By Gary Symons
TLL Editor in Chief
New Year’s Day marked a major change in the music licensing industry, as the Mechanical Licensing Collective went live as part of the Music Modernization Act.
The bill was passed in 2018 with the goal of bringing in more fair rules for the compensation of musicians and songwriters, and called for the establishment of a body to oversee payment of royalties for songs that are downloaded, streamed, or sold as a record or CD.
The MLC is a non-profit established under the regulations established in the Music Modernization Act, and has broad implications for songwriters or any company that has purchased the rights to music. The MLC also comes into play just as the market for music rights has heated up, with more than $4 billion invested in 2019 alone in buying up various music catalogs.
The MLC’s role is to ensure that musicians are fairly paid, in a timely fashion. It was created to more efficiently identify, match, and distribute mechanical royalties to the songwriters and publishers. Prior to Jan. 1, digital music services themselves were responsible for identifying the artist or rights holder, and paying them the royalties due. There was no independent body overseeing that process, and some publishers were difficult to identify or to find.
As a result, digital music services like Spotify, Apple Music, and other similar operations would hold these payments, and the money would sit there until the songwriters were found and paid, or alternatively, enough time passed that the service would simply split the money among known publishers based on their relative market share.
The system was difficult for both the digital music services and for artists alike, and left services open to a barrage of copyright lawsuits for money they may already have paid out to publishers.
Under the new law, music services will pay a blanket license fee to the MLC, and the MLC takes on the task of finding and paying the artist. In cases where the artist simply can’t be found, the Collective will typically distribute the balance in the account to its members.
The costs of the MLC are being paid by the digital music services, but in return, those services are indemnified against any potential lawsuits in the event an artist feels he or she has not been properly compensated. The major streaming services, including Spotify, Apple Music, Pandora, Amazon Music, and others, have collectively granted $62 million to the Collective, which is now led by music industry executive and MLC CEO Kris Ahrend.
Artists with a label will typically be enrolled in the Collective automatically, but all other musicians must enroll through the MLC’s online portal, and also fill out the Music Data Organization Worksheet. The MLC will collect and distribute statutory mechanical royalties to copyright owners “when their work is streamed on interactive streaming services like Apple Music or Spotify, or sold on downloading services like Amazon Music,” according to the legislation.