May 3, 2018Vol 6 | Issue 2

www.soundexchange.com1

In This IssueN O T E F R O M T H E P R E S I D E N T

We are Making Major Progress on Music Licensing Reform — Together 2

C A P I T O L H I L L N O T E S

Music Reform Legislation Passes in House of Representatives! 3Senate Moving Forward with Music Reform Legislation 4

P O L I T I C A L A C T I O N N O T E S

SoundExchange Legislative Fund: Standing Together, Standing Strong 4

S O U N D E X C H A N G E R E S O U R C E S

Your 2018 Checklist 5

A D V O C A C Y N O T E S

Satellite Radio Royalty Rates Increase 6

R O Y A L T Y N O T E S

Music Data Exchange: A Business Solution for Labels and Publishers 7

O N T H E R E C O R D

Our Allies on Capitol Hill Sound Off 8

G E T T I N G S O C I A L

Lawmakers Tweet Their Support for Music Creators 9

ADVOCACY EDITION

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We are Making Major Progress on Music Licensing Reform – Together

Over the last four years, SoundExchange members have sent many

thousands of letters to Congress asking for reform of our music

licensing laws. When Congress held hearings at the start of its lengthy

copyright review in 2014, it was my honor to represent music creators

as a witness before the House Judiciary Committee asking that they

modernize our laws by requiring fair pay for all music creators whenever

their music is played.

Today, I’m happy to report that our work together is paying off.

Last week, the U.S. House of Representatives passed the comprehensive

Music Modernization Act (H.R. 5447) by a unanimous vote, 415-0. This is

an historic victory that happened because of our collective efforts. It happened because of the industry-

wide unity and legislative consensus we worked so hard to achieve. And it happened because of our

efforts to help lawmakers understand how important music reform is to you — the music creators who

are the lifeblood of our industry.

In 2017 alone, our artist partners and advocates utilized our letter writing campaign to send thousands

of constituent letters. United States Senators from all 50 states and Members of Congress from 419 out

of 435 districts across the country received letters asking them to support music creators by supporting

music licensing reform legislation.

Because of your hard work, we’re on the cusp of success. The fight isn’t over though, and our focus

now shifts to the U.S. Senate.

While several pieces of music legislation have been introduced in the Senate, there is not a single

comprehensive package yet. We are encouraging our Senate allies to bring these many issues together

into a single, comprehensive Music Modernization Act, like the bill passed in the House, to include:

u The CLASSICS Act (S. 2393) to ensure equal treatment for legacy artists who recorded music

before 1972;

u The AMP Act (S. 2625), which builds on SoundExchange’s existing process for honoring letters

of directions for producers and sound engineers; and

u The mechanical licensing reform bill (also called the Music Modernization Act).

Lawmakers need to hear your voice to make this happen.

N O T E F R O M T H E P R E S I D E N T

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I encourage you to read this special advocacy edition of SoundByte to learn more and to find out how

you can get engaged.

Thanks to our SoundExchange family for everything you have done to support our advocacy efforts on

Capitol Hill. Let’s continue our work together to make history.

Yours in Music,

Michael Huppe

President & CEO, SoundExchange

Music Reform Legislation Passes in House of Representatives!

On April 25, the House of Representatives

passed the comprehensive Music

Modernization Act (H.R. 5447) by a

unanimous vote of 415-0.

The bill “brings early 20th century

music laws for the analog era into the

21st century digital era,” original sponsor

and House Judiciary Committee Chairman

Bob Goodlatte (R-VA) said moments prior

to the House vote. Also referred to as

the “unity package,” the omnibus Music

Modernization bill contains provisions from

several music licensing reform bills in the

House, including:

u The CLASSICS Act, which will close the pre-1972 loophole by providing federal protection for sound

recordings made prior to February 15, 1972;

u The AMP Act, which will codify SoundExchange’s longtime practice of honoring Letters of Direction

from artists who want to share royalties with producers and other creative participants who work

with them and create a new process that will allow eligible participants in recordings made before

the digital performance right was enacted in 1995 to share in digital royalties for those recordings; and

u Provisions of the Fair Play Fair Pay Act, which will establish a “willing buyer, willing seller” rate

standard requiring all digital platforms to pay fair market value for music.

C A P I T O L H I L L N O T E S

N O T E F R O M T H E P R E S I D E N T

Rep. Darrell Issa (R-CA), Mary Wilson of The Supremes, Rep. Hank Johnson (D-GA), legendary singer Darlene Love and Rep. Jerrold Nadler (D-NY) at an event February 14 on Capitol Hill to support passage of the CLASSICS Act.

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Senate Moving Forward with Music Reform Legislation

Following the stunning outcome in the House, our focus must now turn to the Senate, where the

Senate Judiciary Committee has scheduled a hearing on music licensing reform for Tuesday, May 15.

