The Mechanical Licensing Collective (MLC), which is tasked with tracking, collecting, and distributing mechanical licenses from streaming services in the U.S., has just been granted a $62 million starting budget.
Initially, the MLC — principally backed by major music publishers Universal Music Publishing Group, Sony/ATV Music Publishing, and Warner/Chappell Music — had requested $66.25 million in startup capital from major streaming services like Spotify, Apple Music, Pandora, and Amazon Music.
That initially drew howls of protests from the major streaming services, though the streaming group has now approved something close. According to a joint resolution shared with Digital Music News this morning, an agreement for $33.5 million in pre-launch startup capital and an additional $28.5 million for first-year operations has been approved. The $28.5 million tranche would cover operations during the first year, starting in 2021.
That adds up to $62 million, for a span of roughly two years (assuming a one-year ramp-up period). The resolution was approved by both the MLC and the ‘Digital Licensing Coordinator,’ or DLC, which is being overseen by DiMA (which, in turn, represents the major streaming services).
The resolution comes as a surprise, at least based on the reactions of certain streaming platform executives. One streaming executive noted that the MLC’s $66.25 million budget was roughly ‘three times’ the estimate they had constructed to build a mechanical streaming company, though perhaps the inflated MLC demand is simply the cost of doing business. Other complaints have poured in, including from a separate streaming executive, who felt that the MLC’s licensing approach is extremely narrow and inefficient.
That may be true, but for streaming platforms, the MLC allows them to largely offload mechanical licensing responsibilities and the threat of future litigation — at least theoretically. Lingering infringement liability is a heavy burden, and a weapon that major publishers are leveraging nicely.
The official document, dubbed the ‘Determination and Allocation of Initial Administrative Assessment to Fund Mechanical Licensing Collective’ was officially submitted to the U.S. Copyright Office’s Copyright Royalty Judges shortly after 12:30 pm ET today (November 14th).
The document hasn’t been officially posted, but here’s the opening declaration:
“The Mechanical Licensing Collective (“the MLC”) and the Digital Licensee Coordinator (“the DLC”) (collectively, the “Participants”), hereby notify the Copyright Royalty Judges (the “Judges”) that they have reached a full settlement of all terms in the above-captioned proceeding (the “Proceeding”) concerning the amount and terms of the initial Administrative Assessment under Section 115 (“Section 115”) (d)(7)(D)(iii) of the U.S. Copyright Act. In light of the foregoing, the Participants respectfully request that the Judges suspend the case schedule and direct the Participants to jointly submit proposed regulatory language implementing the Settlement as detailed below on or before November 26, 2019 (or as otherwise ordered by the Judges).”
Also worth noting: after the 2021 funding is exhausted, the MLC and DLC will determine future yearly budgets on an ongoing basis. (Update: we’re hearing that the parties have ‘basically approved a $30 million annual budget ongoing). The document itself was signed by MLC attorneys at Pryor Cashman LLP, and by DLC attorneys at Mayer Brown LLP and Latham & Watkins LLP.
I would have told them to collect the money from the 13 floor and the rest at the bottom after they jump.
It doesn’t cost $62 mil to run a company like this for 2 years, maybe $10 mil max, $15 mil if you’re incompetent. MLC is just a scam, the biggest players are mopping up billions for themselves.
Why this happened:
1 – $62MM: yes a total scam boondoggle but big publisers see MLC as a profit center (+ huge personal salary generator + mop-up of a billions in unmatched royalties they don’t own)
2 – DSPs know its bullshit BUT don’t want to get sued again or the bad press that comes with it. They know nobody’s getting paid properly and all this goes to the major publishers… but whatever.
3 – Spotify gets positive Wall Street + $10 mln annual bill. Fine, one less problem.
It will cost at least this amount if not more to even take a stab at what’s often been tried but never accomplished: A truly global database of music rights.
The DSPs must’ve recognized the inconsistency of their position: They want to expand the scope of the database beyond mechanicals at the very same time they were arguing (incorrectly) that it could/should be done for less.
Nonsense. Even $62 million over two years won’t produce a good global music database of songs. It will take decades if not more with wide variations in global implementation.
Had they demanded the work proceed on a shoestring they’d’ve no place to complain when it turns out to be far more limited in actual results than they’d hoped. This settlement reserves them the right to complain when inevitably down the road they are critical of MLC for not having accomplished the heretofore unachievable at any price.
At less than $5 million a year per continent, there is not enough money to build the database properly, let alone build a proper back-end for payouts. Don’t be surprised if the database produced and the back-end built fail to meet expectations, growing the very black box they are intended to shrink.
At which point the same critics who wanted to allocate $2 million a year per continent will howl hypocritically.
Finally, don’t be surprised when some of the biggest rights organizations and owners around the world refuse to cooperate, reckoning their databases are their most valuable asset. At what cost will we replace their lack of cooperation? A very high price indeed, if the burden can be met at all, leaving serious holes in the resulting coverage.
Neither should we be surprised if others stop building databases, deciding instead to rely on MLC efforts. Why should they give when they can simply take? What value will they gain from duplication? The amount in question isn’t enough to replace current efforts around the world. If as a result the database slights Africa, for example, there will be congressional hearings to question the fairness of the effort — not to mention the resulting hole that develops if big European PROs, to cite another example, fail to cooperate.
You’ve gotta understand. Cocaine is expensive.
David Israelite, Jody Gerson, Jon Platt, Golnar Khosrowshahi, Guy Moot, Michael Huppe, Mitch Glazier, Daniel Ek…
“MLC was being unfairly organized by the largest music publishers, with provisions that unfairly enrich themselves.”