and tax themselves.  It would support H. L. Mencken’s definition of faith where he says, “Faith may be defined as an illogical belief in the occurrence of the improbable.”

Solution:  I believe the MMA should require any entity seeking to become Corporation B to produce a coherent business plan and budget for the entire 5-year period that includes responsible projections of actual revenue.  And that financial plan (and revenue production) should be monitored throughout the 5-year term on an ongoing basis.  If a major component of a proposed budget is based on the “hope” of voluntary contributions, that proposal should be eliminated from the competition.

Hole 6.  MMA Has Nothing In Place To Assure The Public That These Outsourcing Corporations Claim Nothing Proprietary.  There are no requirements in the MMA that the entity selected to serve as Corporation A maintain open books, open board meetings, open processes, and systems built upon open source code where possible.  That is unacceptable.  To outsource is one thing.  But to outsource into a “black box” system run by (and kept secret by) the biggest players in the industry would be irresponsible.  This entity could end up building and controlling software, data, data analytics capabilities – all that would be privately controlled and owned, and the architecture and ownership of that code would be private as well.

Solution:  There should be a clear requirement that all data, all algorithms, all software written and compiled and maintained by Corporation A (or its subcontractors) be auditable, open, preferably based on open source, and all of it owned by the government, not by the corporation or by any subcontractor.  The MMA, and the contract between the CO and Corporation A, should expressly state that the corporation will have (and assert) no proprietary rights (including copyright and/or trade secret) in any of the software, tools, database, APIs, algorithms, or other documentation or records it creates or compiles.  This would need to include, not just the data, itself, but what is often referred to as the “resultant data,” and/or the “aggregated data;” i.e. any data that either Corporation A or B derives or creates based upon the original data.  Bottom line: These two outsourcing corporations effectively serve as the “trusted agent” of the government, and owe it (and us) a fiduciary duty to protect the public’s interests.  That needs to ring CLEAR in the MMA.  The LAST thing we need is another private big data company that hoards as an asset the data it derives from the public.

Hole 7.   Independent Creators Aren’t Being Given Real Audit Rights.  Once an independent songwriter wants to find out whether he/she has been paid fairly under this two-corporation outsourcing boondoggle, he or she will find that the audit rights under the MMA are horrific.  The songwriter needs to hire a “qualified” accountant (that’s defined loosely, and of course the corporation is not likely to agree to anyone easily).  Then, the notice of the audit needs to be prepared, and actually published in the Federal Register.  Then, the auditor needs to obtain the relevant records from the corporation.  There’s no obligation for Corporation A to provide records within any time period, or in any format.  The devil is definitely in those details.  THEN, the auditor needs to prepare a draft report and send it to Corporation A.  Then, Corporation A gets to pore over the draft, and send back any questions and caveats.  Then, the auditor has to issue a new report.  Even if the auditor ends up finding an amount is owed by Corporation A (even a big amount), the musician has to pay all costs for the audit.  I find it very telling that the lobbyists who drafted the MMA, put such detail and concern into my right to audit, but there is absolutely zero detail describing most other key business terms about how Corporation A will operate.  It would be laughable if it wasn’t so scary.  This laborious and expensive process is the equivalent to me having NO audit right, because the dialed-in audit costs are guaranteed to be in excess of $50,000.  Given the fact that streaming revenue for most independent musicians doesn’t even amount to pocket lint, let me tell you how many of us would spend this amount on an audit to “recover” pocket lint: zero.

Solution:   First, for independent musicians who own their own music and haven’t given it away to the “big three” – give us a simplified audit path that is cost-effective and reflects the amount in issue.  Second, if any music creator does undertake the monumental effort of an audit, and if it is found that Corporation A has underpaid by a large margin, it should be responsible for the costs of the audit.  And third, at a bare minimum, the MMA should require the CO to conduct “spot audits” of independent music creators’ accounts and records throughout each year of the contract, to ensure that proper payments are being calculated and sent, and to ensure the overall robustness of Corporation A’s systems and processes.  Spot audits should be conducted throughout each year, and deficiencies should be required to be addressed as a part of a formal review process.  Although the specific financial information from an audit should be protected as confidential, any deficiencies found by the auditors should be public.  That is standard, and the lobbyists who drafted the MMA surely know that.  This potential liability would create a direct incentive for this private corporation to be diligent and accurate.