Currently, there are three separate bills in the Senate: The CLASSICS Act (S. 2393), the AMP Act (S.

2625) and a limited version of the Music Modernization Act (S. 2334) that only focuses on mechanical

licensing reform for songwriters. We want to encourage the Senate to bring these separate bills together

into a single comprehensive package.

On February 7, Senators John Kennedy (R-LA), Chris Coons (D-DE), Thom Tillis (R-NC), Bob Corker

(R-TN) and Cory Booker (D-NJ) introduced the Senate version of the bipartisan CLASSICS Act to close

a loophole in current U.S. copyright law that allows digital music services to avoid paying royalties to the

legacy artists who recorded music before 1972. The CLASSICS Act will ensure that legacy artists are not

forced to go to court to get paid the royalties that are rightfully theirs.

It is crucial that we ensure fair treatment for legacy artists is part of any comprehensive music licensing

reform legislation in the Senate. Contact your Senator and make sure your voice is heard.

Learn more about the pre-72 loophole and the CLASSICS Act here.

The SoundExchange Legislative Fund: Standing Together, Standing Strong

We work every day to lift the voices of music creators on Capitol Hill and

protect the value of your work.

The opponents we face in those fights on Capitol Hill have fat wallets and

spend tens of millions of dollars annually lobbying members of Congress.

We will never match them dollar-for-dollar, but we are stronger when we

stand together.

SoundExchange must rely on a variety of strategies and tools to build

relationships with policymakers and advocate for music creators. One

important component is our federal political action committee (“PAC”),

the SoundExchange Legislative Fund.

C A P I T O L H I L L N O T E S

P O L I T I C A L A C T I O N N O T E S

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As you may know, most corporations and associations active on Capitol Hill sponsor PACs, which are

authorized by federal law and are the only way that a corporation may make contributions to federal

candidates. A PAC such as the SoundExchange Legislative Fund may solicit voluntary contributions

only from certain members and employees of SoundExchange and only under procedures set forth in

federal regulations.

If you are a SoundExchange member, please email us at sxpac@soundexchange.org  for more

information. If you are not a SoundExchange member, but would like to become one, please visit our

registration and membership page for more information.

Your 2018 Checklist

We mean it when we say: All music creators deserve fair pay, on all platforms and technologies,

whenever their music is used. So, we are doing everything we can to ensure lawmakers understand why

it’s so important to pass music licensing reform legislation. But we can’t do it alone.

Here’s your 2018 checklist:

1.

Contact your Senators to encourage them to support comprehensive music licensing reform legislation

that includes the CLASSICS Act (S. 2393).

2.

Participate in the SoundExchange Legislative Fund.

3.

Do you want to meet with your member of Congress? We can help you set up a meeting in

Washington or in your district. Contact us at advocacy@soundexchange.com.

We are on the verge of the most important music legislative achievement in decades, but we need your

help to amplify the concerns of all music creators. Let’s work together to pass the CLASSICS Act and a

comprehensive package like the House version of the Music Modernization Act and improve the lives

and livelihoods of all music creators.

Make sure your voice is heard!

P O L I T I C A L A C T I O N N O T E S

S O U N D E X C H A N G E R E S O U R C E S

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Satellite Radio Royalty Rates Increase

The Copyright Royalty Board

(CRB) issued a historic decision

on the determination of rates for

SiriusXM’s satellite radio service late

last year.

SoundExchange advocated in this

proceeding on behalf of artists and

rights owners because we remain

focused on supporting music

creators any way we can.

The CRB increased the rates for

SiriusXM from 11 percent of revenue

to 15.5 percent of revenue effective

January 1, 2018. (Since the CRB’s

decision, SiriusXM has filed a motion to ask the Copyright Royalty Board Judges to reconsider its

decision and change the new rate to 14.7 percent.)

The CRB’s rate increase is the single-largest year-over-year royalty rate increase the CRB judges have

established since the first panel of judges was appointed in 2006.

The CRB’s determination applies to rates through 2022.

The new satellite radio rate makes sense for many reasons. SiriusXM has paid below-market rates for

years because of the so-called 801(b) rate standards under which satellite radio and “grandfathered”

cable radio services operate. That standard allows the CRB to adopt royalty rates that are very different

than what the market would dictate. As a result, recording artists and rights owners have subsidized

SiriusXM for years.

The CRB provided the reasoning behind its decision on January 10, when the Copyright Royalty Judges

made their “initial determination” public.

