The MLC Issues Notices of Intent to Audit Digital Service Providers, Verifying the Accuracy of Royalty Payments to The MLC

Exercising a key right granted by the Music Modernization Act, The MLC issues notices of intent to preserve its right to audit digital services.

The Mechanical Licensing Collective (The MLC) has issued notices of intent to conduct audits of Digital Service Providers (DSPs) that started operating under the compulsory blanket license administered by The MLC in 2021. The audit period noticed includes usage under the blanket license that occurred between January 1, 2021 and December 31, 2023, the first three years of The MLC’s full operations.

By sending audit notices to both the United States Copyright Office and DSPs, The MLC is exercising a key right granted by Congress in the landmark Music Modernization Act (MMA). This right enables The MLC to conduct audits of DSPs operating under the blanket license to ensure the DSPs have accurately reported and paid royalties.

Conducting audits represents an additional way that The MLC can ensure the accuracy of the usage reports and royalty payments submitted by DSPs. The MLC already takes a number of steps to ensure the DSPs report accurately, including scrutinizing the monthly usage reports provided by DSPs via automated and manual reviews. The MLC also utilizes the records of use process established by the U.S. Copyright Office’s regulations to further examine specific aspects of DSP usage reporting.

Members of The MLC will not bear any of the audit costs; these will be covered by The MLC’s operational budget, which is funded by DSPs at no cost to songwriters or music publishers under the MMA. Should an audit reveal an underpayment of any amount, The MLC will distribute the full amount of any recovery to the impacted rightsholders, without deducting any audit costs or fees.

“Ensuring DSPs have reported royalties accurately is one of The MLC’s statutory responsibilities under the MMA,” says Kris Ahrend, Chief Executive Officer of The MLC. “The MLC has tapped music industry audit veteran, Jane Bushmaker, a member of The MLC’s Analytics & Automation team, to oversee DSP audits, which will be conducted by experienced outside audit firms,” he continues.

Alisa Coleman, Chair of the Board of Directors of The MLC says, “The MLC’s audit right is a first in the 115-year history of the U.S. compulsory mechanical license and provides enhanced protection for songwriters and music publishers. The audit notices filed by The MLC mark the beginning of its fulfillment of this important function.”

The MLC has sent audit notices to the following DSPs:

The MLC will update Members on the results of any DSP audits The MLC conducts and will clearly identify any monies recovered in audits on the royalty statements it provides to Members. For more information visit https://www.themlc.com/dsp-audits.