EXCLUSIVE: MusicRow Talks To SESAC On MMA Compromise And Moving Forward

Pictured (L-R): SESAC Chairman and CEO John Josephson and SESAC Exec. VP, Operations, Corporate Development and CFO, Kelli Turner.

As previously reported on Thursday, Aug. 2, The National Music Publishers’ Association (NMPA), the Nashville Songwriters Association International (NSAI), the Songwriters of North America (SONA), and SESAC announced unconditional support for the Music Modernization Act (MMA). All parties endorsed a provision to the proposed legislation to amend the Mechanical Licensing Collective’s (MLC) administration of voluntary licenses outside the scope of the Section 115 compulsory license in order to ensure private vendors can continue to participate in the open market.

This amended provision in the agreement states the MLC will administer songwriter royalties on blanket mechanical licenses. For any direct mechanical licenses, those negotiated between a publisher or self-published songwriter and streaming services, the streaming service will select the administrator of those copyrights. These admin functions can be provided by the MLC, as well as other vendors such as the Harry Fox Agency, owned by SESAC’s parent company, Blackstone. This provision allows competition and free market to continue as part of the agreement. For other non-mechanical royalties such as synchronization and lyrics, the MLC will not administer those licenses.

Performance royalties will continue to be administered and licensed by the Performing Rights Organizations such as ASCAP, BMI, GMR and SESAC.

MusicRow spoke to SESAC’s Chairman and CEO John Josephson and the organization’s Executive VP Kelli Turner on Friday, Aug. 3, to discuss this compromise to the MMA and how the industry is now ready to move forward in full support of the proposed legislation to benefit songwriters.

MusicRow: How did the compromise come about? What can you say about the discussions that took place to resolve the disagreements so quickly?

Josephson: The most important thing to keep in mind is this was really a process led by the senators and their staff. They had encouraged us, over the course of the past two weeks, to compromise. We had originally presented what we characterized as a middle-of-the-road proposal at a meeting that took place in Washington two weeks ago. That proposal obviously was not received positively. Over the course of the ensuing two weeks, there were communications between the two sides. A proposal was put forth by the other side, that we discussed and agreed would be a compromise we could advocate to the senators that they should consider when drafting the actual legislation.

MR: How does that compromise benefit companies like Harry Fox?

It limits the areas of commercial activity that the Collective can operate and guarantees that significant portions of the administration market for these rights will remain subject to competition in the free market. It preserves or guarantees the preservation of a very significant portion of the markets within which these companies operate. And in so doing, makes it possible for them to continue to operate as they have historically, with the one exception being the segment of the market that will be under the domain of the Collective.

MR: SESAC’s position has always been to act in a way that benefits the songwriter. How does this proposed legislation benefit them?

First of all, the compromise that we reached preserves the structure and governance that I think the songwriter groups felt very strongly about. In the first instance, they’re getting all of the governance provisions that they’d originally fought very hard for. It was never our intention to try and diminish those. But to the extent that they had concerns about any of the administration activity taking place outside of the Collective in an area where they didn’t have direct oversight, that won’t be the case under this resolution. A second portion of the answer is a little bit more esoteric. Philosophically, we’re very committed to the view that free markets and competition drive the best outcomes for writers. This is a segment of the market that is somewhat removed from writers directly but our view in the long run is that when you have people competing to provide these administration services, you get the highest quality service, delivered at the lowest possible price. When that happens, there’s more money in the ecosystem in total and to the extent that there’s more money in the ecosystem, ultimately everyone benefits, including writers.

MR: What will be the role going forward with SESAC on this legislation? There are still a few hurdles to get through for it to pass in the Senate and then back to the House.

SESAC is enthusiastically and vigorously supporting the MMA. All of the resources that we have available at our company are driving towards that. I would add that Blackstone has been active on the Hill working with senators, who encouraged the compromise, to help gain approval of the act in the Senate. Blackstone remains available, to the extent that any of the industry trade associations would like their support, not just in the Senate, but for the rest of the process that’s involved in getting this bill enacted into law.

MR: SESAC received a lot of backlash from the industry in proposing changes to the MMA. You released a statement saying there was “a lot of misinformation and misrepresentation regarding SESAC.” What was the biggest misconception?

I think there were two fundamental misconceptions. The most important one was that we were trying to derail the MMA. We’ve consistently expressed our concern regarding the form of the legislation that came out of the House, but we’ve always supported broadly the objectives of the MMA. Some people were asserting that this was a poison proposal, the objective of which was to derail to the act or the bill and that’s one hundred percent not the case.

I think there was also a lot of confusion about the substance of the compromise proposal we made. A lot of people thought it was the same thing as the Cruz amendment, which it wasn’t. It’s something entirely different that was specifically designed on our part to try and meet the needs, as we understood them, or the preferences of all the other groups, starting with the writers, the publishers, as well as the digital companies. Obviously, they ended up objecting to it, but it was intended as a compromise that would still advance competition as suggested by Senator Cruz’s amendment. I think those were the two biggest misconceptions.

MR: The unanimous position among all parties is that everybody wins when we get this legislation passed. So after such a heated exchange, what do we, as industry members, need to know moving forward?

I would say two things. First of all, I think reconciliation starts with good will. I think that NSAI certainly demonstrated that in the press and the interviews that they’ve done since the announcement. We reciprocate that. I’m very confident, if not certain, that NSAI’s top priority is their membership. Our top priority is our affiliates. It’s certainly in our collective best interests that we put this behind us and move forward together. Secondarily, we all have the interest of songwriters at heart, and I think we need to put this behind us in order to best serve their interests. I feel very confident that NSAI feels that way and we certainly do as well.

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About the Author

Sherod Robertson is President and Owner of MusicRow Enterprises. He oversees all operations and develops strategic initiatives for MusicRow magazine, RowFax, and MusicRow's CountryBreakout chart. Robertson previously served as Director of Finance of Arista Records after beginning his career as Vice President of Finance and CFO at Reunion Records.

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