Major Publishers Will Receive a $1.5 Billion In the First Year After the Music Modernization Act Passes

Major music publishers are expected to reap a massive and near-immediate windfall if the Music Modernization Act (MMA) passes into law, according to sources.  But critics say that this unclaimed money doesn’t belong to them.

As the Music Modernization Act moves closer to a final vote in the Senate, critics are pointing to language in the bill that could unfairly benefit major music publishers.

Specifically, major publishers like Sony/ATV Music Publishing, Universal Music Publishing Group, Warner/ Chappell Music, and others stand to gain an estimated in $1.5 billion in unclaimed mechanical royalties within the first year of the bill’s passage, according to details shared by sources close to the legislation.

Earlier, controversy surrounded a clause that would distribute unclaimed mechanical royalties after just three years, based on existing marketshare.  As part of the MMA’s payout process, streaming plays that are reported but not claimed will sit in an unmatched pile administered by the Mechanical Licensing Collective, or MLC, which would be created by the Music Modernization Act.

Effectively, that means that the MMA will distribute unclaimed royalties to publishers that do not actually own the copyrights.  The argument behind this arrangement is that after three years, the royalties are unlikely to be properly matched and claimed.

The three-year holding period has remained intact in the Music Modernization Act’s language, despite concerns about the narrow timeframe:

‘‘(H) HOLDING OF ACCRUED ROYALTIES.

(i) HOLDING PERIOD.—The mechanical licensing collective shall hold accrued royalties associated with particular musical works (and shares of works) that remain unmatched for a period of at least 3 years from the date on which the funds were received by the mechanical licensing collective, or at least 3 years from the date on which they were accrued by a digital music provider that subsequently transferred such funds to the mechanical licensing collective pursuant to paragraph (10)(B), whichever period expires sooner.”

Earlier, California Senator Dianne Feinstein expressed concern over the three-year arrangement.

“[The MMA] establishes that after three years, royalties that go unclaimed get split 50-50 between music publishers and other songwriters – different songwriters than the ones that are due these royalties,” Feinstein stated back in May.