The Mechanical Licensing Collective - The MLC

Good morning. Today's topic is on the Mechanical Licensing Collective, or the MLC for short. The way I'm going to run this Zoom video call is we're going to start with a brief disclaimer, then I will discuss what the MLC is, why it's important, the steps to sign up with the Mechanical Licensing Collective, and I will also post resources and links to the Copyright Office in the MLC in the chat. Those are posted already, so please feel free to copy them. And then at the end of the video conference, I will post them again. So we always start with the fun stuff. It's important. The disclaimer is that this information in this webinar is purely informational. It's general education. It's not going to reflect all information or developments. Also, the webinar is public, so please don't share any confidential or private information in this webinar. And again, purely educational. This is not legal advice and does not create any attorney client relationship by your participation. So let's begin. Technology and business often outpace law, and this is especially true for laws relating to new technologies in music. So in response to these digital music technologies, the Music Modernization act, it's often called the MMA, was passed in 2018 to fix some of the challenges where the old laws and practices were problematic in the face of new technology. So what is the mlc? Well, the mma, that's the law, enabled the United States Copyright Office to form a nonprofit arm called the MLC in response to these challenges, because certain streaming services that were utilizing musical compositions were either not properly obtaining the mechanical licenses or not properly paying for those mechanical license royalties. So Title one of the Music Modernization act replaces the old existing song by song compulsory license for these particular digital streams with a blanket licensing system. And that enables digital music providers to obtain a blanket license and then they can go out and reproduce and distribute digital phonorecords broadly instead of doing it on a case by case basis. Now, the digital phono records that we're talking about are specifically permanent digital downloads. Think like, you know, when you download an MP3, limited downloads or interactive streams, think Spotify, for example. So as of January 1, 2021, the mechanical licensing Collective went into effect. So what is it exactly? Well, the Mechanical Licensing Collective is now the exclusive administrator that will grant, collect and distribute royalties paid under this new blanket Mechanical License to U.S. based Digital Audio services for digital music providers so that they can license and pay for these streams and downloads. So that's the first thing. So for US based digital service providers, we call them DSP for short. They can now get a blanket license via the Mechanical Licensing Collective. The digital services providers pay the Mechanical Licensing Collective and the Mechanical Licensing Collective then pays the rights holders to the musical composition. So we're talking songwriters and publishers are the ones that get paid. More importantly to me, anyway, it creates a centralized public database for song and rights holder information for licensors. Think if you are a music supervisor or you're trying to license a song, it was nearly impossible or at least a significant burden to find true and accurate information as to who owned the songs, what the splits are, who the rights holders were, all of that. So through the MLC we now have a centralized public database. It's completely free, where you can go and type in a song or type in a songwriter and find accurate information. The accuracy is the hope, right? But prior to that, you know, doing your due diligence for rights and clearance could be a bit of a nightmare. So to me, this is a really important aspect to have a centralized public free database to obtain rights holder information. So to recap, the Music Modernization act enabled the creation of the Mechanical Licensing Collective and it's really serving two purposes. One public database, going to create a free public database that contains information relating to the musical compositions, the rights holders for those works, in other words the songwriters and their publishers, and the splits. And in cases where the Mechanical Licensing Collective is not able to match musical works to copyright owners, the Mechanical Licensing Collective is authorized to distribute any unclaimed royalties to copyright owners identified in the MLC records, you know, based on those shares as reflected in a report's usage by the digital music super digital music providers. Now I mention that because it is really key for the rights holders to first of all join the mlc, know, become registered with them. And secondly, and this is really the key part to upload accurate information on your song catalog. So that's the first part. And again the second part. Once that information is in the database, then the MLC will then administer the royalty payments to the rights holders. So they're collecting all of these royalties from these blanket license and these digital service providers and they're going to issue payments to the rights holders in their system. This is what's really cool. There is no fee for these services charged to the rights holders. It's not like some organizations in the past and even by necessity said, look, we're happy to administer your royalties, but we're going to take 15% for doing so, because this is a government sponsored organization and it's a Nonprofit, and it's under statute, the digital service providers are actually paying for the operating costs. And then all the money collected under the blanket licenses goes out to the rights holders, 100% free of charge. So there's no taking a percentage off the top. Now all of that's really exciting. And at the same time we have to describe what exactly does the MLC cover, because it doesn't cover all royalties. It's actually a very narrow band, but it's an important band and stream of income. So what does the MLC cover? It covers the mechanical license for the musical composition. In other words, it's publishers and songwriters that gets paid. And it's not worldwide streaming services, it's just collecting these blanket licenses for US based streaming services. So it's not all sources of revenue, but it is an important source of revenue. So you definitely want to sign up. And it only covers these interactive streams and downloads, which again, it's not taking the place of or replacing bmi, ascap, csac, et cetera. It's covering these interactive streams and downloads. And that's a really important source, but it's not eliminating the need for songwriters and publishers to register their catalog with their public performance agency. Okay, so let's talk about one of the common questions that comes up. Like what do you mean by interactive digital audio only reproduction of phonorecords? Like that's really what it covers and that's a mouthful. So let me give you some examples and when I say, oh, of course that. So as of the date of this recording, the following digital service providers that have signed up for blanket licenses via the MLC or are Spotify, and I like to use them as an example, because you can modify your playlist, you can skip songs, you can track, that's interactive. SoundCloud, iHeartRadio, Apple Music, Sonos, MixCloud and others are some examples. So when you can make a playlist or skip songs or repeat songs, that's interactive. And these digital service providers are paying the blanket license fee collected by the mlc. MLC