Music & Musicians

New music legislation set to boost artist royalties, and may give independents a more fair shake

Key Points
  • On Oct. 11, President Donald Trump signed the much anticipated Music Modernization Act (MMA) into law at the White House.
  • Independent artists, who don't fare as well as major label artists in terms of compensation, could see bigger paydays from streaming.
Musician Kid Rock, right, speaks as U.S. President Donald Trump, left, listens during a signing ceremony for H.R. 1551, the Hatch-Goodlatte Music Modernization Act, in the Roosevelt Room of the White House in Washington, D.C., U.S., on Thursday, Oct. 11, 2018. 
Andrew Harrer | Bloomberg | Getty Images

After years of being overlooked by the music industry's rapid adoption of streaming and bigger royalties, independent artists may finally see a bigger slice of the pie, thanks to a new laws that govern digital music and royalty payments.

Back in October, President Donald Trump signed the Music Modernization Act (MMA) — a sweeping piece of legislation that updates copyright laws and ensures that artists will be better compensated for streaming.

While the bill's signing in October was largely eclipsed by a colorful appearance in the Oval Office by Kanye West, the new law has big implications for independent artists, whose music flies under the radar. As streaming devours a larger share of music listening, experts say the MMA could be potentially lucrative for musicians of all stripes, but independent artists in particular.

According to data from BuzzAngle Music, a firm that tracks industry performance, audio streams worldwide skyrocketed by more than 50 percent year over year to more than 376 billion. That growth has been led by platforms like Apple Music and Spotify, both of which have added significant numbers of subscribers over the last few years. It also means independent musicians are likely to get a larger slice of booming music streaming revenues.

The MMA updates current copyright law to fit better into the digital age by doing a few things: It allocates royalties to music producers, updates licensing rules for streaming to make sure rights-holders are paid in a more efficient fashion, and ensures that artists receive royalties on songs that were recorded before 1972. The act creates the Music Licensing Collective, an organization that is slated to start collecting and distributing royalties starting in 2021.

James Donio, president of the Music Business Association, a non-profit that aims to advance and promote music commerce across delivery models, predicted that the MMA would have a positive impact on all artists, including independent ones.

"This is going to change the landscape of the music business." Donio told CNBC recently.

MIAMI GARDENS, FL - FEBRUARY 04: Prince performs during the 'Pepsi Halftime Show' at Super Bowl XLI between the Indianapolis Colts and the Chicago Bears on February 4, 2007 at Dolphin Stadium in Miami Gardens, Florida. (Photo by Jonathan Daniel/Getty Images)
Jonathan Daniel | Getty Images Sport | Getty Images

The music industry's transition to the digital era has been fraught with controversy, and not every artist has embraced the technology completely. Prior to his death, legendary singer Prince was fiercely opposed to having his songs hosted on digital platforms, while Taylor Swift once went toe-to-toe with Apple over its streaming compensation policies — and won.

Although hit makers usually have little to worry about in terms of streaming compensation, indie artists are often underpaid, and experts say their contributions to the music industry are frequently overlooked. According to data from the Worldwide Independent Network (WIN), independent labels generated over $6 billion in sales in 2016, accounting for 38 percent of the global market for recorded music.

Richard Burgess, CEO of the American Association of Independent Music (A2IM), a non-profit trade organization for independent musicians, hailed the legislation as "a significant step toward better lives for music creators and those that support them."

A2IM, which lobbied for the bill's passage, worked with the industry and policymakers for years. The organization's chief told CNBC recently that while similar bills have been proposed in the past, the MMA represented a compromise of sorts.

"It doesn't encompass everything we wanted," Burgess told CNBC in a recent interview. "It does, however, represent a package of things that were doable."

While the exact financial impact of the MMA on independent artists is still unclear, Burgess said the economics of streaming for all artists is likely to receive a boost from the new law. Royalty payments vary based on the platform, with YouTube being notorious for its relatively low payouts, according to Burgess.

"It ranges from the full value of the stream down to 18-20 percent," he said, and can change over the course of an artist's career. When a performer first lands on the scene, they tend to receive a smaller percentage of money from streaming. As that artists's career progresses and hopefully becomes more successful, that percentage goes up.

As time goes on, Burgess says it will be easier to see the effects of this bill.

"In terms of being paid, especially considering independent artists tend to be songwriters as well, it will definitely have a positive impact on them," Burgess said. The transparency that comes with a new royalty collection and distribution regime will also help, he said.

"Anything that straightens out the industry, grooms the data and makes sure it's in a central place where anyone can access it, and makes sure payments are being paid is definitely a positive," Burgess told CNBC. "This is a huge step in the right direction."