MLC, Digital Services Strike Deal to Fund Music Modernization Act-Mandated Database

The Music Modernization Act that passed in October 2018 was hailed as a landmark achievement for the music industry in creating a solution to several issues that have long plagued the business, particularly in the digital age. And today (Nov. 14) marks another critical step forward for the functions the MMA mandates, including the funding for a central database that will allow for the matching of song recordings to rights holders so that songwriters and publishers can get paid for the use of their copyrighted works.

The Mechanical Licensing Collective (MLC), which was established by the Copyright Royalty Board earlier this year to build and operate the central database, today reached an agreement with the Digital Licensing Coordinator (DLC), which represents the digital music services that the MMA mandates must fund the MLC, to provide the funding for the implementation and operation of the MLC and its database. The MLC must be up and running by Jan. 1, 2021, according to the legislation.

Under the agreement, the MLC will receive $33.5 million in startup costs, as well as a first-year operating budget of $28.5 million, with the bill being split among the digital services — Amazon, Apple, Google, Pandora and Spotify — proportional by size, with the largest footing the larger portion of the payment. The MLC board had originally requested $37.25 million in startup funding and a first-year operating budget of $29 million, according to a document the organization filed with the CRB on Sept. 13. Before the formal collections for the MLC costs begin in 2021, the DLC will provide interim financing.

"Today’s agreement between the MLC and the DLC represents a landmark achievement for every facet of the music industry," MLC board chairman Alisa Coleman and DLC board chair James Duffett-Smith said in a joint statement announcing the agreement. "As a result of this accord, the central feature of the Music Modernization Act will be able to commence operations with the resources necessary to help ensure its success."

In addition to the funding, the MLC and DLC announced the creation of a new budgeting committee, to be comprised of members from both sides of the negotiating table in equal number, that will continuously evaluate the MLC’s operating costs. That, according to the announcement, will limit the need to return frequently to the CRB to mediate any disputes that may arise in the future.

"Overall, this agreement is a great step forward for all of us within the music community and clearly builds off the tremendous progress we made with the passage the Music Modernization Act," Coleman and Duffett-Smith’s statement continued. "With this phase behind us, we will now continue our work together to finalize the operations and other requirements under the law as we prepare to help songwriters get the royalties they are owed."

Following the announcement, National Music Publishers Association president and CEO David Israelite issued a statement calling the deal an "important step" for the industry.

"The deal struck with the biggest streaming companies in the world to fund the collective’s start up and future operational costs is an important step forward for our industry,” said Israelite. "The collective is an unprecedented agency serving both songwriters and steaming services so that the entire system works better. We are pleased the digital services met the budgetary requirements to ensure the success of the MLC’s mission.  The Music Modernization Act contained ambitious requirements and this agreement will give all parties a good head start on achieving its goals."

Also praising the funding pact is Garrett Levin, CEO of the Digital Media Association (DiMA), a trade group that was an integral industry ally in getting the Music Mordernization Act passed into law.

"This is a watershed moment in music licensing and a win for the entire music community,” said Levin. "The agreement between the MLC and DLC highlights the unwavering commitment of the streaming companies to establishing a fully functional MLC that can fulfill its mission. At the heart of the MMA is the potential to establish a system that works better for songwriters and allows streaming services to continue innovating on behalf of fans and creators. The streaming services have been committed to building that better system, which is why we were able to come together and reach this agreement today."