Music industry settles a big fight ahead of Grammys

The music industry may be close to an agreement on how to pay musicians fairly for their work — just in time for Sunday's Grammys. Members of Congress will hold a hearing Friday in New York City to discuss a bipartisan bill to rewrite music licensing and copyright laws, featuring testimony from celebrity artists like Aloe Blacc and Booker T. Jones.

Why it matters: It's unusual that musicians, record labels, and streamers would compromise on something this big. For the first time in over a decade, an overhaul of the copyright laws — and a chance to put more money in artists' pockets — has a chance to pass in Congress due to unprecedented support from stakeholders across the industry.

The impact: If it passes, the legislation could give music publishers faster access to royalty payments.

The back story: The Music Modernization Act is the most significant update to music copyright law since 2006. It updates the current music licensing process with better technology and transparency through a publicly available database that matches sound recordings to the embodied musical works.

• In an unusual twist, streaming companies like Spotify and Pandora support changes that would give artists a bigger cut of copyright revenue through more general licenses.
• Supporters are optimistic about the bill's passage, especially given that its lead sponsor, Sen. Orrin Hatch (R-Utah) — who writes songs when he's not doing his day job — is retiring this year, and hopes to get this legislation passed before he leaves.
• The bill, which mostly addresses songwriters' rights, follows in the footsteps of other legislation that makes music licensing information accessible, like a bill introduced by Rep. Jim Sensenbrenner that addresses performance rights.

What's new: Widespread support for this type of reform is unusual, given the historical business differences between artists, record labels and streaming companies.

• Years of tension have led to major copyright infringement battles, like the $1.6 billion lawsuit filed against Spotify in December.

The collective action comes as music streaming revenues reach an all-time high, forcing the entire industry to reimagine the way music creators, labels and distributors work together.

• The Digital Media Association (DMA), which represents Pandora, Spotify, YouTube, Amazon and others, predicts that music streaming hit $3.4 billion revenue in 2017, up 53% from the previous year.
• Their estimates mimic those of the Recording Industry Association of America, which estimates that nearly 70% of all streaming revenue in the U.S. came from subscription services like Spotify and Apple Music last year.

Streamers and music creators have been able to broker some more strategic partnerships in recent months, signaling hope for a sweeping bill to stand a chance in a Republican-led Congress.

• In December, Facebook and Universal Music struck a multi-year licensing deal to let customers across all Facebook media properties use recorded music and publishing catalogs for video across Facebook.
• Just days before, YouTube struck deals with Universal Music Group and Sony Music, giving YouTube music licenses from three of the biggest record labels: Universal, Sony and Warner.
• In June, YouTube came to a multi-year agreement with American Society of Composers, Authors and Publishers (ASCAP) — the trade group that represents music creators — to ensure that musicians, publishers and songwriters are fairly compensated for the use of their music on YouTube.

While there is mostly consensus on music licensing reform, there's a very small portion of the bill that is causing problems. It allows judges to consider more information when setting rates for how much songwriters get paid.

• The National Association of Broadcasters and a few smaller advocacy groups argue that portion of the bill only benefits songwriters, and not distributors. The NAB says it is working with the bill's sponsors and hopes to resolve those concerns.
• Sources say this two-page portion of the 100+-page bill could scuttle the entire legislation if not resolved.
• "Unfortunately, the current bill text includes unrelated provisions that will almost certainly result in unjustifiable cost increases for local radio and TV broadcasters and many other music licensees, for whom the rest of the legislation is largely irrelevant," the NAB says in a statement.