As ordered reported by the Senate Committee on the Judiciary on June 28, 2018
Under current law, a digital music provider (such as Spotify, Apple Music, or Pandora) must pay the copyright owner a royalty fee to use a protected work of music. If it does not otherwise have a voluntary license agreement with the copyright owner to use the work, the music provider must file a notice of intent—on a song-by-song or record-by-record basis—with the copyright owner or the U.S. Copyright Office when it seeks to use any copyrighted digital musical work.
S. 2823 would eliminate notice-of-intent licensing for digital musical works and direct the Copyright Office to designate a nonprofit entity—a mechanical licensing collective, or MLC—to administer a new blanket-licensing system. Under such a license, a digital music provider could use certain copyrighted musical works without filing a notice of intent to do so. S. 2823 also would require the MLC to collect royalties from digital music providers using the blanket license and distribute them to copyright owners.
CBO estimates that enacting S. 2823 would increase deficits by $47 million over the 2021-2028 period. That amount comprises an increase in direct spending of $222 million and an increase in revenues of $175 million. In addition, CBO estimates that, over the 2019-2023 period, it would cost $1 million to implement the bill, subject to the availability of appropriated funds.
Because enacting S. 2823 would affect direct spending and revenues, pay-as-you-go procedures apply.
CBO estimates that enacting S. 2823 would not increase net direct spending by more than $2.5 billion or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2029.
S. 2823 would impose intergovernmental mandates, as defined in the Unfunded Mandates Reform Act (UMRA), in the form of preemptions of state laws, but CBO estimates that the costs of those mandates would fall well below the threshold established in UMRA for intergovernmental mandates ($80 million in 2018, adjusted annually for inflation).
The bill would impose private-sector mandates on companies that provide digital music services by:
- Requiring those companies to pay higher fees when they apply for licenses issued by the MLC to cover the administrative costs of the organization;
- Requiring those companies to provide usage reports to the MLC each month detailing the artists and works that have been streamed; and
- Changing the processes used to resolve disputes over claims of copyright infringement in certain cases.
Because of the uncertainty in determining the effect on settlements due to copyright holders under the new dispute resolution process, CBO cannot determine whether the aggregate cost of the mandates on private entities would exceed the annual threshold established in UMRA for private-sector mandates ($160 million in 2018, adjusted annually for inflation).