MBW’s Stat Of The Week is a series in which we highlight a single data point that deserves the attention of the global music industry. Stat Of the Week is supported by Cinq Music Group, a technology-driven record label, distribution, and rights management company.
Back in 2018, a bill was signed into US law that paved the way for a complete overhaul of the music licensing framework in the market via the introduction of a blanket mechanical license for digital service providers (DSPs).
That bill, the Music Modernization Act (MMA), resulted in the designation, by the United States Copyright Office (USCO), of the Mechanical Licensing Collective (MLC) – an entity tasked with licensing and administering rights.
What that has all meant in practice since then, is that music streaming services in the United States like Spotify and Apple Music have been required to pay large sums of mechanical royalties to MLC, which serves as an exclusive administrator.
The MLC’s job is to then distribute these royalties to music publishers, administrators, ex-US CMOs, and self-administered songwriters, composers and lyricists whose songs have been streamed.
In 2022, the MLC’s second year of operation, the organization directly distributed more than $532.3 million in royalties to its Members and processed usage covered by voluntary licenses maintained by DSPs valued at an additional $48 million, bringing the MLC’s total royalties distributed for the year to roughly $580.3 million.
The MLC revealed this distribution figure in a letter to its members this week, and obtained by MBW.
To date, according to the MLC, including February 2023, royalties distributed by the MLC have reached the $1 billion milestone, including $945.9 million in blanket royalties and another $137.1 million in voluntary royalties.
“Reaching this milestone shows that the processes we built and launched a mere two years ago are working effectively, allowing us to fulfill our mission to pay rights holders their digital audio mechanical royalties.”
Kris Ahrend, MLC
MBW reached out to the MLC for a comment on the milestone. MLC Chief Executive Kris Ahrend said that, “reaching this milestone shows that the processes we built and launched a mere two years ago are working effectively, allowing us to fulfill our mission to pay rights holders their digital audio mechanical royalties”.
He added: “It also shows how much we as an industry can accomplish when we work together. We’re grateful to our members, partners and other stakeholders for playing their part.”
Elsewhere in the letter obtained by MBW, the MLC says that its current average match rate for the nine distributions it completed in 2021 was more than 90%, and its current average match rate for the twelve distributions it completed in 2022 is more than 89%.
The MLC also addresses the industry’s so-called “black box”, the unpaid pool of royalties that rightsholders can’t access because of insufficient data.
The MLC says that for digital audio mechanicals in the US, the “black box” prior to the body’s inception turned out to be $426.9 million in unpaid royalties accrued by 21 DSPs between 2007 and 2020.
The MLC adds that it is “illuminating this so-called black box’ by reporting the data about unpaid royalties to its Members on a regular basis and by making the data for unpaid royalties available for Members to search and act on using tools within The MLC Portal.
Speaking with MBW back in December 2021, Kris Ahrend explained that “members can use the Portal to manage their catalogs, register works and access their royalty statements”.
He added: “The Portal is also where members can access resources like our new Matching Tool, which enables them to search the unmatched sound recording uses we have accumulated and propose matches to songs they have registered with us.”
Commenting on the latest news, Ahrend noted that the MLC, “began paying out matched historical royalties last June, and to date we’ve paid out more than 20% of the oldest unmatched royalties, for uses that took place between 2007 and 2017”.
He continued: “We expect that percentage to increase significantly over the next few months as we begin our second pass at these older uses. We also already made all of the data for the remaining unmatched uses from this period available for our members to search using our Matching Tool.
“The majority of the historical unmatched royalties we received ($373.6 million of the $426.9 million) relate to more recent uses that took place in the last three years before the new blanket license took effect (2018-2020), and the rates for these uses (Phono Records III) have still not yet been finalized by the Copyright Royalty Board (CRB). Once those rates are final, the DSPs have 6 months to send the new usage reports and royalties.“
The CRB sets the rates administered by the MLC. The 2018-2022 songwriter rate proceedings were battled out by the National Music Publishers Association (NMPA) (on the publishers’ side) and the streaming services in a legal showdown known as ‘CRB III’.
Those proceedings, for the five years between 2018 and 2022, saw the CRB decide to increase songwriter/publisher royalty rates for streaming and other mechanical uses from 10.5% to 15.1% .
