The Mechanical Licensing Collective’s (MLC) Comprehensive Audit Initiative: Ensuring Accuracy and Transparency in Digital Music Royalties
A New Era of Accountability in the Music Industry
In a groundbreaking move that promises to transform the music industry, the Mechanical Licensing Collective (MLC) has initiated a comprehensive audit initiative targeting digital service providers (DSPs) operating under its compulsory blanket license. This sweeping move marks a watershed moment in the history of mechanical licensing, introducing unprecedented levels of scrutiny and accountability to ensure accuracy and transparency in digital music royalties.
Background: The Music Modernization Act (MMA) and the MLC’s Role
The Music Modernization Act (MMA), enacted in 2018, brought about a seismic shift in the landscape of music licensing in the United States. Recognizing the complexities and inefficiencies of the previous song-by-song licensing system, the MMA introduced a new blanket license for musical work mechanicals, aiming to streamline the process and address long-standing issues in the music industry.
At the heart of this transformation lies the MLC, a non-profit organization tasked with administering the new blanket license, ensuring the distribution of royalties to songwriters, composers, and music publishers, and addressing the substantial pool of unmatched and unpaid publishing royalties that had accumulated under the old licensing system.
Auditing DSPs: Ensuring Accuracy and Protecting Rights
The MLC’s decision to conduct audits of DSPs is a crucial step in fulfilling its statutory responsibilities under the MMA. These audits aim to verify the accuracy of reported royalties, ensuring that songwriters and music publishers receive fair compensation for their creative works.
The MLC’s audit process will be overseen by Jane Bushmaker, a seasoned music industry audit veteran and member of the MLC’s Analytics & Automation team. Experienced external audit firms will be engaged to conduct the audits, bringing their expertise to the task of scrutinizing DSPs’ royalty reporting practices.
Bridgeport Music’s Audit Request and the MLC’s Response
The MLC’s auditing initiative comes shortly after Bridgeport Music, representing George Clinton and Funkadelic, exercised its right to audit the MLC. Bridgeport Music’s decision to initiate an audit is rooted in its history of assertive copyright enforcement and its involvement in high-profile copyright cases, including the controversial Blurred Lines lawsuit.
The MLC has emphasized that its decision to send notices of intent to audit DSPs was independent of the Bridgeport Music development. The MLC’s CEO, Kris Ahrend, reiterated that ensuring DSPs’ accurate royalty reporting is a fundamental statutory responsibility under the MMA.
Significance of the MLC’s Audit Initiative
The MLC’s audit initiative marks a watershed moment in the history of mechanical licensing in the United States. For the first time in 115 years, DSPs will be subject to audits, providing enhanced protection for songwriters and music publishers.
Alisa Coleman, Chair of the MLC’s Board of Directors, emphasized the importance of the audit function in fulfilling the MLC’s mission. She noted that the audit notices filed by the MLC signal the commencement of its commitment to this critical responsibility.
List of Companies Subject to MLC Audits
The MLC has identified a comprehensive list of DSPs that will be subject to its audit process. These companies include:
- Spotify
- Apple Music
- Amazon Music
- Tidal
- Deezer
- Pandora
- Mixcloud
- iHeart Radio
- Ultimate Guitar
- PianoTrax
- WeavRun
- SiriusXM
- SoundExchange
- Meta (formerly Facebook)
- TikTok
- Triller
- ByteDance
- Tencent Music Entertainment
- NetEase Cloud Music
- KuGou Music
- QQ Music
- Xiami Music
- Kugou Music
- Kuwo Music
Conclusion: A Step Towards Transparency and Fairness
The MLC’s comprehensive audit initiative is a significant step towards ensuring transparency, accuracy, and fairness in the digital music royalties landscape. By scrutinizing DSPs’ royalty reporting practices, the MLC aims to safeguard the rights of songwriters and music publishers, ensuring that they receive fair compensation for their creative contributions. This initiative marks a new era in mechanical licensing, setting a precedent for enhanced accountability and protection within the music industry.