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Recording Academy Outlines Pros and Cons of Both MLC Applicants, Endorsing One But With Caveats

Grammy Award
Courtesy of The Recording Academy

      

The Recording Academy has weighed in on which group it feels would be best to build and administer the Mechanical Licensing Collective and the blanket mechanical licenses created by the Music Modernization Act. In commentary submitted to the Copyright Office and made available to Billboard, the Academy praises various aspects of the proposals of both the American Music Licensing Collective and the one via the Industry Consensus Group, sponsored by the National Music Publishers' Association, the Nashville Songwriters International Association, and the Songwriters of North America.

But ultimately the Academy endorses the latter applicant, although it said that the Copyright Office should push the consensus group for more information before making its decision on which side to pick.

"The Academy… appreciates the leadership demonstrated by the boards of the American Music Licensing Collective ("AMLC") and the Mechanical Licensing Collective ("MLC") in their respective submissions to serve as the Collective," the Recording Academy commentary stated. "Upon review, the [Copyright] Office is fortunate to weigh two entities that have demonstrated substantial expertise, resources, strategy and financial commitment to establish a fully operational Collective. Both have also demonstrated a clear commitment to the rights of songwriters."

While the Academy had initially been among those endorsing the efforts sponsored by the NMPA, NSAI, and SONA in the initial press release announcing the Board back in early February, it was conspicuous in its absence among the endorsing entities listed on the official application submitted to the Copyright Office when that application was posted on March 23. 

In response to an inquiry from Billboard last week, the Academy issued a statement, "The Recording Academy has an obligation to its songwriter members to study both submissions for the new Collective carefully and with due diligence," the Recording Academy chief industry government and member relations officer Daryl Friedman said. "Therefore, we could not exclusively endorse either entity prior to studying their full proposals."

But with its submission to the Copyright Office this week it said the Academy believes the consesus MLC is best equipped to run the Collective, according to a statement from the Academy. "However, additional information is necessary regarding accurate data matching and songwriter outreach to ensure every songwriter is properly paid for their work. The Office anticipated the need for applicants to 'supplement their initial submission' and we encourage them to seek more information in these areas."

In its commentary, signed by the Academy's director of government relations Michael Lewan and its senior director of advocacy & public policy Todd Dupler, it stated, "The AMLC, in particular, should be credited for opening up dialogue on many areas of concerns previously raised by the Academy such as operational transparency and board representation. Additionally, the Academy values the AMLC's commitment to mitigating against unclaimed royalties, and appreciates its dedicated approach to matching unclaimed works. At its core the Collective should fundamentally be focused on paying songwriters what they are owed -- and the AMLC showed throughout its submission a commitment to this goal." 

But then it endorsed the competing applicant, saying it believes the Industry Consensus Group is best equipped to satisfy the statutory requirements of the MMA. "The MLC submission embodies a thoughtful, meticulous, and comprehensive approach," its Commentary stated. "It demonstrates the administrative and technological capabilities necessary to perform the required functions of the Collective. The Academy has confidence in the MLC's ability to create and operate the Collective in accordance with the statute."

Before making a decision, however, the Academy urged the Copyright Office to push the Industry Consensus Group for more information about two of the Academy's main concerns: education and outreach to D-I-Y songwriters; and unclaimed -- black box -- royalties where songs and composers aren't matched. According to the MMA law, those royalties should be held for at least three years before a decision is reached to distribute them. At the end of those three years, the MMA says the MLC "may" then chose to distributes those royalties by market share.

Those royalties are alleged to likely consists of belonging to songwriters unaffiliated to publishing companies and performance rights groups.

This is a source of major contention between the two applicants with the AMLC saying that its competitor has a conflict of interest, in that the five largest music publishers sit on its board and can vote themselves a share of those funds, even though they likely won't even use the AMLC for collections and payments since they traditionally have direct deals with the digital services and get paid directly from them.

But the law also provides safeguards, which the Industry Consensus Group took advantage of by appointing all indie publishers and songwriters to both the unclaimed royalty committee and the dispute resolution committee which will both have a role in the issue. Further, the law states that the MLC must be re-certified every five years by the Copyright Office and when it is doing that process, it will undoubtedly look at what has happened regarding the disbursement of black box monies.

Consequently, on the unclaimed royalty issue, the Recording Academy urged the Copyright Office to exercise its authority to request supplement information and additional public comment that will allow the applicants to set up the MLC to offer further analysis and details.

For example, the Academy noted that the Industry Consensus Group has committed to ensuring extensive efforts to clean up the unclaimed accrued royalties even if it means holding those royalties beyond the three-year period cited in the law before making a distribution. But then the Academy also noted that the consensus group added in its submission they will withhold distribution royalties "where appropriate" in situations where there is "reasonable evidence" that this will result in material increases of matching success.

Thus, the Academy notes that the Industry Consensus Group's strong commitment comes "attached with qualifiers," which raises the question of whether that applicant will robustly and relentlessly  work to match unclaimed royalties. The Academy asks what constitutes "reasonable evidence" and "where appropriate." At what point is it no longer appropriate to continue to delay payment of accrued royalties," the Academy wondered.

On the other hand, the Academy noted that the AMLC establishes a high standard for itself in matching unclaimed royalties. It asserts that it would start from a 70 percent match rate prior to launch, and achieve a 94 percent match rate by the end of 2025.

Finally, on that issue, the Academy stated: "Before making a final designation, the Office should ask [the Industry Consensus Group] to make a more explicit commitment to delay the distribution of unclaimed royalties, if such a delay is necessary to ensure that royalties are matched to the appropriate copyright owners to the greatest extent possible, in accordance with the discretion provided under the statute."

Moving onto educating D-I-Y songwriters, the Academy noted that while the AMLC application contains a "robust public out reach strategy complete with concrete communication tactics, staffing details and information of videos, advertising and websites, it fails to say how it will measure the effectiveness of its efforts; nor specify what steps it will take to target self-publishing unaffiliated songwriters."

The Academy also pointed out the AMLC proposal does not detail any existing relations to augment its outreach to the organizations like publishers, PROs and songwriter organizations that collectively represent hundreds of thousands of songwriters.

Finally, the Academy notes that the Industry Consensus Group proposal is even more limited in details about its educational efforts to raise awareness of the MLC and its submission, saying its proposal does not specify strategies, tactics, cost or staffing needs on this front. Yet it notes that the applicant does have extensive industry connections that would be helpful.

Whichever applicant is chosen, the Academy pledged to work with them on outreach aimed at educating the greater songwriter and music creator community.


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