The Mechanical Licensing Collective Commences Audits of Digital Service Providers to Ensure Accurate Royalty Reporting

In a transformative move, the Mechanical Licensing Collective (MLC) has launched a comprehensive audit process of all digital service providers (DSPs) operating under its compulsory blanket license. This unprecedented initiative aims to ensure the accuracy of reported and paid royalties, safeguarding the rights of songwriters, composers, and music publishers. The audits will encompass a wide spectrum of companies that utilize music, including popular streaming platforms, internet radio services, and music applications.

Background: The Music Modernization Act and the MLC’s Role

This decisive step finds its roots in the Music Modernization Act (MMA) of 2018, a landmark legislation that reshaped the music industry’s licensing landscape. The MMA introduced a blanket license for musical work mechanicals, replacing the intricate and inefficient song-by-song licensing system that plagued the industry. This fundamental change sought to address the substantial pool of unmatched and unpaid publishing royalties, known as “black box” royalties, which had accumulated due to the complexities of the old system.

The MMA also established the MLC as the central entity responsible for administering the new blanket license and distributing these black box royalties equitably among rights holders. The MLC’s mission is to ensure that songwriters, composers, and music publishers receive their due compensation for the use of their creative works in the digital realm.

MLC’s Statutory Responsibility to Audit and Be Audited

The MMA explicitly grants the MLC the authority to conduct audits of DSPs and to be audited itself. This provision underscores the paramount importance of transparency, accountability, and accuracy in the administration of the compulsory mechanical license. The MLC’s audits aim to verify the accuracy of reported royalties by DSPs, ensuring that songwriters and music publishers receive their rightful share of revenue.

Independent Decision to Audit DSPs

The MLC emphasizes that its decision to initiate audits of DSPs was entirely independent of any recent developments or external pressures. The MLC’s CEO, Kris Ahrend, affirms that ensuring DSPs’ accurate royalty reporting is a statutory responsibility under the MMA. The MLC has engaged Jane Bushmaker, an experienced music industry audit veteran, to oversee the audit process, which will be conducted by qualified external audit firms.

Audit Process and Objectives

The MLC’s audits will focus on verifying the accuracy of royalties reported by DSPs to ensure that songwriters, composers, and music publishers are receiving fair compensation for the use of their works. The audits will delve into various facets of DSPs’ operations, including data collection, processing, and reporting practices. The MLC seeks to identify any discrepancies or errors in royalty payments and ensure that all DSPs are fully compliant with the terms of the blanket license.

Enhanced Protection for Songwriters and Music Publishers

Alisa Coleman, Chair of the Board of Directors at the MLC, emphasizes the significance of the MLC’s audit function. She states that the audit notices mark the beginning of the MLC’s fulfillment of its important role in protecting the rights of songwriters and music publishers. The audits are designed to safeguard the financial interests of rights holders and ensure that they receive accurate and timely compensation for the use of their creative works.

List of Companies Intending to Audit

The MLC has announced its intention to audit the following DSPs:

• Apple Music
• Amazon Music
• Deezer
• iHeart Radio
• Mixcloud
• Pandora
• PianoTrax
• Spotify
• Tidal
• Ultimate Guitar
• WeavRun

Conclusion

The MLC’s comprehensive audits of DSPs represent a major step forward in ensuring the accuracy and fairness of royalty payments to songwriters, composers, and music publishers. These audits are a direct result of the MMA’s provisions and reflect the MLC’s commitment to fulfilling its statutory responsibilities. The audits will undoubtedly contribute to a more transparent and equitable music industry ecosystem, benefiting all stakeholders involved in the creation and distribution of music.