The Music Modernization Act (“MMA”) was enacted into law on October 11, 2018, heralding the most significant change to music licensing in a generation.
Prior to enactment of the MMA, the system for mechanical licensing – the process of gaining permission for making and distributing of phonorecords – found in Section 115 of the Copyright Act was outdated and difficult to manage. You could either obtain direct (sometimes called “voluntary”) licenses from the copyright owner in each of these musical works or go through a compulsory licensing process that still involved obtaining permission on a song-by-song basis by filing a “Notice of Intention” with known copyright owners or with the United States Copyright Office (“USCO”) in the event the copyright owner could not be located.
That system worked well enough in an era when “phonorecords” literally meant physical production of vinyl, cassettes, and CDs, and the production of phonorecords occurred in big batches over time with a relatively small number of musical works and sound recordings. It did not work as well in a digital era when the making of phonorecords became instantaneous, with anyone able to become a creator, able to produce digital phonorecords delivered in the form of downloads, limited downloads, and interactive streams (in addition to the physical media above).
That’s why the MMA instituted a new blanket licensing system (the “Blanket License”) which is more streamlined and offers benefits to all stakeholders. Creators are more likely to get paid in a shorter time frame for the uses of their songs, digital music providers can clear rights more efficiently, and music fans are able to enjoy the benefit of the greatest amount of legally available content in the history of music.
The USCO has some excellent background materials as well to help you understand the MMA:
Summary of the Music Modernization Act (USCO summary of the provisions and legal requirements from the MMA)
Understanding the Music Modernization Act (Useful educational materials in both print and video format to help explain key aspects of the MMA)
Music Modernization Act FAQ (USCO provides a useful Frequently Asked Questions page on key provisions and requirements of the MMA)
What is the Digital Licensee Coordinator and what will it do?
The Digital Licensee Coordinator (“DLC”) is a non-profit entity designated by the United States Copyright Office (“USCO”) to represent digital music providers in connection with the administration of the license provided under Section 115 of the Copyright Act. The DLC is guaranteed representation on The Mechanical Licensing Collective’s (“The MLC”) Board of Directors (in a non-voting capacity) and on The MLC’s Operations Advisory Committee, which is focused on developing and improving the technological and logistical operations of The MLC, including building and maintaining its systems, as well as best practices.
The DLC will coordinate with The MLC, work to effectuate the goals of the Music Modernization Act (“MMA”) to provide licensing efficiency and transparency, and ensure that the new blanket licensing system is, and remains, fair and workable for the digital music industry – both digital music providers and copyright owners.
The DLC’s specific activities include:
Litigation and Regulatory (non-Lobbying) Advocacy. The DLC litigated and eventually negotiated settlement of the Administrative Assessment proceeding before the Copyright Royalty Board and has filed comments in response to the USCO’s Notices of Inquiry and Notices of Proposed Rulemaking in proceedings implementing the MMA. It is important to note that the DLC is statutorily prohibited from engaging in lobbying activity.
Assisting in Compliance and Oversight. The DLC will engage in efforts to enforce notice and payment obligations with respect to the Administrative Assessment, receiving monthly reports from The MLC regarding any licensees not in compliance, and working with those licensees toward full compliance.
Engaging in Education and Outreach. The DLC will assist in publicizing the existence of The MLC to the digital music industry and educating copyright owners about the blanket license, as well as helping to locate and identify copyright owners of unmatched musical works.
Who is eligible for membership in the Digital Licensee Coordinator?
Membership is open to two types of entities: digital music providers (“DMPs”) that are licensees under the Blanket License and Significant Non-blanket Licensees. The common element between the two is that they are each engaged in a “Covered Activity” in the form of making digital phonorecord deliveries of musical works, including in the form of a permanent download, limited download, or interactive stream, where such activity is subject to compulsory licensing under Section 115 of the Copyright Act. The statutory definition of a “Blanket Licensee” can be found here. The statutory definition of a “Significant Non-blanket Licensee” can be found here. Our explanation of the difference between the two can be found here.
