The Mechanical Licensing Collective (The MLC) has issued notices of intent to conduct audits of Digital Service Providers (DSPs) that started operating under the compulsory blanket license administered by The MLC in 2021.
According to a press release issued on Wednesday (January 17), the audit period noticed includes usage under the blanket license that occurred between January 1, 2021 and December 31, 2023 – the first three years of The MLC’s full operations.
Established by the landmark Music Modernization Act (MMA), the MLC is a nonprofit entity designated by the United States Copyright Office to develop and administer a mechanical licensing system that launched on January 1, 2021.
The MLC is responsible for collecting and distributing royalties payable to songwriters and copyright owners by digital music services, and for the creation of a first-of-its-kind, public database that will contain critical copyright information on all musical works.
Back in February 2021, Spotify, Apple and other services paid $424.38 million in historical Unmatched Royalties to the Mechanical Licensing Collective.
Of that $424.38m, $163.3m was received from Apple, $152.2m from Spotify, while Amazon and Google transferred $42.7m and $32.8m, respectively.
By sending audit notices to both the United States Copyright Office and DSPs, The MLC says that it is exercising a “key right granted by Congress” in the MMA.
This right enables The MLC to conduct audits of DSPs operating under the blanket license to ensure the DSPs have accurately reported and paid royalties.
According to The MLC, conducting audits represents an additional way that it can ensure the accuracy of the usage reports and royalty payments submitted by DSPs.
The MLC says that it already takes a number of steps to ensure the DSPs report accurately, including scrutinizing the monthly usage reports provided by DSPs via automated and manual reviews.
The MLC says that it “also utilizes the records of use process established by the U.S. Copyright Office’s regulations to further examine specific aspects of DSP usage reporting”.
The organization states in the press release announcing the audit notices that its members “will not bear any of the audit costs” and that costs will be covered by The MLC’s operational budget, which is funded by DSPs at no cost to songwriters or music publishers under the MMA.
And, should an audit of a DSP reveal an underpayment of any amount, The MLC says it will distribute the full amount of any recovery to the impacted rightsholders, without deducting any audit costs or fees.
The MLC also says that it will update Members on the results of any DSP audits that it conducts and will “clearly identify any monies recovered in audits on the royalty statements it provides to Members”.
Billboard reported in December that the Mechanical Licensing Collective (The MLC) is itself being audited, by Bridgeport Music.
“Ensuring DSPs have reported royalties accurately is one of The MLC’s statutory responsibilities under the MMA.”
Kris Ahrend, The MLC
“Ensuring DSPs have reported royalties accurately is one of The MLC’s statutory responsibilities under the MMA,” said Kris Ahrend, Chief Executive Officer of The MLC.
“The MLC has tapped music industry audit veteran, Jane Bushmaker, a member of The MLC’s Analytics & Automation team, to oversee DSP audits, which will be conducted by experienced outside audit firms,” he continues.
“The MLC’s audit right is a first in the 115-year history of the U.S. compulsory mechanical license and provides enhanced protection for songwriters and music publishers.”
Alisa Coleman, The MLC
Alisa Coleman, Chair of the Board of Directors of The MLC added: “The MLC’s audit right is a first in the 115-year history of the U.S. compulsory mechanical license and provides enhanced protection for songwriters and music publishers.
“The audit notices filed by The MLC mark the beginning of its fulfillment of this important function.”
The MLC has sent audit notices to the following DSPs:
