Nashville group says SESAC proposal endangers Music Modernization Act

SESAC is building a new headquarters building on Music Row. (Photo: LOGO )

An 11th-hour proposal by the music licensing company SESAC to change the Music Modernization Act could torpedo the landmark copyright legislation that is on the brink of becoming law, supporters of the legislation warn. 

Songwriters and publishers have been hunting for new digital music licensing laws for years, and in 2018 momentum has been on their side. Stakeholders representing every corner of the music industry, including digital music companies such as Spotify and Apple, record labels, artists and the largest performance rights organizations all back the legislation.

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Senator Lamar Alexander played a few tunes written by Senator Orrin Hatch while they discuss the Music Modernization Act Courtesy Lamar Alexander office

The Music Modernization Act has already cleared the House and a crucial Senate committee without a single opposition vote.

If enacted, the bill would:

• Improve digital royalty payouts to songwriters
• Begin paying artists and labels a digital royalty for songs recorded prior to 1972
• Create a new licensing collective to oversee digital mechanical licensing for songwriters and music publishers.

It's the last component of the MMA that has irked SESAC, the Nashville-based for-profit licensing agency owned by the private equity firm Blackstone, to propose changes to the legislation.

SESAC's pitch to change the MMA stems from the company's concern that creating a new licensing collective would make companies that administer such licenses obsolete. SESAC owns the licensing firm the Harry Fox Agency, which it purchased in 2015 from the National Music Publishers Association with eyes on expanding the services it could offer member songwriters.

The Harry Fox Agency employs about 100 people and administers over $150 million in royalties annually.

The proposal to change the bill has sparked a flurry of criticism, with supporters of the current legislation saying the changes could derail the measure. Bart Herbison, the executive director of the Nashville Songwriters Association International, said Congress must move urgently to approve legislation that songwriters have pushed for several years.

Herbison accused SESAC of trying to kill the bill with the late proposal and said those who crafted the legislation would rather no bill pass than the amended version that SESAC has pitched to Senate offices in Washington D.C.

Lawmakers could simply choose to ignore the proposal, though Blackstone, which had $360 billion in assets when they purchased SESAC in 2017, wields significant clout in Washington.

"Blackstone/SESAC waits until July 18 to introduce a proposal that fundamentally would change the way this works," Herbison said. "It adds expense, layers of redundancy. It is so troubling and they've altered it so dramatically that none of the stakeholders — the songwriters, the music publishers, the record labels, the digital services and others — can now support the legislation."

In an emailed statement on Monday, Blackstone reiterated its commitment to modernizing music copyright laws.

“Blackstone strongly supports music modernization, and we are confident legislation will be signed into law this year as long as all parties continue working in the same cooperative spirit that has characterized the process so far," a company spokeswoman said.

According to a draft proposal obtained by The Tennessean, SESAC is proposing to allow certified licensing companies such as Harry Fox to handle the licensing and administration of digital mechanical licensing. Under the legislation as constructed, that job would fall to the new music licensing collective, and the digital music companies would actually pay for the cost of administering the licenses.

SESAC's proposal calls for the new licensing collective to maintain a new comprehensive copyright database, serve as the single place for filing a licensing notice and resolve conflicting copyright claims.

In the draft document, SESAC blasted the MMA as creating a government-mandated monopoly. Although the legislation cleared the Senate Judiciary committee earlier this month with a voice vote, conservative Senators Ted Cruz and John Cornyn did express some reservations about this point, seemingly sympathizing with private companies that currently administer digital licenses.

More: Private equity firm Blackstone to buy SESAC

More: Music Modernization Act: US Senate panel approves landmark music industry bill

More: Goodlatte to unveil sweeping music copyright reform package next month

"As currently drafted, the MMA vests exclusive administrative rights in a single, government-mandated entity," the SESAC document calling for changes to the MMA says. "Competition in the musical composition licensing marketplace is vital to ensure 1. low-cost, innovative solutions to distributing royalties to hard-to-find copyright owners, 2. improved accuracy in musical composition metadata and 3. improved and more streamlined dissemination of accurate metadata.

"Suggestions that creating a monopoly reduces costs and improves efficiencies are contrary to two centuries of economic experience in the United States, which counsel that competition drive efficiency and keep costs down."

But Herbison scoffed at the notion that the proposed licensing company would be government-mandated. He said the current licensing system is outdated and that the proposed licensing collective would be a private organization managed by publishers and songwriters.

Bart Herbison  (Photo: Sam Simpkins // The Tennessean)

Herbison attributed the SESAC proposal to "corporate greed" and accused the company of supporting the broken status quo. Herbison said that if this late effort by SESAC ultimately undoes the legislation, he would spend "all my time as executive director of NSAI making sure everyone knows who is to blame for this bill's failure."

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In addition to being a U.S. Senator, former Tennessee governor Lamar Alexander is apparently also a songwriter, making $110 last year for his part in the creation of country singer Lee Brice’s song ‘Falling Apart Together.’

Music copyright reform bills have advanced in the past, only to be undone by their final hurdles. Although the legislation seems to have the backing of the vast majority of Senators, as evidenced by its unanimous passage in committee, just a few lawmakers could sideline the entire bill.

"This is bad faith," Herbison said. "It's certainly bad faith on behalf of Blackstone/SESAC/Harry Fox. In what appears to be a troubling play for corporate greed — either way if the bill passes or fails — to ensure business for Harry Fox.

"We are calling on SESAC to drop this proposal and support the MMA as written with the caveat that we are willing to listen to them (on selecting of vendors that would contract with the new licensing collective). We are out of time. This was more complicated than negotiating the Paris Peace Treaty. It just was. It took years and years."

Despite the back-and-forth earlier in the day on Monday, a SESAC spokeswoman released a statement expressing optimism that the bill could still pass this year.

“We expect that as the Senate continues to work through these issues with input from concerned and well-meaning stakeholders, an appropriate resolution will be reached and the MMA will be passed before the end of the year," the SESAC spokeswoman said.” 

The proposed licensing collective is viewed as the linchpin to the legislation, because expensive lawsuits have been filed in recent years against streaming companies for using songs without the proper license. Those lawsuits triggered expensive settlements and brought Spotify and Apple to the negotiating table on the MMA.

In exchange for eliminating the legal liability that the streaming companies currently experience, the onus for identifying songwriters and paying them the royalties they are owed would fall to the new licensing collective.

It's similar to how the nonprofit group SoundExchange handles digital royalty payouts for artists and record labels.

Reach Nate Rau at 615-259-8094 and nrau@tennessean.com. Follow him on Twitter @tnnaterau.

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