The Mechanical Licensing Collective’s healthy startup budget is meeting resistance from at least one major streaming platform.
Just how much does it cost to start a US-based licensing agency for streaming mechanicals? The newly-minted Mechanical Licensing Collective, backed by major publishers like Warner/Chappell Music, Sony/ATV Music Publishing, Downtown Music Publishing, and others, recently submitted a $66.25 million budget to get the operation started. The amount would cover everything leading up to the MLC’s opening (a ‘startup assessment of $37.25 million), as well as costs for first-year operations ($29 million for 2021).
The cost structure is being sent to major streaming DSPs like Spotify, Amazon Music, YouTube/Google, Apple Music, and Pandora/SiriusXM, a group that will be collectively paying the tab for the MLC’s creation according to the rules of the Music Modernization Act (MMA).
The MLC’s proposed budget certainly sounds expensive, especially by music industry standards. Despite a roaring industry comeback, funding rounds for startups greater than $10 million are rare, with $66.25 million for two years virtually unheard of. But how much does it really cost to create a mechanical licensing organization from scratch?
According to one of the largest streaming music platforms in the world, not $66.25 million.
In a conversation with Digital Music News, an executive at the platform — which is easily one of the top five in terms of sheer size and subscribers — indicated that the MLC’s math is being regarded as wildly expensive. According to the source, who has reviewed the MLC’s proposal, the $66.25 million price tag is ‘easily three times the cost of creating a comparable organization of this nature,’ according to their analysis.
“We know what [mechanical licensing] services spend and what it costs to do that work,” the source relayed, while noting that “it’s a big price tag without a lot of information attached to it.”
In fairness, the major platform exec noted that there are certainly ‘extra factors’ in play for the MLC, including ‘education, outreach, that sort of thing,’ though there isn’t a lot of information about what those costs are. Also raising flags is that the MLC is proposing to build expensive in-house capabilities, while also using expensive, outside agencies to get the work done.
“What would we get for that money?” the source continued. “Everybody wants more information and transparency on that [$66.25 million] cost.”
By ‘everybody,’ the source hinted that other DSPs seem to be asking similar questions.
Separately, a second source to Digital Music News noted that the budget is likely to result in an impasse between major streaming providers and MLC-backing publishers, with the U.S. Copyright Office’s Copyright Royalty Board (CRB) deliberating over the details. That would pit the National Music Publishers’ Association, or NMPA, against DiMA, which represents the interests of the streaming giants.
Beyond that, we haven’t heard much about discussions between the various parties over the $66.25 million ask. But some behind-the-scenes negotiations may be happening, with the NMPA-led MLC starting with a high bid to wrest the best price out of DSPs.
And who else stands to benefit from the MLC’s juicy, eight-figure budget? We’re not sure if the Harry Fox Agency (HFA) is one of those outside groups, though it looks like a plum contract is ahead following some crafty horse-trading leading up to the Music Modernization Act’s passage in late 2018.
More as this develops.