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Competing Groups Vying to Form Mechanical Licensing Collective Slam Each Other's Proposals

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While the two applicants vying to be named the group that will build the Mechanical Licensing Collective created by the Music Modernization Act (MMA) have thus far engaged in mudslinging at their competitors, in the comments to the Copyright Office filed Monday and posted Tuesday evening, each group let loose with both barrels in appraising the other's proposal.

The Industry Consensus Group (ICG), which has submitted the proposal dubbed the "MLC," filed a 42-page commentary picking apart its competitor's proposal for building the Mechanical Licensing Collective. Meanwhile, Rhonda Seegal, the interim CFO of that competitor, the American Music Licensing Collective (AMLC), also filed commentary criticizing various aspects of the ICG proposal.

The ICG's commentary on the AMLC's proposal concludes that, "AMLC is not a serious candidate to be the collective, and shows no capability of fulfilling the responsibilities of running a nationwide collective on behalf of all songwriters and copyright owners, responsible for billions of dollars in royalties." Furthermore, it states, "There can be no mistake, AMLC does not meet the statutory requirements to be designated as the collective, and is unqualified and unprepared to fulfill the duties and requirements of the collective. Its proposal is one of a chartless and uninformed wandering towards a failure that would have a very real and very harmful effect on songwriters and copyright owners across the nation and world."

The ICG's effort is being sponsored by the NMPA; the Nashville Songwriters Association International (NSAI); and the Songwriters of North America (SoNA). Its commentary was signed by lawyers Frank Scibilia and Ben Semel, of the law firm Pryor Cashman LLP, which is identified as the attorney for the MLC.

The AMLC's effort appears to be spearheaded by Clearbox Rights CEO John Barker and Audiam founder Jeff Price, with input from Songwriters Guild of American (SGA) president Rick Carnes and others, although the ICG says its proposal to form the MLC is unsigned.

The Copyright Office has until July 8 to decide between the two competing proposals. Comments were due by April 22, and more than 600 were submitted in total.

In her commentary to the Copyright Office, AMLC CFO Seegal says she has "identified several troubling issues and misleading statements" in the NMPA-led proposal. First off, she claims that the NMPA has incorrectly named itself the "Mechanical Licensing Collective," even though the Copyright Office has not yet designated anyone to serve in that role. She asserts that the MLC name, which was used in the ICG's submission, is a "misrepresentation that is causing confusion and is misleading to many songwriters and copyright owners."

Ironically, Seegal herself doesn't represent that she is affiliated with the AMLC anywhere in her comments to the Copyright Office, instead identifying herself as a recently-retired senior vp finance at AMTRAK, as well as mentioning she formerly was a corporate officer at several publicly-traded Fortune 500 companies. However, her LinkedIn page says she is currently interim CFO of the AMLC.

Seegal further claims in her statement that there are other misleading and incorrect statements in the ICG proposal and from its sponsors, including the NMPA's claim that it represents "all American music publishers and their songwriting partners," which she states is not so.

Like others affiliated with the AMLC, she points to the conflict of interest with regards to the "black box" royalties built up from the inability to match some recordings to compositions and thus identify who should be paid those publishing royalties. By having executives employed by the three major music companies on its board -- the body that would decide who will receive that money, which by MMA law is based on market share -- "creates a serious conflict of interest."

She also attacks the ICG's budget, saying its proposal does not provide sufficient information to "pass the smell test." She notes that the group's large overhead for the first five years is comprised of a $200 million-plus budget, which she says is more than four times larger than the AMLC's proposed spend over that same time period.

And she notes that, even though the NMPA proposal lays out a staff organizational chart, the submission also says its org chart has not yet been determined. "Given the number of caveats in the NMPA proposal, I would have little confidence that the group will meet its objectives in the designated time frame and within budget," she states.

She also says the ICG proposal lacks information about education and outreach to songwriters, which she believes could be a disadvantage to minorities, songwriters of color and other lower socio-economic groups, which she asserts have no access or limited access to information and education concerning their rights. The "NMPA-led group, if chosen," she says, "could disproportionately transfer significant wealth from minority artists, their families and communities."

Meanwhile, the ICG commentary on the AMLC's application meticulously compares each board member to the requirements set out by the MMA to qualify as a board member of the MLC and asserts that the AMLC board falls short on most every criteria.

The law states that the MLC board members should reflect copyright owners and have the endorsement and enjoy substantial support from copyright owners of musical works that together represent the greatest share of the licensor market for uses of such works in covered activities, as measured over the preceding three full calendar years. The ICG claims that the AMLC doesn't show that it meets that criteria.

"More troubling still is that AMLC has misrepresented facts to the Register about endorsement," the ICG comments state. "The statement that AMLC's alleged endorsers ‘represent hundreds of thousands of separate and unique music publishers whose music is distributed on digital streaming services in the United States' is simply not true.'

