So, how much does it cost to get a mechanical licensing collection agency off the ground?
That would be $37.25 million before the agency opens its doors, and another $29 million to get through the first year. All in, the as-yet-unformed Mechanical Licensing Collection (MLC) is asking the U.S. Copyright Office to green-light a whopping $66.25 million — just to get off the ground.
That’s a jaw-dropping number — even by unicorn-chasing Silicon Valley standards. Indeed, that kind of money in such a short time period usually means that investors are looking for a billion-dollar exit. But in this case, the aim is just to create an agency that collects, processes, and pays mechanical streaming licenses — specifically to US-based publishers and songwriters.
In a proposal made public on Tuesday (September 17th), the major publishers backing the MLC insisted that their estimate was both “efficient” and “effective”.
“The CRB submission is the result of months of research on the most efficient and effective way to run this unprecedented new collective that will serve the needs of both the songwriters and their music publishers as well as the digital music services from Day One,” the group explained.
“The proposed start-up assessment is $37.25 million, with an annual assessment starting at $29 million in 2021, when the MLC commences its blanket licensing operations.”
We’re not sure how much of that $66.25 million will go towards salaries, though we’re expecting a few seven-figure executive positions to emerge. Already, SoundExchange CEO Michael Huppe is strongly rumored to be advancing towards a big MLC role. Huppe has been roundly criticized for pulling a salary north of $1 million, despite waning revenues at SoundExchange and a number of chronic payout issues.
The MLC was created by the Music Modernization Act (MMA), which was inked into law by President Trump in October of 2018.
In short order, the proposal backed by major publishers Sony/ATV, Warner Chappell, and Universal Music Publishing Group won the bid to run the MLC, edging out a rival group that ran on a more cost-effective platform.
All of which means the MLC is now in a position to enjoy the spoils. But one interesting wrinkle is that the U.S. Government won’t be footing this bill — at least not the lion’s share. Instead, major streaming platforms and tech behemoths like Spotify, Apple, Amazon, Google/Alphabet, and others will pay the modest ‘startup’ fortune.
That sounds like the beginning of another fight, with ‘partners’ like Spotify quickly turning into adversaries once the MMA was passed. Presently, a consortium of music publishers are battling against Spotify, Amazon Music, Pandora, and Google over the rate that streaming services should pay for mechanicals.
So perhaps this just becomes another battleground.
“We are going to continue to work tirelessly in these CRB proceedings to ensure the tech giants who joined with us to pass the MMA continue that partnership to fully fund the most important piece of the legislation, the entity that will actually implement the requirements of the legislation,” warned MLC Board Chairman Alisa Coleman.
Already, signs of tense relations are surfacing. Behind the scenes, rumors are swirling that major streaming platforms are being asked by major music publishers to withhold streaming mechanical payments to songwriters and publishers who claim them. Instead, those payouts would be reallocated towards starting up the $66.25 million MLC machine.
The MLC officially gets started on January 1, 2021.
More as this develops.