Hole 8.  The MMA Doesn’t Require Respect For International Standards for Data and Metadata.  The MMA only makes the most cursory mention of metadata.  However, at least one of the big industry players has been complicit for years in systematically stripping valuable metadata from creators’ works.  Any successful future for digital and streaming music relies on the integrity and protection of metadata.  And this issue has major international implications, with the need to interface with, and collaborate with international entities and data rights organizations that may have different views and different interests from the “big three” and from the NMPA and the other groups that have driven the drafting of the MMA.  The MMA should not grant this black box Corporation A a free license to develop its own private data management system that is not integrated with the world around it.

Solution:  The MMA should require that any database respect the integrity and value of all existing metadata, and that no systems or processes used by Corporation A should diminish or impair the value or function of any such metadata.  Similarly, the MMA should require that Corporation A use its best efforts to harmonize its systems and processes with other important international systems and standards.  The “advisory board” on such issues should be given much greater authority.  We all know that most advisory boards are only for show, but this one needs to have teeth and government mandate.

Hole 9.  The MMA Strips Away Individuals’ Rights to Protect Their Copyright Rights.  The MMA does not appear to deal with the issue of the massive Notice of Intention (NOI) documents filed with the CO by Google, Amazon and others.  There is a huge unresolved financial liability associated with that maneuver.  The filings are impenetrable, and the big data lords who have filed them have made a mockery of an old provision in the copyright law.  But instead, the MMA seems to simply provide some sort of virtual immunity for any such past acts, if the infringers cooperate with Corporations A and B.  Of course, the inherent conflicts of interest in such an immunity scheme are manifold.  Immunity is usually a constitutional sort of thing, and should not be handed out lightly.  For sure, an infringer should not be given immunity for agreeing to follow rules and procedures that were established by the infringer itself.  That’s like a get out of jail free card printed by the prisoners.  It’s completely absurd, but that’s essentially what the MMA does.

Solution:  The MMA should not “retroactively” absolve any company from previous copyright infringement.  It is not up to Congress to bargain away a creator’s right to sue for copyright infringement.

Hole 10.  The MMA Strips Workaday Music Creators of Their Rights Under International Treaties Adopted World-wide.  The language of the MMA seems to prejudice the rights of musicians who, for whatever reason, choose not to formally register their works with the CO.  To prejudice any such rights would be a violation of international treatises that the U.S. has signed, including the Berne Convention, which recognizes the copyright rights of a creator, even if the work is not formally registered.

Solution.  It is critical that a statement be added to the MMA that “Nothing in this Act is intended to diminish or impair the rights of any copyright owner who has chosen not to register a copyrighted work with the U.S. Copyright Office.”  It is also incumbent upon the drafters to address the rights of international musicians and songwriters.

I’ll stop here, but this is only a sampling of the holes in this bill.  The fact that our lawmakers are considering fixes to the copyright law is very promising.  But if the approach is to outsource the solution to private companies, it should be done in an iron clad way that protects the music creators themselves, not just the behemoth publishers and data lords that get wealthy off of the creative works of hardworking musicians.

As I wrote earlier, these 10 points should be a litmus test, showing us the real intentions of those who drafted the MMA.  And for those organizations that have not fully thought this through, and have too hastily come out in favor of passing the MMA as it presently exists, I hope this will make you say to yourselves (like Fagin sang in Lionel Bart’s “Oliver!”) – “I think I’d better think it out again.”

Maria Schneider


Henry Gradstein: How the Music Modernization Act Takes Royalties From DIY Songwriters and Gives Them to the Major Publishers 


Nicole Haff and Cassie Daum: The Forfeiture of Unclaimed Royalties and the Loss of Meaningful Access to Litigation Under the Music Modernization Act


David Newhoff: Can Streaming Ever Work For Songwriters?


Paul Resnikoff: Music Modernization Act-Spotify


Marc Ribot: The Red Ink Beneath Streaming’s “New Dawn”