The comment continues that most of the music industry songwriter groups that endorsed the AMLC are themselves not copyright owners, which is a requirement of the law. Moreover, two of the organizations listed in the AMLC's endorsement section have since refuted those endorsements, citing the Australian Collections Management Organization (APRA AMCOS) and CIAM, the International Council for Music Creators. The former itself submitted a comment to the Copyright Office saying that while one of its board members may have endorsed the AMLC, the organization itself does not do so. The latter issued a statement saying it has not endorsed either of the competing applicants.

In the meantime, "MLC has established that it is exclusively endorsed and supported by over 130 music publishers that own the relevant exclusive copyright rights to over 7.3 million musical works," the ICG says. "AMLC's endorsers demonstrate no ownership of relevant rights ... In sum, however measured, whether by the plain English metric set forth in the statute or by the metrics advanced by AMLC, MLC is the only entity that is ‘endorsed by, and enjoys substantial support from, musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities, as measured over the preceding three full calendar years,' which calls for MLC's designation as the collective."

It then points out that at least a third to a half of the AMLC's board members do not appear to meet the most basic statutory requirements to be appointed to those positions. 

The Consensus Group comments then go through the AMLC board members one by one, either asserting or questioning their qualifications to meet the legal criteria to be on the MLC board. For example, it notes that ClearBox's Barker is classified as a publisher board member, which implies his company owns copyrights. But it adds that the Clearbox website identifies itself as a music publishing administrator, according to the ICG comments.

The ICG also wonders how the AMLC board was chosen and notes that it doesn't appear to have by-laws yet on how they will be chosen going forward. The AMLC, the ICG claims, provides no transparency into its how its governance was selected despite a specific a Copyright Office request to do so. 

Furthermore, the ICG states that since AMLC is a non-member corporation, "this is even more alarming ... leaving the 14 handpicked voting board members with absolute power to reelect themselves indefinitely with no term limits."

While the AMLC has continually accused the ICG of having conflicts of interest, its own submission to form the MLC doesn't mention any of its own conflicts of interest, the ICG charges. For example, it notes that the AMLC plans to hire DataClef as a vendor, which represents a conflict that it does not disclose: DataClef is owned by SOCAN, the Canadian performance rights organization, which also owns board member's Jeff Price Audiam company, but AMLC does not disclose that relationship.

Further, the AMLC board "includes multiple individuals that are ineligible under the plain language of the statute, and was handpicked to include primarily associates of AMLC founders or persons otherwise connected to SOCAN, the Canadian parent company of AMLC's intended vendor partner DataClef," the ICG alleges. "A handful of others appear to have been added at the last minute to fill out vacant spots in time for the Register's proposal deadline."

The ICG points out that the AMLC's board also does not include a single representative of a large or midsized music publisher, which it claims is is a serious problem. "The presence of publishers of all sizes and genres on MLC's board is precisely what makes it "faithfully reflect the entire music publishing community," the ICG comments state. On the other hand, the AMLC submission -- as well as public comments by its board members -- reveals "a decided bias against large music publishers, repeatedly disparaging them, although their works represent the majority of the royalties that the collective would be charged with processing," according to the ICG comments.

In talking about the AMLC's claim about its own board alleged conflict of interest, the ICG notes that whether or not one of its board members have a direct deal with a digital service provider has nothing to do with unclaimed accrued royalties. Those companies will also face the same matching and distribution issues as would any other copyright owner, it pointed out; and thus it will also be entitled to their market share portion of unclaimed royalties, just like any other rights holders, including fully independent songwriters.

Finally, the ICG comments claim that, based on the AMLC's submission, it appears unprepared to take on the task for which it has submitted an application.

"AMLC offers a casual, uninformed, and conflicted approach to building collective operations," the ICG comments stated. "Among the most troubling issues are: AMLC's apparent failure to lay any groundwork to date for meeting statutory deadlines; its nonchalant lack of workable planning or budgeting for sustaining development or operations; its failure to even consider numerous important functions of the collective; and its lack of transparency and vendor affiliation."

The ICG claims that the AMLC has not demonstrated the ability to discern what technology requirements are needed "to build and maintain the largest global market's end-to-end mechanical license administration and royalty processing platform in less than two years." It adds, "AMLC's cavalier disregard for the complexity of this process and the diligence it demands is alarming."

The AMLC proposal does not demonstrate a thoughtful or diligent approach to the statutory responsibilities of the collective, states the IGC. It notes, "The proposal lacks a plan or timeline for developing the myriad capabilities required of the collective, and AMLC's proposed budget is untethered to the reality of executing on the massive scope and broad functions that include nationwide license administration, rights database population and maintenance, automated and manual works matching systems, royalty processing, and much more."

ICG comments conclude by saying the AMLC group is fundamentally unprepared to built the necessary administrative and technological capabilities. 

"With no organizational plan, no timeline, no groundwork, an inadequate budget and no detail of the technological requirement that the collective must development," the ICG argues, the AMLC effort "shows a serious lack of consideration for the duties and responsibilities that the collective owes to the songwriters and copyright owners whose livelihoods are in the hands of the collective."