The Effective Collective

The Mechanical Licensing Collective (MLC) is all in on collecting and distributing digital music royalties

The nonprofit Mechanical Licensing Collective was established by the Music Modernization Act of 2018 (MMA) to create a more efficient way for digital service providers (DSPs) to license the music they make available on their platforms and ensure the proper rightsholders—self-administered songwriters, composers, and lyricists and music publishers, administrators and collective management organizations (CMOs)—are paid the mechanical royalties to which they are entitled for the use of their musical works. All songwriters are encouraged to join the MLC to verify the data related to their work is accurate.

Previously, when a DSP could not identify the owner of a copyrighted work, they held on to the money and, as a result, have held unclaimed millions of dollars. Now, the DSPs forward unclaimed and unmatched revenue to the MLC, which tracks down the rightful owners of musical works, ensuring proper payments.

The MLC is already off to a great start in 2021. In January, the organization collected $40 million in direct payments on behalf of registered songwriters and composers. In April, the MLC paid out more than $24 million in matched royalties to its members for streaming and download usage by DSPs during the month of January. In June, DSPs delivered all remaining data pertaining to historical unmatched royalties.

What’s in the box?
More than $424 million in accrued historical unmatched music royalties were turned over to the MLC. Because these royalties can’t be paid if a song title or writer’s name doesn’t match the streaming company’s database, they sat in a digital “black box.” The unclaimed payments came mostly from Apple Music ($163.3M), Spotify ($152.2M), Amazon Music ($42.7M), and Google Play Music/YouTube ($32.9M).

Security blanket for music rights holders
Under a new blanket mechanical license administered exclusively by the MLC, DSPs in the U.S. must send monthly usage reports and mechanical royalty payments to the MLC. The organization matches the usage activity to the appropriate musical works owners using data in the new musical works database and distributes received royalties to music publishers, musical works administrators, self-administered songwriters, composers and lyricists.

The MLC has the right to audit each DSP operating under the blanket mechanical license once every three years.

Taking the initiative with the DQI
The MLC created the Data Quality Initiative (DQI), mandated by the U.S. Copyright Office, to provide an integrated way for music rights owners to verify their owned and administered catalogs matched records held by the MLC. This initiative enables the accurate and timely clearance of music and the receipt and distribution of royalties to music rights holders.

By creating a new system of mechanical licensing, the MLC is streamlining compensation for songwriters, while also establishing a working solution for streaming services. There may be miles yet to go, but the MLC has already taken several steps in the right direction for songwriters and publishers.

For information on how music rightsholders secure more timely royalty payments through the Mechanical Licensing Collective (MLC)

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