“The Judges find that SiriusXM’s increased profitability does not provide an independent basis to adjust

the 15.5% identified by the Judges. SiriusXM earns sufficient profits, as the only satellite radio provider,

to allow it to pay the opportunity costs of its service to the record companies. Those opportunity costs,

properly weighted, constitute the building blocks for the 15.5% rate. The evidence … makes it abundantly

clear that SiriusXM, through its monopoly of the satellite radio distribution channel, has the financial

capacity to pay higher rates and still maintain a high level of profitability.”

A D V O C A C Y N O T E S

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In other words, it’s not SiriusXM’s financial performance alone that warranted an increase in royalty

rates, the judges wrote. It’s this idea of “opportunity cost.” SoundExchange witness Professor Robert

Willig described opportunity costs as something incurred when “sales through one distribution channel

reduce … sales through other distribution channels (thereby reducing compensation earned by content

creators from those other channels …).”

The CRB also said SiriusXM bears all the hallmarks of a “natural monopoly.”

“As a natural monopolist in the satellite radio market, SiriusXM can, and does, realize substantial profits,

as demonstrated in fine detail by [SoundExchange witness] Professor [Thomas] Lys,” the judges wrote.

“The history of SiriusXM bears out this point. When there were only two satellite firms — Sirius and XM —

both were on the brink of bankruptcy. … After they merged, they were transformed from two pumpkins

into a single coach, as it were, realizing profits across many financial measures.”

Music Data Exchange: A Business Solution for Labels and Publishers

On Tuesday, May 15, at Music Biz in Nashville,

SoundExchange Chief Operating Officer Jonathan

Bender will speak publicly for the first time about

Music Data Exchange (MDX), an important new

initiative to facilitate the exchange of sound recording

and publishing data between record labels and music publishers.

MDX is a free software application developed in cooperation with the RIAA and NMPA that provides

a central database of pre-release metadata and publisher rights, and claiming capabilities. The site

employs the latest in automated messaging to enable high-volume, real-time data exchange.

MDX offers publishers full visibility to claimed and unclaimed percentages for new releases, and allows

publishers to communicate their shares. That results in owner-established links between new release

recordings and their underlying compositions.

The net result is that information sharing between publishers and labels is improved and the speed and

accuracy of mechanical royalty payments is improved.

If you plan to attend Music Biz, make sure you also attend “Music Data Exchange: Linking Recordings to

Compositions” on Tuesday, May 15 at 10:40 am at Music Row 5 (Metadata Summit).

A D V O C A C Y N O T E S

R O Y A L T Y N O T E S

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Our Allies on Capitol Hill Sound Off

Our many allies on Capitol Hill have been busy! Here’s what they are saying about music licensing reform.

“The Music Modernization Act, which is the first major update to our music licensing laws in decades,

finally brings our music laws into the digital age. The Music Modernization Act is the product of endless

amounts of hard work by stakeholders and many members of the House Judiciary Committee, as we

reviewed our copyright laws to ensure they were keeping pace in the digital age,” House Judiciary

Committee Chairman Bob Goodlatte said following the April 25 House vote.

“We are at a unique moment in time where virtually all the major industry stakeholders have come

together in support of a common music policy agenda,” House Judiciary Committee Ranking Member

Jerrold Nadler (D-NY) said following the April 25 House vote.

“Today’s vote shows that the People’s House can mobilize on behalf of the people — their work ethic,

their livelihoods and their creative spirit. By updating copyright laws for the digital age, the Music

Modernization Act encourages Americans to keep producing the anthems that punctuate our lives. Now

the Senate has the opportunity to prove what I know to be true, that both sides of the Capitol value

American innovation and artistry,” Rep. Doug Collins (R-GA) said.

“The legislation passed out of the House today represents a fresh, new era for the music industry. Many

of the complexities that created business uncertainty for both creators and distributors of music are

solved by the Music Modernization Act. Stakeholders from across the industry — including record labels

and publishers, both small and large, and digital services such as Spotify and Pandora — should be

applauded for their tireless efforts to find common ground. Most importantly to me, the CLASSICS Act,

which I authored, is included in this package,” Rep. Darrell Issa (R-CA) said.

Here are some stories that discuss the importance of music licensing reform:

It’s Time for SiriusXM to Get Serious About Paying Music Creators

Music Modernization Act Unanimously Passes U.S. House of Representatives

Music Modernization Act Passed by U.S. House of Representatives

Reps. Issa, Nadler Introduce Much-Needed Fix For ‘Oldies’ Copyright Battle

New Bill Drops to Protect Pre-1972 Copyrights

Why the Music Modernization Act is Important for the Music Industry

O N T H E R E C O R D

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Lawmakers Tweet Their Support for Music Creators

Lawmakers used Twitter to communicate their support for music creators following passage of the

Music Modernization Act in the House. Here are a few examples of what they are saying on their social

networks about the importance of music licensing reform and passage of the Music Modernization Act:

G E T T I N G S O C I A L

#MusicModernizationAct