The Music Modernization Act is Stifling Innovation in the Music Industry
We were told when we started our company that the institutions within the music industry were always going to be against us. In fact, many people told us these institutions would do everything in their power to curb innovation to make sure the money stayed where it always has - in the pockets of the major labels and the major music streaming services.
Finally, after 10 years of archaic practices in the music streaming industry, which widened the financial gap between the one percent of the music industry stakeholders and the rest of the starving artists, the Music Modernization Act (“MMA”) was created. At its most basic level, the goal was to take the onus off of major streaming platforms to track and remit royalties generated from these major platforms into the pockets of the right artists/labels in a more timely fashion through a new government-subsidized organization known as the Mechanical Licensing Collective (“MLC”).
Sounds great, right? Wrong. This will set back the music industry for years to come.
Imagine starting a process to MODERNIZE MUSIC and how music is monetized for all artists, yet the only stakeholders the MLC brought in to discuss how the MMA and the MLC would operate are the major streaming platforms and major labels themselves. So, what did they do? They structured the MLC in a way that will save these major corporations millions of dollars while completely neglecting the reason why the law was written in the first place - to oversee the music streaming platforms that have consistently, purposefully and negligently not paid the creators - whose content drives their service - their fair share in a transparent and efficient way.
The MMA was designed to regulate and modernize the practices of “royalty-bearing” music streaming services like Spotify, YouTube, and Apple. Next year, the MLC will open its doors and, as part of its first year of operations, it requires the companies included within the MLC to help pay for “start-up fees.” Companies outside of the largest music streaming companies, such as smaller DSPs and smaller royalty-bearing music streaming platforms, must also share unproportionally in these expenses. Essentially, the MLC and the largest streaming platforms want smaller services to pay more than their fair share for the MLC to oversee and audit the largest players in the music streaming industry…even those services who operate to fix the same problems as the new entity itself.
It gets worse.
LÜM was created to serve a similar foundational mission to these entities - to help guide an industry that needs to better support its creators through innovation. Because of that, we made a choice to not be a part of the traditional recorded music industry. We pay NO royalties and instead have proven that there is a better future. Instead of royalties, LÜM created the first virtual gifting system in a music discovery platform that allows fans to help directly support their favorite independent artists. The result?
Artists on LÜM earn an average of ~6x more per stream than every single other music streaming platform in the U.S.
Just like so many other companies that are trying to advance the music industry, LÜM is now facing an uphill battle against an organization (MLC) that was developed in conjunction with the same stakeholders who put the music industry in this position in the first place. The fees LÜM and other innovative companies are facing, to help fund the MLC, are substantial. Every new innovative company will face them and will provide a financial hurdle that will leave the majority of current and future innovative music startups dead in the water. No new entrants and no new competition mean the industry will stay exactly where it has for the last 15 years - putting money in the pockets of the rich and neglecting those that are trying to change the industry for the better.
We cannot let this happen. Innovation must continue or we face a scary reality for the music industry and the majority of artists and innovators that have been neglected by it.
Making an Impact
3yMax Fergus - what exactly is your gripe? The minimum fee? $60,000 for a blanket mechanical license is a bargain for ANY service. If LUM was using the NOI process to clear mechanicals, then it was spending more than $60k per year on either external support or internal controls. If it wasn't clearing all of its mechanicals, then the MMA gives it a 'get out of jail free' card. Recall, the Webcaster Settlements in 2007 created a minimum fee for the 114 license at $50,000, which is around $64,000 in constant dollars. It is hard for me to see how $60,000 for blanket immunity to statutory damages claims for any reproduction or distribution on your platform is unfair. If your gripe is with something else, I'm interested to hear it.
Attorney | General Counsel, Commercial Contracts, Product Launch, Intellectual Property, Licensing | Agile, Business-First Legal
3yI'm not a label hack, I started in music at the original Napster and worked as general counsel for another music startup that negotiated for dangerously disruptive music rights and prices, so I come from the tech side. But I've also represented and worked closely with the labels and the individuals in their BALA groups, and I learnt that all of my preconceptions about their (mal)intentions were completely wrong. While the labels must deal with the market power of the half dozen major streaming players, they have folks who champion startups and new models as best they can. I don't doubt your challenges, but I would consider re-evaluating your prejudices and assumptions about intentions. Some of your fears, for examples, reflect flatly incorrect assumptions about the deals between the labels and streaming services.
radio personality at RP Broadcasting
3yA good thing is that it in a few years, a lot of extremely vintage recordings which should have been public domain a long time ago in the US and are public domain overseas with a miniscule PRO royalty having to be paid will be public domain with the CLASSICS part of the act in a few years.
Business Manager at Collins Aerospace (A United Technologies Company)
3yStay focused on your craft and product excellence; creators will continue to flock and users will always hunger for sonic creativity and inspiration. There are way too many people that are not willing to be told what to listen to, nor how to consume art!!! Together Forward
Sr. Client Strategist @ Beyond Studio | Co-founder @ Future Front Row
3yThis news is not surprising to me. I've put my heart in peace that change won't come from the top down. As always, give enough value proposition to the artists with alternatives and they'll move accordingly. User centricity, faster payouts, etc. There's enough tech stack (see web monetisation, etc.) to make a big change from us, the entrepreneurs, to shift the needle. You guys at Lum did an incredible job already. Matter did an amazing job too. Plenty of others in the making. Once users move, investors move, we move to decision tables, and THEN law moves accordingly. It'll take at least a decade, but I'm 110% convinced we'll get there.