Why should I become a member of the Digital Licensee Coordinator?
To allow your voice to be heard, to be in the room, and to contribute your knowledge so the system works more efficiently and effectively for you and your company.
Not every Blanket Licensee and Significant Non-blanket Licensee is created equal. Digital music providers (“DMPs”) come in all shapes and sizes, with different perspectives and different needs. You have different operational structures and pricing plans. Despite its name, the Blanket License, especially the more intricate details of its administration, will not affect everyone the same way. As the DLC interacts with other stakeholders, including but not limited to the United States Copyright Office (“USCO”) and The Mechanical Licensing Collective (“The MLC”), and shapes the various procedures and processes within the Blanket License, we need to know how you will be impacted so we can paint the most complete and accurate picture possible about the needs of DMPs.
How do I become a member of the Digital Licensee Coordinator?
The Digital Licensee Coordinator (“DLC”) membership application is available here.
What is The Mechanical Licensing Collective and what will it do?
This informational page set up by The Mechanical Licensing Collective (“The MLC”) provides an overview of how the new licensing regime will work and The MLC’s role.
The MLC’s governance structure is set forth in the Music Modernization Act (“MMA”). It is led by a Board of Directors that comprises fourteen individuals: ten must be representatives of music publishers and four must be professional songwriters who retain and license mechanical rights for songs they have written. There are also three non-voting members, one of whom represents the Digital Licensee Coordinator (“DLC”).
In addition to its Board of Directors and full-time staff, The MLC carries out its work through three statutory advisory committees: the Unclaimed Royalties Oversight Committee, the Dispute Resolution Committee, and the Operations Advisory Committee (whose membership is equally split between The MLC and DLC representatives).
What is The Mechanical Licensing Collective's Musical Works Database?
The Mechanical Licensing Collective (“The MLC”) is required to establish and maintain a publicly accessible musical works database with information about musical works, including (1) the identity and location of the copyright owners and their ownership shares, and (2) the sound recordings in which those works are embodied.
The MLC will also establish a portal that writers and music publishers can use to submit and maintain their musical works data. These tools will help ensure that creators and music publishers are paid properly. The MLC Portal – which will roll out later this year – will allow copyright owners to submit and maintain musical works data, ensuring efficient administration of the blanket license and proper distribution of royalties. The MLC must make the musical works data it maintains in this database available, free of charge, in a bulk, machine-readable format to digital music providers operating under valid notices of license, significant non-blanket licensees and their authorized vendors, as well as the Register of Copyrights. It must also make this musical works data available to other persons or entities who wish to access it for a fee that does not exceed the marginal cost to The MLC of providing this access to the data to such person or entity.
How does the Blanket License work?
The Blanket License offers licensees the ability to engage in one-stop shopping to clear mechanical rights more efficiently. The Music Modernization Act (“MMA”) created a mechanical licensing collective to administer licenses to digital music providers (“DMPs”) for the reproduction and distribution of copyrighted musical works. Administration of the Blanket License includes not only the collection of royalties from DMPs and distribution of those royalties to the copyright owners of the musical works involved, but also the collection of administrative fees to be paid by DMPs for the operation of this mechanical licensing collective. The United States Copyright Office (“USCO”) has designated the non-profit The Mechanical Licensing Collective, Inc. (“The MLC”) to administer the Blanket License and designated the Digital Licensee Coordinator, Inc. (“DLC”) to represent the interests of DMPs in this process.
The Blanket License goes into effect on January 1, 2021 (“License Availability Date”). After that date, DMPs who have properly filed a Notice of License will report their usage of sound recordings and pay associated mechanical royalties (based on the statutory royalty rate) for the underlying musical works to The MLC on a monthly basis. The MLC will then take the information in the usage reports, match the information about the sound recordings identified in the usage reports to its database of musical works, and distribute paid royalties to known copyright owners (songwriters, composers, lyricists, and music publishers). Where the copyright owner is not known – commonly referred to as an “unmatched work” – The MLC will hold the royalties in question for at least three years and then distribute those royalties pursuant to a market-share based distribution policy to be established by The MLC to all known copyright owners.
