Rights holders and streaming platforms agree on MLC's funding

By Emmanuel Legrand

The creation of the Mechanical Licensing Collective (MLC), the collective management company created in the United States as part of the Music Modernisation Act (MMA) adopted in October 2018, has just reached what is described as "a landmark achievement" by reaching an agreement with music streaming platforms guaranteeing the organisation's funding.

  The MLC, which is scheduled to be operational from January 1, 2021, will be responsible for negotiating with digital services and managing mechanical rights licenses on behalf of authors, composers and music publishers. Under the terms of the agreement, filed with the Copyright Royalty Board, streaming platforms, represented in the Digital Licensee Coordinator (DLC), a non-profit organisation, have agreed to pay $33.5 million for start-up costs and an initial $28.5m for 2021's budget.

  The DLC includes Amazon, Apple, Google, Pandora and Spotify. The accepted budget is virtually in line with the requests of the MLC, which detailed the organisation's launch and structure costs in a document published in early September ($37.25m for the launch costs and an annual budget of $29m).

The necessary resources

  The MLC was awarded by the Copyright Office in early 2019 to the project supported by the National Music Publishers Association (NMPA), supported by various authors/songwriters associations and the subject of broad consensus in the music community.

  In addition, the MLC and the DLC announced the creation of a new budgeting committee, made up of an equal number of representatives of rights holders and platforms, whose function will be to continuously assess the operating costs of the MLC. 

  “Today’s agreement between the MLC and the DLC represents a landmark achievement for every facet of the music industry," said MLC board chair Alisa Coleman and DLC board chair James Duffett-Smith in a joint statement. "As a result of this accord, the central feature of the Music Modernisation Act will be able to commence operations with the resources necessary to help ensure its success."

  They added, “Overall, this agreement is a great step forward for all of us within the music community and clearly builds off the tremendous progress we made with the passage the Music Modernisation Act. With this phase behind us, we will now continue our work together to finalise the operations and other requirements under the law as we prepare to help songwriters get the royalties they are owed.”

A good head start

  For NMPA President and CEO David Israelite the deal is "an important step forward for our industry." He added, “We are pleased the digital services met the budgetary requirements to ensure the success of the MLC’s mission. The Music Modernisation Act contained ambitious requirements and this agreement will give all parties a good head start on achieving its goals.”

  Garrett Levin, CEO of the Digital Media Association (DiMA), which regroups all the main digital platforms, said the agreement was "a watershed moment in music licensing and a win for the entire music community" and a major step in "establishing a fully functional MLC that can fulfill its mission." 

  Said Levin: “At the heart of the MMA is the potential to establish a system that works better for songwriters and allows streaming services to continue innovating on behalf of fans and creators. The streaming services have been committed to building that better system, which is why we were able to come together and reach this agreement today.”


[The agreement between the MLC and the DLC is effectively a major step towards the establishment of a fully functional MLC. When the MLC filed in September with the Copyright Office its financial requirements, there was concern that the bill would be hard to swallow for the music streaming sector. 

The agreement, which calls for start-up costs of $33.5 million and an initial budget of $28.5m for 2021 is slightly lower than was was asked for by the MLC (respectively $37.25m and $29m) but will still give the new structure enough funds to build from scratch the tool that the whole music publishing community finally expects to solve once for all the thorny issue of mechanical licensing in the US. 

Unlike most western countries that have adopted long time ago the collective management system to license and administer mechanical rights, the US market continued to have the most byzantine system, and not a very effective one. For music streaming services, this agreement is also a good deal, far cheaper than the risks of facing class action lawsuits for failing to license mechanical rights. 

There's still a long way to go before the MLC gets fully functional, not least the creation of a database of music works, but this major hurdle has been passed and both rights holders and digital platforms can breathe a sigh of relief.

  — Emmanuel Legrand]