2019 American Music Awards

Mechanical Licensing Collective Board Members Outline Challenges, Next Steps

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With the Jan. 1, 2021 deadline for building and launching the Mechanical Licensing Collective (MLC) fast approaching, MLC board chairman Alisa Coleman and non-voting board member Danielle Aguirre laid out where things stand now and the big obstacles before the board during an event for the Association of Independent Music Publishers New York Chapter in New York City on Monday (Oct. 21).

The National Music Publishers' Association-led group was chosen by the U.S. Copyright Office this past July with a mandate to build and launch the MLC, which was created by the Music Modernization Act to administer the blanket mechanical license that the landmark legislation created. As part of that, the MLC must build a song database, with accurate songwriter and publisher information for every song in that database, matching compositions to recordings so copyright owners can receive the correct renumeration of mechanical royalties from digital music services for playing their work. The MMA also created a digital licensing coordinator (DLC), which will be run by the Digital Media Association (DiMA), and which will be tasked with representing those digital services which will foot the bill for the MLC.

The MLC board has submitted a proposed budget to the Copyright Royalty Board asking for $37 million in start-up costs and $29 million as a first-year operating budget. As the DLC did not settle on those costs with the MLC, it looks like it will be up to the CRB judges to rule on how much the MLC will cost.

“Anybody who has launched a brand new company with all the technology and data [that the MLC will require] can understand how intense this job will be,” said Coleman, who is also COO for ABKCO and president of the AIMP’s New York Chapter, during the event. “We have culled the best of the best in the industry to help us.” 

The structure creates a “unique” dynamic at the front end, according to Aguirre, who also serves as executive vp and general counsel of the NMPA: While the MLC board has to work with the digital services to build and operate the the MLC, the two sides are facing off on many fronts even beyond the cost structure, which likely will be settled through a fee assessment proceeding similar to the rate trials that the CRB oversees.

“We understand that the digital services are paying for this, so we have tried to be very reasonable in what we are asking for, which we think is truly needed," Aguirre said. "We don’t want to skimp.... We want this to succeed.”\

According to the law, the DLC doesn’t have to fund the launch or operating budget costs -- nor turn over what Billboard estimates to be $250 million in unmatched "black box money" that still needs to be paid out -- until November 2020, or 45 days before the MLC launch date. That creates a funding issue for building the MLC; sources say the NMPA is fronting the money in the meantime. The law also allows for the possibility that the digital services voluntarily contribute money to get the MLC up and running, which would be offset when the funding mechanisms are settled, but no such contributions have yet been forthcoming, according to the MLC’s filing with the Copyright Office.

However, the discussion between Aguirre and Coleman didn’t touch on that funding issue. Instead, the two discussed how the digital services are withholding information that could be critical in building the MLC.

For example, Aguirre said that the MLC "has many times asked about how much in unmatched royalties there are, and how big or small this issue is.” As part of that, the MLC would like to know what type of match rate the digital services are experiencing, she added, so that the MLC has an understanding of what they will be faced with when it’s operating. “It’s important to understand this ... and it would be great to know that today so that we can build and set up the company’s systems to handle it,” she said.

The MLC has hired a search firm to help find qualified senior management with the goal of having a CEO in place by the end of the year, and after senior management is in place, “that team will help us build out the rest of the staff,” Aguirre said.

Meanwhile, all the publishers and songwriters working with the MLC are doing it on a volunteer basis, Coleman noted. “The man hours we are all contributing -- over 2,000 hours worth -- is not adding to the cost,” she said. “We feel we are doing this for the future of the business."

On another front, the MLC board has narrowed its search for vendors to help it build and implement the database, with three organizations likely to be contracted: One to handle song matching, royalties distribution and streaming reports for copyright holders; another to build the portal through which songwriters and publishers can access and update information; and a third to handle design, branding, communications and outreach, Aguirre said.

Initially, the MLC will rely on the third-party vendor’s database, with the goal of eventually owning that database. The MLC board’s goal is to have songwriter and publisher portals operational in advance of the MLC launch so that those songwriters and publishers can check their information to make sure it is correct in the database; and if not, be able to correct it. Moreover, the MLC will have processes in place to clean the data as the MLC becomes operational. 

“Anyone will be able to access this database so everyone will have a vested interest to get this right,” Aguirre said.


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