Streaming Services Must Pay Late Fees on Mechanical Licenses, US Copyright Office Rules

Streaming services must pay late fees on mechanical licenses
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Streaming services must pay late fees on mechanical licenses
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Photo Credit: Igal Ness

The US Copyright Office has ruled that streaming services must pay late fees on royalty payments in connection with the Music Modernization Act’s blanket mechanical license.

On Tuesday (September 5), the US Copyright Office issued a ruling confirming that songwriters and publishers are owed late fees when digital music providers do not pay royalties to the Mechanical Licensing Collective on time. Late fees have been hotly debated between music publishers and streaming service providers since the Music Modernization Act was passed in 2018.

The Music Modernization Act (MMA) went into effect on January 1, 2021. It changed how streaming services licensed music to a blanket mechanical licensing system instead of a piecemeal “song-by-song” approach. At that time, digital music providers had to go to the newly-created Mechanical Licensing Collective (MLC) to obtain a blanket mechanical license to continue to use licensed music on their platforms.

“The Office concludes that the statute’s due date provisions are unambiguous,” says the Copyright Office in its ruling on Tuesday. “The statute’s reference to ‘due date for payment’ clearly refers to the date on which monthly royalty payments are required to be delivered to the MLC.”

The law stipulates that mechanical payments are due “45 calendar days after the end of the monthly reporting period.” Streamers must pay out royalties owed to the MLC, which then pays the writers and publishers monthly. Payment not received on time is considered late and subject to additional penalties outlined in the MMA.

Per the Copyright Royalty Board judges, the current period of Phonorecords IV (2023-2027) specifies that a streaming service must pay the late fee of 1.5% per month or the highest lawful rate, whichever is lower, for any payment owed to the copyright owners that was not paid on time. Late fees accrue from the due date until the copyright owner receives compensation.

National Music Publishers’ Association (NMPA) President and CEO David Israelite says: “This is a major victory for music creators who have waited far too long to be made whole from the appeal, which significantly delayed their compensation.”

“The USCO’s decision reiterates our assertion that the due dates are unambiguous and any past-due payments to the MLC must come with appropriate statutory penalties.”