Mechanical Licensing Collective (MLC) Officially Granted $62 Million in Startup Capital

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.