then redistributes those blanket license royalties to the rights holders of the music compositions. Great. So while the MLC covers this very important revenue stream, specifically mechanical royalties for US based interactive digital music service providers, it doesn't cover other revenue streams. So let me talk about them so you can see the difference. Non digital uses. So if you are still pressing vinyl, then physical product is still subject to the same prior law for compulsory mechanical licenses on a song by song basis. That's another topic for another webinar. But just know if you are producing and reproducing a manufacturing physical product, you need a traditional mechanical license under the old and still valid law. Now this law is for mechanical license audio only interactive streams and downloads for the reproduction and distribution musical composition. Again, I refer back to Spotify as an example. Okay, what doesn't it cover? Another area that it does not cover is non interactive public performance. So think live performance, broadcast, Internet radio, satellite radio, any public performance that is not interactive. So if I were to go to for example Sirius XM satellite radio, I can listen to it and I can enjoy it, but I can't skip songs, I can't download a playlist, I can't control what that actual performance, it is not interactive. It's passive. That being said, it's not like you don't get paid for that public performance. You still do. And rights holders are absolutely entitled to those public performance and is for example, those that are paid via your performing rights organization that you affiliate with, think ascap, BMI or csac. So I'm going to reiterate this because it's really important when you sign up with the mlc. That doesn't mean you're replacing the very good services that ascap, BMI and CSAC are supposed to provide in collecting your public performance. There's no overlap. There's one stream and then the southern stream. And those streams are non interactive performance. So that's why they're covered under performance royalties and not the MLC which is covering the mechanical reproduction and distribution. I know that's complicated. Your takeaway is just know sign up with the MLC and then keep your public performance income generated through ascap, EMI or csac. Make sure you're affiliated with the performing rights organization. And briefly, I want to also talk about what else is not covered. And I want you to think about this in terms of the different revenue streams, which I think will make it easier. And I like the metaphor of a stream. You know, you have different streams are all flowing into the same lake. That same lake is your bank account. It's you. So you have the MLC that's collecting this one stream, you have another stream that is coming in from your public performance income, right? That's not the mlc. And then you would have another stream that say is being used for audio visual works. In other words, your music is now attached to a visual product or content that's a synchronization license. And that synchronization license is not collected by the mlc but it is another valid stream of income for you. So just know that the MLC does not collect on that, they don't modify that, they don't take any piece of that you're still 100% entitled to. The rights holders are to get their rights and royalties from those license fees, etc. Okay, so this mechanical license, why is it important for this particular audience? Okay, this audience will generally be composed of self administered songwriters or publishers. But the majority of the people I'm speaking with are these self administered songwriters, true publishers. You know, they have a team of people to really understand this and guide them. So I'm, my goal is to speak to those songwriters where this might seem complicated. So I can break it down. If you have not given away your publishing to someone else, right? In other words, you know, Warner Chappell or you know, a true publisher, you have your own rights. And even if you created a publishing company through ASCAP or bmi, because sometimes you can create your publishing company there, you're still a self administered songwriter. In that case, the MLC is going to be really, really helpful to you because they will handle this administration for you for these based blanket license fees that are paid by the digital service providers and they will distribute them to you. Now I mention that because if you don't register and sign up, then you don't have a seat at the table. So you know, everybody's passing around cake. And if you don't have a seat at the table to get your slice of cake, you're not going to get your slice of cake. So that being said, we're going to go into the next step which is the what to do in order to register and sign up. So what to do? Self administered songwriters can become a member of the LLC by going to the MLC.com and there's going to be a portal there. There will be links for self administered Songwriter. There's also a really helpful link called how it works. And then there's phone numbers, emails and contact information. And because this is basically created through the copyright office, they have like real life people that are happy to answer your questions, walk you through it and do all of that. So in the chat you're going to see the link to its portal.themlc.com signup, also the mlc.com self administeredsongwriter and then the mlc.com how it works and I will repost them again at the end of the chat. So once you become a member, and by the way, it's not automatic because it takes a minute for them to get you in the system. But once you become a member, you're going to get some emails and links. You'll be able to log in and you can upload your songwriter information and song data. So you become a member, then you go in and upload your songwriter information and song data. Now this is something where I apologize for repeating it, but it's only because it is so important. This is key. Please make sure that your data is 100% accurate. If you have co writers on a song, reach out to them, confirm the splits, confirm that their songwriter information is accurate. Confirm that you're spelling their name correctly. Confirm you know if it's a Jane Smith, right? That particular songwriter, Jane Smith may have registered her songs in other databases as Jane and then her middle name and Smith so that she's not confused with others. So you want to match and match, mirror what your other songwriters are doing and you don't want to put in any inaccurate information as to your splits. Here's why. If the information is inaccurate, guess what? The MLC is going to get conflicting data and they're not going to pay anybody until they know that who they're paying is correct. So you may inadvertently create a delay by uploading wrong information. And the MLC is really, really relying on the songwriters and publishers to upload the information and make sure that their facts are straight up front. So the resources and links are going to be in the chat and this is going to conclude the webinar portion of this call. I will be doing follow up webinars on this subject and other subjects relating to music law and intellectual property. And at the end of this recording, I am going to end the recording and I will open up the mics for Q and A. And again, friendly reminder, this is educational information only. It's not legal advice. You're welcome to ask general questions in the Q and A, but please do not share any confidential or private information. And remember that this is a public forum. Thank you so much. I will open up the Q and A in just a minute.