USA's MLC submits proposal for funding with a start-up budget of $37.25m

By Emmanuel Legrand

The Mechanical Licensing Collective (MLC), which will administer the new nationwide blanket license system for mechanical rights in the USA as part of the Music Modernisation Act (MMA) provisions, has submitted to the Copyright Royalty Board (CRB) a proposal for the funding of the collective management organisation.

  The MLC estimates that to carry out the statutory demands of bill, its start-up costs will be of $37.25 million and its annual admin costs in 2021 of $29m. The assessment for funding for the years post-2021 has been redacted in the public version of the filing on the grounds that it consists of "private commercial and financial information related to the MLC’s ongoing and future contract negotiations that would, if disclosed, competitively disadvantage the MLC in such negotiations."

  The MLC is due to start operating on January 1, 2021. According to the MMA, the CRB judges are tasked with setting in an amount sufficient to cover the MLC’s total costs and that the funding be made through an “administrative assessment” on the digital services. The law mandates that the assessment will be wholly paid by the digital services, which are expected to argue about such expenses.

  The MLC said that the the CRB submission was "the result of months of research on the most efficient and effective way to run this unprecedented new collective that will serve the needs of both the songwriters and their music publishers as well as the digital music services from Day One."

A reasonnable budget

  It added: "The proposed assessment is the right one under the law, and the budget is very reasonable for digital companies to pay to receive the benefits the blanket license will provide them. The MLC’s operating budget and staff must be capable of comprehensively meeting and executing the extensive requirements and responsibilities of the Collective under the law in less than 15 months from now.”

  The filing outlines the organisational structure of the MLC and its budget. All the details about budgets, salaries and other costs have been redacted in the public version of the filing.

  The filing contains testimonies from Alisa Coleman, the Chair of the Board of Directors of the MLC, Chief Operating Officer of ABKCO Music & Records, and President of the New York Chapter of the Association of Independent Music Publishers, who addresses the MLC’s actual and estimated total costs associated with the numerous operations that will fall under the supervision of the COO of the MLC.

  It also has contributions from Richard Thompson, a consultant for the MLC in the role of interim Chief Information Officer and former Chief Technology Officer of music services company Kobalt Music Group, who looked at “the cost estimates associated with the development, acquisition, implementation and maintenance of computer and information technology infrastructure and related technological and operational services deployed to fulfill the statutory mandate of the MLC.”

 A full-service structure

  Paul Kahn, the Executive Vice President and Chief Financial Officer of Warner Chappell Music, addressed the structure of the Proposed Assessment, and the “reasonable actual and estimated costs of the MLC,” while Danielle Aguirre, Executive Vice President and General Counsel of the National Music Publishers’ Association addressed “the reasonableness of the MLC’s legal costs incurred and budgeted, including for in-house and outside counsel, in connection with establishing, maintaining and operating the MLC to fulfill its statutory functions.”

  The filing suggests that the headquarters of the MLC is expected to be located in Nashville, Tennessee, described as "one of the country’s cultural epicenters of the music industry."

  The documents filed with the CRB outline the structure of the MLC, with a CEO and a COO, under which many of the operational functions will be reporting to. Operational divisions of the MLC include a Songwriter and Publisher Relations Group, a Licensee Relations Group, a Communications Group and an International Relations Coordinator.

  One of the key units at the MLC will be the Rights management group, tasked by the statute "with building and maintaining a centralised database of musical works ownership, providing information to the public that not merely identifies the tens of millions of works that underlie the streaming offerings of digital services, but identifies the copyright owners of each share of each work.”

  In addition, the MLC "must match each musical work to all of the sound recordings in which it is embodied." The task is vast since platforms like Apple Music or Spotify claim to have over 50 million recordings and that 40,000 new sound recordings are uploaded each day to Spotify.

Finding data partners

  The MLC has launched a Request for Information process in order to gather information and scope out its technology needs. All leading vendors were contacted directly for participation, and the MLC received submissions from ASCAP, AxisPoint, BackOffice, BMI, BMAT, Consensys/HFA/Rumblefish/SESAC, Crunch Digital, DataClef/SOCAN, DDEX, Gracenote, IBM/SACEM, ICE, Music Reports, Open Music Initiative (OMI), SourceAudio and SXWorks.

  In February 2019, a smaller group of participants “determined to be most likely to meet the high demands of MLC” were prioritised for movement into a Request for Proposal process, including ASCAP, BackOffice, Consensys/HFA/Rumblefish/SESAC, IBM/SACEM, ICE, Music Reports and SXWorks. But since then, three of the initial RFP participants — ASCAP, BackOffice and ICE —determined “that the aggressive demands of the statutory time line for the MLC conflicted with other business goals and removed themselves from the process,” leaving Consensys/HFA/Rumblefish/SESAC, IBM/SACEM, Music Reports and SXWorks as potential technology providers.



> The Songwriters Guild of America (SGA) has withdrawn its Petition to Participate before the Copyright Royalty Board. (Another petition by David Powell has been dismissed by the Copyright Royalty Judges. ) 

  The SGA, which supported a competitor to the MLC, had petitioned the CRB to be included in the proceedings for determination and allocation of assessment to fund the MLC. In reaction, the MLC, with the acquiescence of the Digital Licensing Coordinator submitted a motion asking the Copyright Royalty Judges to bar SGA’s participation in the proceedings.

  SGA explained its decision to withdraw its petition by its concern that “its continued activities in the Proceeding on an adversarial basis – rather than in its preferred role as a collegial music industry organisation that also serves as the copyright administrator for many of its members – will be counterproductive to the interests of the music creator community in this narrow instance.”

  However, the SGA said remained “unconvinced that the presence on the MLC board of a small minority of music creators (no matter how diligent and well-meaning they may be) will be able to prevent the major music publishing corporations from attempting to successfully exert undue influence.”

  In the petition, the SGA “respectfully implores” the Judges to make “the proper funding for MLC activities specifically designed to identify the proper owners of unmatched musical compositions [and royalties] wherever they may reside in the world... one of the highest priorities of these Proceedings.”