A Victory for Music Streaming Artists

Prior to July 2024, artists who have transferred the rights to their copyrighted music to streaming platforms and music publishers ran the risk of never seeing royalties even after a proper termination of such deals. The Copyright Office recently provided clarification surrounding termination benefiting the artists.   

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Imagine you are an up-and-coming artist who has just had their first major hit. Prior to your success, you successfully copyrighted your work before shopping your hit single to different music publishers and even considered the upside of certain streaming platforms. Either taking a lump sum or a set payment structure from a record label or independently through a streaming service, you relish in your newfound wealth. 35 years down the line, you decide to reclaim the rights to your masterpiece, but even after properly terminating the transfer you do not receive a royalties check for your hard work. Prior to July 2024, this was the reality for all music artists.

In the modern age of music streaming, artists have long fought to receive proper royalties for their works of art. With virtually all artists conveying the rights of their copyrighted works to streaming platforms such as Apple Music, Spotify, and Amazon Music, there has always been a debate surrounding the ability of artists to invoke termination. In the United States, artists have the right to ‘terminate the exclusive or nonexclusive grant of a transfer or license’ after 35 years for works created after 1978 or 56 years for works created before 1978.

When artists want to convey their works they obtain a Compulsory License which is provided by the Mechanical Licensing Collective, an entity created by the Music Modernization Act of 2018. In a recent ruling, the United States Copyright Office has provided clarification surrounding artists’ abilities to reclaim mechanical royalties from streaming platforms and music publishers.

Before July 2024, the Mechanical Licensing Collective had interpreted the “derivative work” exception, 17 U.S.C. § 203(b)(1), to allow the acclimation of royalties to platforms and music publishers beyond artists properly invoking termination. A simpler understanding of the actual broadness of the Mechanical Licensing Collective’s interpretation is provided by the Author's Alliance in 2022. The Author’s Alliance stated that “[the derivative work] exception applied to any of the sound recordings used by digital music providers that incorporate music from songwriters, despite the statutory language in the MMA and elsewhere indicating that funds for mechanical rights under the statutory blanket license should be paid out to whomever the copyright holder is at the time of the actual use.” Effectively the Mechanical Licensing Collective did not bother to establish a process for holding royalty funds while a termination dispute was being resolved and created a rule that gave publishers the right to forever receive the royalties as long as they used the copyrighted work once before a termination date. This ruling completely undermined the language of the § 203(b)(1) “derivative work” exception and provided creators who properly terminated rights without access to royalties over their works.

In a large victory for artists, the ruling by the United States Copyright Office on July 9, 2024 now provided guidance to the Mechanical Licensing Collective ensuring fair compensation to artists who have properly invoked termination. The United States Copyright Office’s decision now requires the Mechanical Licensing Collective to establish a remedy for prior misinterpretations of the § 203(b)(1) “derivative work” exception and the decision provides new guidelines for ownership transfers including royalty payment changes in the context of proper terminations. Jordan Bromley, a board member of the Music Artists Coalition (MAC), after the release of the United States Copyright Office’s decision stated, “The Music Artists Coalition has long advocated for this change, and we’re thrilled to see it come to fruition. This decision not only ensures fair compensation for songwriters who reclaim their rights, but also sets a precedent that strengthens the very foundation of copyright law in the digital age. It’s a clear message that in the evolving landscape of music streaming and licensing, the rights of creators must be protected and respected.” This large-scale victory for the rights of artists sets the stage for fair and just compensation for past and up-and-coming artists alike.