Thanks to the Music Modernization Act, the Music Licensing Collective was born on January 1st of this year. If you don’t know what either of those things are, here is an in-depth video from Berklee that is a great place to start.
The MMA was an Act consisting of three parts. One of the parts involved the creation of the Music Licensing Collective, a non-profit organization that would administer blanet mechanical licenses to DSPs, collect the mechanical royalties, and distribute the royalties to the appropriate rights holders. Acting essentially as a PRO for mechanical rights, the MLC is a long-awaited change to a long outdated status quo (as explained in the video). This particular legislation is of special interest to me personally because it is the first major music and copyright law passed and enacted while I have been in college studying music industry.
Certain kinds of digital music involve mechanical rights. When you purchase and download a track from Apple Music, that involves a reproduction of the file from the Apple server onto your personal computer. Reproduction = Mechanical Right. Only the copyright owner can do that, unless he authorizes another party to digitally reproduce his music via a mechanical license. Interactive-streaming like Spotify or Tidal also requires mechanical licenses for every track on the site. That is a LOT of licenses, data, publishers, and songwriters. Originally, the DSPs had to contact the various writers/publishers for every track they wanted to stream to get a license.
Now the MLC is here to take care of everything. Songwriters and publishers join the MLC and register their songs and data. DSPs pay for a blanket mechanical license to every song in the MLC database and report the song usage to the MLC, which then distributes the license fee as royalites to the various rights holders based on how much their songs were streamed/downloaded.
In April, the MLC completed its first royalty distribution. With more than $40 million to work with, the MLC successfully matched and distributed $24 million to members thanks to their public database and Data Quality Initiative. $11 million has not been matched, $4.9 million has been matched but the rights holder has not submitted a claim or become an MLC member, and $500,000 is on legal hold. Interestingly, as opposed to how the government handles your late tax return, the MLC says “All of the royalties currently pending distribution will accrue interest until they are distributed, as required by the MMA.”
This first distribution was received very well, as it is normal for some royalities to not match up or be claimed. Of course, as time goes on the database will grow substantially and more publishers will join the MLC and submit/edit their metadata, which will increase royality matching in the future. The $500,000 on legal hold is very likely due to song split issues amongst the songwriters. No licensing of a song should ever be done until all the parties involved agree on who gets what share of the copyright. Until the MLC is told the copyright shares of each writer on a particular song, they cannot pay a penny to anyone for that song’s streams.
For a first impression, the MLC is looking good. However, it is a little early to see any significant effects. I am looking forward to keeping tabs on the development of this new payment system and organization, as well as the impact of the MMA in general.