The Mechanical Licensing Collective (The MLC) has issued notices of intent to audit Digital Service Providers (DSPs), including Spotify, SoundCloud, and Apple Music, to ensure the accuracy of royalty payments under the compulsory blanket license administered by The MLC. The audit period spans usage between January 1, 2021, and December 31, 2023 – the first three years of The MLC’s full operations.
Established by the Music Modernization Act (MMA), The MLC, a nonprofit entity, oversees the development and administration of a mechanical licensing system, responsible for collecting and distributing royalties to songwriters and copyright owners. The audits, involving nearly 50 DSPs, exercise a key right granted by Congress in the MMA.
The audits aim to verify the accuracy of usage reports and royalty payments submitted by DSPs, ensuring compliance with the compulsory mechanical license. The MLC emphasizes that its members will not bear any audit costs, covered instead by The MLC’s operational budget funded by DSPs.
Kris Ahrend, CEO of The MLC, stated, “Ensuring DSPs have reported royalties accurately is one of The MLC’s statutory responsibilities under the MMA.” The audit process involves scrutiny of monthly usage reports through automated and manual reviews, as well as leveraging the U.S. Copyright Office’s records of use process.
The MLC’s audit right, a first in the 115-year history of the U.S. compulsory mechanical license, is viewed as a crucial mechanism for enhanced protection of songwriters and music publishers. Alisa Coleman, Chair of the Board of Directors of The MLC, emphasized the significance of the audit right, stating, “The MLC’s audit right is a first in the 115-year history of the U.S. compulsory mechanical license and provides enhanced protection for songwriters and music publishers.”
The organization has appointed music industry audit veteran Jane Bushmaker, a member of The MLC’s Analytics & Automation team, to oversee the DSP audits, which will be conducted by experienced outside audit firms. The MLC has committed to updating members on audit results, clearly identifying recovered amounts in royalty statements, and distributing any recovered funds to impacted rightsholders without deducting audit costs or fees.
Mechanical Licensing Collective: The comprehensive list of DSPs receiving audit notices includes major players like Spotify, Apple Music, Amazon Music, and others. The audits represent a pivotal step in upholding the integrity of royalty reporting and payments within the music industry ecosystem.