The Mechanical Licensing Collective (MLC) Embarks on Comprehensive Audits of Digital Service Providers (DSPs)

Introduction

The Mechanical Licensing Collective (MLC), established under the Music Modernization Act (MMA) of 2018, has taken a significant step towards ensuring the accuracy and transparency of royalty payments to songwriters and music publishers. The MLC has issued notices of intent to audit all digital service providers (DSPs) that operate under the compulsory blanket license administered by the MLC since its inception in 2021. This wide-ranging audit initiative aims to verify the accuracy of reported and paid royalties, offering enhanced protection for the rights of music creators.

Background

The MMA brought about a transformative change in the music industry by replacing the complex and inefficient song-by-song licensing system with a new blanket license for musical work mechanicals. This shift was prompted by the accumulation of a substantial pool of unmatched and unpaid publishing royalties, amounting to $427 million, under the previous licensing system. The MLC was established as the central entity responsible for distributing these “blackbox” royalties and administering the new blanket license moving forward.

Scope of the Audits

The MLC’s audit notices encompass a diverse range of DSPs, including on-demand streaming services like Spotify, Apple Music, Amazon Music, Tidal, and Deezer. Interactive streaming services associated with internet radio companies such as Pandora, Mixcloud, and iHeart Radio are also subject to these audits. Additionally, music apps like Ultimate Guitar, PianoTrax, and WeavRun fall within the scope of the MLC’s audit plans.

Objectives of the Audits

The primary goal of these audits is to ensure that DSPs have accurately reported and paid royalties to songwriters and music publishers. The MLC seeks to identify any discrepancies or errors in the royalty payments made by DSPs, thereby safeguarding the rightful earnings of music creators. The audits will also assess the DSPs’ compliance with the terms and conditions of the compulsory blanket license administered by the MLC.

Statutory Authority and Oversight

The MLC’s right to conduct audits and be subject to audits itself is explicitly stipulated in the Music Modernization Act. This provision reflects the importance of accountability and transparency in the administration of the compulsory blanket license. The audits will be overseen by Jane Bushmaker, a veteran in the music industry audit field and a member of the MLC’s Analytics & Automation team. Experienced external audit firms will be engaged to conduct the audits, ensuring independence and expertise in the process.

Significance of the Audits

The MLC’s audit initiative marks a milestone in the history of the compulsory mechanical license in the United States. For the first time in 115 years, DSPs will be subject to audits, providing enhanced protection for the rights and interests of songwriters and music publishers. The audits aim to ensure that creators receive fair compensation for their works, fostering a sustainable ecosystem for music creation and distribution in the digital age.

Conclusion

The MLC’s comprehensive audits of DSPs represent a crucial step towards ensuring the accuracy and transparency of royalty payments in the music industry. These audits will help rectify any discrepancies or errors in royalty reporting and payments, safeguarding the livelihoods of songwriters and music publishers. The MLC’s commitment to accountability and transparency sets a new standard for the administration of compulsory blanket licenses, promoting fairness and equity in the digital music landscape.

Full List of Companies to be Audited by the MLC

1. Spotify
2. Apple Music
3. Amazon Music
4. Tidal
5. Deezer
6. Pandora
7. Mixcloud
8. iHeart Radio
9. Ultimate Guitar
10. PianoTrax
11. WeavRun

Call to Action

The MLC’s audit initiative is a significant step towards ensuring fairness and transparency in the digital music industry. Stay tuned for updates on the progress of these audits and the impact they will have on the livelihoods of music creators.