The Mechanical Licensing Collective Completes First Royalty Distribution | Mechanical Licensing Collective

The Mechanical Licensing Collective (The MLC) has announced the completion of its first-ever monthly distribution of mechanical royalties. The organization’s distribution – its first connected with the new blanket license established by the Music Modernization Act of 2018 (MMA) – included royalties from the use of musical works by U.S. digital service providers (DSPs) during January 2021. It did not include any historical unmatched royalties.

The distribution process started in February when DSPs began reporting their streaming and download usage data for January 2021 to The MLC. The royalty pool for all usage data reported to The MLC totaled more than $53 million when calculated at the applicable statutory rates.

The MLC was then able to match approximately 80 percent of the royalties reported to musical works registered in its public database, a figure that is in line with industry benchmarks for initial matching results. Once the matching work was completed, The MLC established which uses were covered by voluntary licenses between the DSPs and copyright owners – a substantial portion in this case – and thus needed to be carved out of each DSP’s blanket license.

After carving out the matched uses covered by voluntary licenses, The MLC determined that the remaining amount of mechanical royalties owed by DSPs to the MLC totaled more than $40 million, which The MLC successfully collected. Those royalties were then included in the monthly distribution process, the results of which are as follows:

$24 million in matched royalties was paid by The MLC to its Members;
$16.4 million is currently pending distribution as follows:
$4.9 million in matched royalties related to shares of registered works for which claims have yet to be submitted by a rightsholder/ MLC Member;
$500 thousand in matched royalties on legal hold; and
$11 million related to usage that The MLC has not yet been able to match to the musical works in its public database.

All of the royalties currently pending distribution will accrue interest until they are distributed, as required by the MMA.

The MLC will continue its attempts to reduce the amount of royalties that are currently pending distribution, including by matching uses to registered musical works and identifying rightsholders who have not yet claimed their shares of matched royalties. The MLC encourages its Members to check and update their data in The MLC Portal, and rightsholders who are not Members to join The MLC and register their songs.

“The completion of The MLC’s first monthly processing of royalties and the payment of more than $24 million in royalties directly to rightsholders represents another step toward realizing the promise of the Music Modernization Act,” remarked Alisa Coleman, Chair of The MLC’s Board of Directors.

Kris Ahrend, The MLC’s CEO, added: “Thanks to the hard work and diligence of our team, and the cooperation and support of our many partners, we have now begun fulfilling our important mission of ensuring that rightsholders receive their proper share of the blanket mechanical royalties paid by DSPs.”

More information on timing and scheduling of future royalty distributions, as well as information about how and when royalties can be subject to adjustment, can be found at: TheMLC.com/blanket-payments. The MLC has also created an FAQ page on its website that details the particulars of its royalty distribution process, including information on royalty rates and terms, which is available here. Updates on The MLC’s progress in processing the historical unmatched royalties that it received in February can be found here.

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What are the regulations and where can one find the full text of the rates and terms for Phono 4?

The CRB published a Final Rule in the U.S. Federal Register setting the blanket license mechanical royalty rates for permanent digital downloads.

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