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Paying Post-Termination Streaming Royalties to Creators and Their Heirs Is “Common Sense”: Recent Comments on the Proposed Rule on Termination Rights Under the Music Modernization Act

January 20, 2023

Hayley Lenahan and Daniel Schacht, Donahue Fitzgerald LLP

Sections 203 and 304 of the Copyright Act allow creators, or their heirs, to terminate copyright grants after a period of time. This gives authors and their heirs the opportunity to recapture important rights and negotiate better agreements, including increased royalties. Music copyrights can generate a lot of income from streaming royalties and there has been uncertainty as to whether a music publisher whose rights have been terminated could continue to receive streaming income once a copyright termination is effective.

The policy of the Mechanical Licensing Collective (MLC), which was created by the recent Music Modernization Act to handle streaming rights and income, has been to pay these royalties to the terminated publishers who originally entered into the streaming agreement. In response to this policy, the Copyright Office proposed a new rule (87 FR 64405, 87 FR 71286) that would instead allocate the streaming royalties for musical compositions to the owners of recaptured copyrights – i.e., authors or their heirs. According to Business Wire, global music streaming is expected to be worth over $45 billion in 2026, so the financial consequences of this proposed rule will be significant for many older works.

Both publishers and authors submitted comments on the proposed rule. Advocacy groups writing on behalf of creators – including the Authors Alliance, American Library Association, the Electronic Frontier Foundation, Songwriters of North America, Black Music Action Coalition, and Music Artists Coalition – support the new rule and the financial benefits it would give to authors and their heirs. Some publishers, too, are expressing support for the proposed rule, including Wixen Music Publishing, noting that the MLC’s rule is not in line with the Copyright Act, case law, or common sense. Other organizations writing on behalf of publishers have raised legal concerns about the proposed rule, while still supporting the goal of compensating creators and their heirs. The National Music Publishers’ Association and the Nashville Songwriters Association even advocated for an alternative, citing to their own draft bill, the “Termination of Royalties through the MLC Act.”

The window for public comments has now passed and, given the weight of the comments in favor, the Copyright Office’s proposed rule is likely to be enacted. Time will tell whether the rule will be challenged in court, but it looks like a significant victory is on the horizon for those songwriters and their heirs who have filed copyright terminations to recapture their rights to their compositions.

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