The US Copyright Office (USCO) has designated on July 5 the two entities that will operate the Mechanical Licensing Collective (MLC) and the Digital Licensee Coordinator (DLC) to license and administer mechanical rights in the United States under the Orrin G. Hatch-Bob Goodlatte Music Modernisation Act.
The MLC was assigned to the Mechanical Licensing Collective, Inc. (identified by the USCO as MLCI), a project that had received wide industry backing and was proposed by the National Music Publishers’ Association (NMPA), the Nashville Songwriters Association International (NSAI), and the Songwriters of North America (SONA).
The other project, known as American Mechanical Licensing Collective (or AMLC), which was backed by Audiam Founder Jeff Price, Songwriters Guild of America's President Rick Carnes, and drummer Stewart Copeland, among others, did not make the cut.
The DLC was awarded to the single proposal from Digital Licensee Coordinator, Inc. which was backed by the Digital Media Association that represents the main operators of digital services (Amazon, Apple, Google, Microsoft, Napster, Pandora, Spotify, YouTube).
A historic law
“The MMA is the most significant piece of copyright legislation in decades,” said Register of Copyrights Karyn A. Temple. “Music plays an important role in creating our common culture and history. This law will help ensure musical work owners are paid when their work is used. Designating the mechanical licensing collective and the digital licensee coordinator will help make that happen. We look forward to working with the entire music community to further implement and conduct outreach on this historic law.”
The USCO said the decision was taken after "an extensive public inquiry soliciting proposals from entities seeking to be designated as the MLC or DLC, as well as input from interested members of the public" and and that it was "based on the record and statutory selection criteria."
In an 88-page document, co-signed by Temple and Librarian of Congress Carla Hayden, the USCO elaborates on the reason for its choice. The three main statutory requirements for designation of MLC were: i) organisation, board and committee composition, and governance; ii) endorsement and substantial support from musical work copyright owners; and iii) administrative and technological capabilities.
Meeting statutory criteria
The Office concluded "that while both candidates meet the statutory criteria to be a nonprofit created to carry out its statutory responsibilities, only MLCI satisfies the endorsement criteria, and MLCI also has made a better showing as to its prospective administrative and technological capabilities."
The USCO noted that the AMLC proposal focused "more specifically on matching unidentified songwriters to their compositions for payment purposes" and provided "less information on the mechanics of its board and committee selection processes."
The MMA has tasked the MLC to negotiate mechanical licenses with digital service providers, that will operate under a blanket license as of January 1, 2021. The new blanket license will allow digital music providers "to reproduce and distribute musical works as digital phonorecord deliveries, including permanent downloads, limited downloads, and interactive streams," according to the USCO.
Before that date, the USCO said it would "continue to work on implementing the MMA" by conducting "additional rule-makings on the requirements for notices of license and non-blanket activity, and access and interoperability of the MLC database, among others." Additionally, the USCO will "engage in public outreach and education to help songwriters navigate the new system, and will conduct a study on unclaimed royalties."
Negotiating a budget
The NMPA, NSAI and SONA welcomed the decision by the USCO, and said that from now on the focus will be to establish the MLC and be operational by 2021. "Now that the consensus MLC has been selected, the group will formally begin operations," said the three organisations in a statement. "This will include the negotiation of a budget with the digital streaming services who, by law, must fund the collective. It will also include partnering with a vendor to provide administration and matching services and development of a user portal through which publishers and songwriters will be able to manage rights and royalties."
Several companies are on the ranks to become the vendor providing administration and matching services, including Washington, DC-based SoundExchange, which has through its subsidiary CMRRA a composition database in addition to its own recordings database. Los Angeles-based Music Reports is understood to be in discussions with the MLCI, while Canada's performance rights society SOCAN, which also administers mechanical rights, is not in contention.
On the issue of funding, rights holders and DSPs must find an agreement. If a funding agreement cannot be voluntarily determined, the MLC and the digital services will go before the Copyright Royalty Board which will set the MLC's budget through an assessment proceeding.
The Board of the designated MLC includes chairman Alisa Coleman (ABKCO) and directors Jeff Brabec (BMG), Peter Brodsky (Sony/ATV), Bob Bruderman (Kobalt), Tim Cohan (peermusic), Scott Cutler (Pulse Music Group), Paul Kahn (Warner/Chappell Music), David Kokakis (UMPG), Mike Molinar (Big Machine Music), Evelyn Paglinawan (Concord Music), Kara DioGuardi (Songs by KDG), Oak Felder (Crow’s Tree Publishing), Kevin Kadish (We Are Made of Music), and Tim Nichols (THiS Music). Non-voting members include NMPA EVP & GC Danielle Aguirre and NSAI Executive Director Bart Herbison. A third non-voting member will be designated by the DLC.
Industry reactions to the designation of the MLC and DLC:
> David Israelite, President & CEO, NMPA: “This has been a long, deliberative process and we are pleased with the result. The Copyright Office set a high bar and the team behind the MLC submission was transparent, thorough and representative of the entire music publishing and songwriting community. We look forward to seeing the benefits of the Music Modernisation Act come to fruition. As we now move to the funding phase, it is critical that the digital services commit to supporting the MLC properly and become more transparent, starting with disclosing the amount of unmatched money currently at their companies.”
> Steve Bogard, songwriter and President, NSAI: “American songwriters have looked forward to this advance in music licensing for years. The MLC creates a number of historic gains for songwriters including participation in the governance of a mechanical rights agency on both board and committee levels and being guaranteed an activity-based share of unclaimed funds. We have an opportunity now to work with streaming companies to significantly advance digital mechanical licensing efficiency and transparency.”
> Michelle Lewis, Executive Director, SONA: “SONA will remain committed to being a guardian of the MMA, which we and other stakeholders worked so hard to pass. We intend to work with this MLC to help educate all songwriters on the importance of accurate registration and to ensure that a state of the art database be built, serving all entitled parties to receive the royalties they have rightfully earned."
> Teri Nelson-Carpenter, National Chair and Los Angeles Chapter President, Association of Independent Music Publishers (AIMP); Alisa Coleman, AIMP New York Chapter President; and John Ozier, AIMP Nashville Chapter President: “We have worked closely with these organisations to provide guidance on the MLC’s Board of Directors and various committees, and are glad to see that independent music publishers will have a strong voice in the implementation of the MMA and beyond. With the majority of the 14-member MLC Board consisting of independent publishers and songwriters, as well as all the AIMP members on MLC committees, we are in the best position to stand up for the rights of independent publishers, songwriters, and other rights-holders.”
> Garrett Levin, CEO, DiMA: “DiMA’s member companies have extensive experience with the challenges posed in collecting and processing the data needed to connect songwriters with their royalties. We look forward to sharing that knowledge and working collaboratively with MLC Inc. to establish a comprehensive, effective and cost-efficient mechanical licensing system that is governed by specific and measurable success metrics as intended by the MMA…. The success of the MLC is important to all of us within the music industry, and ensuring we have an effective, comprehensive and cost-efficient mechanical licensing system will benefit the entire music ecosystem. Vigilant oversight and accountability will be critical to ensuring the success of the MLC, and we look forward to continued collaboration with Congress, the Copyright Office and all stakeholders to help the MLC reach its goals.”
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