Compact disc (CD) sales revenue reached its peak in 1999 at just over $13 billion and accounted for 90% of all music industry revenue. In June of that same year, Napster®, the peer-to-peer file sharing software, was released to the public. Napster® would become one of the largest disrupters in the history of the music industry. Napster® spawned a new era of software companies, known as digital service providers (DSPs), that offered on-demand music downloads and digital streaming at a fraction of the cost of a CD. Today, music streaming revenue makes up 85% of all music industry revenue.
Copyright law and the framework for royalty distribution was not equipped to handle such a massive change. Since 2015, music revenue steadily increased with popular platforms such as Spotify® and Apple Music®; however, copyright owners did not see the same benefit. The problem was that DSPs faced the threat of massive litigation for copyright infringement, among other claims, and copyright owners were not getting the money that they were owed.
The Music Modernization Act (MMA) is the supposed answer to this problem. The MMA unanimously passed through Congress and became law on October 11, 2018. The key provision of the MMA creates the Mechanical Licensing Collective (MLC). The MLC is a nonprofit organization that will issue and administer blanket mechanical licenses to DSPs for digital streaming platforms beginning January 1, 2021. Any copyright owner needs to be aware of what the MLC will and will not do.
There are four major directives of the MLC. First, the MLC will create and maintain a public database to host copyright information. This database will be entirely free and accessible to the public. The MLC has urged anyone with a copyright interest to register with the MLC (for free) and scrub the database to ensure that their copyright information is inputted and correct. Second, the MLC will administer blanket licenses to U.S. DSPs. Although the MLC will pay publishers outside of the country, it will only collect royalties accrued within the United States from digital streaming. Further, DSPs may not opt-out of the MLC. Third, the MLC will receive and audit usage reports submitted by DSPs. Lastly, the MLC will collect and distribute royalties based on these usage reports. As the MLC is a nonprofit, all collected royalties will flow through to copyright owners.
There are also many things that the MLC will not do. The MLC will not replace any performing rights organization or SoundExchange. Royalties from the MLC will be an entirely new revenue source for copyright owners and will not displace any other revenue source. The MLC will not administer licenses for audio/visual works. Lastly, the MLC will not resolve copyright disputes.
The MLC has begun inputting data into the database with an initial group of copyright owners. On January 1, 2021, the online database will “go live” and copyright owners and other interested parties will be able to register as a member with the MLC. Self-published copyright owners are strongly encouraged to register their works so they, too, can benefit from the MMA. More information may be found at https://themlc.com/.