Who might need the new Blanket License?
At the center of the Music Modernization Act (“MMA”) is a new blanket licensing system for digital music providers (“DMPs”). This new blanket license replaces the existing song-by-song compulsory licensing structure for making and distributing musical works, instead allowing DMPs to make and distribute songs via download or interactive streams.
The Blanket License is a crucial step in modernizing music licensing, but while it is appropriate for many DMPs, not all providers will need to obtain one to operate. Specifically, companies considered “significant non-blanket licensees” under the law will not use the new Blanket License. So how do you know if you need a Blanket License or qualify as a significant non-blanket licensee?
Go here to read more.
What do digital music providers need to do before the license availability date of January 1, 2021?
Section 115 provides for a limitation on liability for prior unlicensed uses. To take advantage of the limitation on liability, between now and the license availability date, a digital music provider must engage in good faith, commercially reasonable matching efforts to identify and locate the owners of musical works. These efforts extend for ninety days beyond the license availability date and involve using one or more bulk electronic matching processes that are employed on a monthly basis in the event the copyright owner remains unidentified.
In those instances where a copyright owner is identified, the digital music provider must generate a statement of account and pay applicable royalties consistent with existing regulations.
If there is no identifiable copyright owner, the digital music provider still must calculate royalties owed for the relevant musical works, which are then transferred to the Mechanical Licensing Collective (“MLC”) after the license availability date (digital music providers are expected to take part in ongoing matching efforts during this time).
Digital music providers who comply with these reporting and payment obligations will not be required to pay statutory damages in the event of a copyright infringement lawsuit.
Digital music providers should familiarize themselves with the United States Copyright Office’s rulemaking because they will be required to make significant changes to revenue and royalty reporting starting with January 2021 usage to the MLC. For digital music providers who engage in voluntary licensing and want the MLC to administer those voluntary licenses, the digital music provider should engage the MLC in conversations as soon as possible to ensure a seamless transition to the MLC.
What are “unclaimed royalties” and what happens to them?
This term refers to royalties corresponding to musical works for whom a particular copyright owner (either the owner of the entire work or the owner of a share in the work) cannot be found (sometimes the copyright owner may not even be known).
Digital music providers seeking to take advantage of the limitation of liability will deliver accrued but unclaimed royalties to the Mechanical Licensing Collective (“MLC”) no later than ninety days after the license availability date. The MLC will hold those unclaimed accrued royalties for a period of no less than three years from license availability date as it uses its musical works database to attempt to find those copyright owners. If a particular copyright owner is found, it will receive its previously unclaimed accrued royalties. Any unclaimed accrued royalties still residing with the MLC at the end of the holding period are to be distributed to known copyright owners according to market share.
The United States Copyright Office has a section of its website dedicated to this issue if you need more information.
Can digital music providers still have direct licenses with copyright owners?
Yes. Pursuant to the Music Modernization Act, licensees can continue any existing direct licenses and can enter into new ones. A licensee does not have to pay royalties to the Mechanical Licensing Collective (“MLC”) for uses of a musical work covered by a voluntary license, but it still must report those works in monthly usage reports to the MLC. In fact, a digital music provider can execute direct licenses with some copyright owners and use the blanket license for those musical works that are not directly licensed.
How is all this funded?
By the licensees. The Music Modernization Act requires that digital music providers and significant non-blanket licensees fund the reasonable costs of creating and running the Mechanical Licensing Collective (“MLC”). The judges of the Copyright Royalty Board (“CRB”) are empowered to determine the proper amount of an administrative assessment fee (“Administrative Assessment”) paid directly by digital music licensees to the MLC. The CRB is also empowered to determine how the total administrative assessment fee is allocated among the various digital music providers. These assessments are entirely separate and distinct from the royalty payments made by digital music providers to copyright owners for actual use of copyrighted musical works – that royalty rate is determined by the CRB in an entirely separate proceeding.
