The MLC’s Bold Move: Auditing DSPs for Accurate Royalty Payments in the Digital Music Industry
A New Era of Transparency and Accountability
In a groundbreaking move that signals a new era of transparency and accountability in the digital music industry, the Mechanical Licensing Collective (MLC) has issued notices of intent to audit all digital service providers (DSPs) operating under its compulsory blanket license. This comprehensive audit plan marks a pivotal moment in the music industry, demonstrating the MLC’s unwavering commitment to protecting the rights of songwriters and music publishers and ensuring the equitable distribution of royalties.
MLC’s Statutory Responsibility: Ensuring Accuracy and Fairness
Established in 2021, the MLC administers the blanket license for musical work mechanicals, replacing the previous song-by-song licensing system that had become increasingly cumbersome and inefficient. This landmark change aimed to streamline the licensing process and address the substantial pool of unmatched and unpaid publishing royalties, which had accumulated to a staggering $427 million.
The MLC’s decision to conduct audits stems from its statutory responsibility under the Music Modernization Act (MMA), enacted in 2018. The MMA revolutionized the music industry by creating a new blanket license for mechanicals and establishing the MLC to distribute royalties and oversee the licensing process. Crucially, the act granted the MLC the right to audit DSPs and be audited itself, ensuring accountability and transparency in royalty payments.
Comprehensive Audits to Verify Royalty Accuracy
The MLC’s comprehensive audit plan encompasses a wide range of companies that license music, including on-demand streaming services like Spotify, Apple Music, Amazon Music, Tidal, and Deezer; interactive streaming services such as Pandora, Mixcloud, and iHeart Radio; and music apps like Ultimate Guitar, PianoTrax, and WeavRun. These audits aim to verify the accuracy of reported and paid royalties, going beyond the measures already implemented by the MLC.
The MLC’s initiative to audit DSPs gained momentum following Bridgeport Music’s decision to exercise its right to audit the MLC. Known for its assertive approach to copyright enforcement, Bridgeport Music’s move highlighted the need for robust auditing mechanisms. However, the MLC emphasized that its decision to conduct DSP audits was independent of the Bridgeport news and was solely driven by its statutory obligations.
MLC’s Commitment to Songwriters and Music Publishers
Kris Ahrend, CEO of the MLC, underscored the importance of ensuring accurate royalty reporting by DSPs, stating that it is one of the MLC’s fundamental responsibilities under the MMA. To spearhead this effort, the MLC appointed Jane Bushmaker, an experienced music industry audit veteran and member of the MLC’s Analytics & Automation team, to oversee the DSP audits. These audits will be conducted by qualified external audit firms, ensuring objectivity and thoroughness.
Alisa Coleman, Chair of the Board of Directors at the MLC, emphasized the significance of the MLC’s audit right, describing it as a groundbreaking development in the history of the U.S. compulsory mechanical license. She stressed that the audit notices marked the beginning of the MLC’s fulfillment of this crucial function, providing enhanced protection for songwriters and music publishers.
Advancing Transparency and Fairness in Royalty Payments
The MLC’s comprehensive audit plan represents a major stride towards ensuring the integrity of royalty payments in the digital music industry. By verifying the accuracy of reported royalties, the MLC aims to rectify any discrepancies and ensure that songwriters and music publishers receive their rightful compensation. This initiative reinforces the MLC’s commitment to transparency, accountability, and fairness in the distribution of royalties, ultimately benefiting the entire music ecosystem.
Full List of Companies the MLC Intends to Audit
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
Conclusion: A Call for Collaboration and Progress
The MLC’s decision to audit DSPs is a bold step towards ensuring the accuracy and transparency of royalty payments in the digital music industry. This move signifies the MLC’s unwavering commitment to protecting the rights of songwriters and music publishers and fostering a more equitable distribution of royalties. As the industry evolves, collaboration between the MLC, DSPs, and rights holders is essential to ensure that the music ecosystem thrives and that creators are fairly compensated for their work.