On November 14, 2019, the MLC and Digital Licensee Coordinator filed with the CRB a Joint Notice of Settlement and Motion to Suspend Case Schedule, notifying the Copyright Royalty Judges that they had reached an agreement on both the overall assessment fee and the individual allocation of that assessment fee among the digital music providers and significant non-blanket licensees. This was approved by the CRB on December 12, 2019, with final regulations published on January 8, 2020.
What is the assessment fee paid by digital music providers to support the operations of The Mechanical Licensing Collective?
The overall assessment amount paid by digital music providers and significant non-blanket licensees (collectively) can be broken into three parts:
A startup assessment in the amount of $33,500,000;
A 2021 assessment in the amount of $28,500,000; and
An annual assessment beginning in 2022, calculated by increasing the previous year’s assessment by the lesser of three percent OR the percentage change in the Employment Cost Index for Total Compensation (as published on the Department of Labor’s Bureau of Labor Statistics website) for the most recent twelve month period for which data is available on the date sixty days prior to the start of the calendar year.
How is each year’s annual assessment fee allocated among digital music providers and significant non-blanket licensees?
The annual assessment fee for individual digital music providers is made up of a number of different parts, including an annual minimum fee and quarterly assessments based on sound recording counts and aggregate sound recording counts. A more detailed explanation can be found in our Annual Assessment Fee Explainer.
I’m a songwriter. Where should I start?
The Mechanical Licensing Collective (The MLC) has set up a helpful page that outlines what songwriters and music publishers need to do now, in advance of the roll out of The MLC Portal, to organize and review their musical works data. You can consult The MLC’s Resources page to better understand The MLC’s functions and how you can Play Your Part.
But the digital music providers are committed to assisting you as well.
In addition to publicizing the existence of The MLC and assisting with publicity about unclaimed royalties, the Digital Licensing Coordinator (“DLC”) is committed to working in conjunction with the United States Copyright Office and The MLC to inform songwriters and publishers of The MLC.
What if I still have questions?
Feel free to send us an email through our Contact Us form.
General contact information, as well as information about the Boards of Directors of the Digital Licensee Coordinator and Mechanical Licensing Collective (“MLC”) and those serving on the MLC’s Committees can be found here.
Pursuant to the Musical Works Modernization Act, title I of the Orrin G. Hatch–Bob Goodlatte Music Modernization Act (MMA), the U.S. Copyright Office has designated a mechanical licensing collective (MLC) and a digital licensee coordinator (DLC) to carry out key functions under the statute.
Title I of the MMA modified the existing section 115 “mechanical” license for reproduction and distribution of musical works in phonorecords (which was previously obtained by licensees on a per-work, song-by-song basis) to establish a new blanket license for digital music providers to engage in specific covered activities (namely, permanent downloads, limited downloads, and interactive streaming).
The MMA directs the Register of Copyrights to designate an entity as the MLC to administer the blanket license and distribute collected royalties to songwriters and music publishers. The MLC is tasked with developing and maintaining a comprehensive database of musical works and sound recordings, which will be publicly available. The MMA also allows the Register to designate a DLC, which will represent digital music services in the administration of the license and in the determination of the administrative assessment fee paid by digital music providers for the reasonable costs of establishing and operating the new MLC. Both entities will be subject to a redesignation process commencing in January 2025.
In December 2018, the Office issued a notice of inquiry soliciting proposals from entities seeking to be designated as the MLC or DLC. Following submission of proposals, the Office also received over 600 comments from members of the public regarding these submissions.
Based on the submissions received and the selection criteria provided in the statute, the Register designated the Mechanical Licensing Collective, Inc. as the MLC, and the Digital Licensee Coordinator, Inc. as the DLC, with the Librarian’s approval.
This page provides links to the record materials in this proceeding, including public comments, ex parte materials, and the Federal Register notice setting forth the Register’s analysis and conclusions. Additional information about the MMA is available here
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