A New Era: A New License for U.S. Digital Audio Mechanicals

Digital audio services are already preparing to secure new license administered by The MLC

NASHVILLE, TN – The Music Modernization Act of 2018 (MMA) established a new blanket mechanical license covering the use of musical works in the U.S. by eligible digital audio services. This license will become available starting on January 1, 2021. The arrival of this new blanket licensing system will mark the beginning of a new era of greater efficiency and transparency in mechanical licensing for musical works in the United States.

For most digital service providers (DSPs) operating digital audio services in the U.S. that offer interactive streaming or digital downloads to consumers, the MMA imposes several new obligations that they will be required by law to fulfill. Some of these require immediate action, while others must be completed no later than February 15, 2021. The MMA created two new organizations to help DSPs fulfill their new responsibilities: The Mechanical Licensing Collective (The MLC), which is responsible for administering this new blanket license, and the Digital Licensee Coordinator (DLC), which is responsible for representing the digital audio services that will be operating under the new blanket license. Both The MLC and the DLC began reaching out to DSPs months ago, to help DSPs prepare to fulfill their new legal responsibilities under the MMA.

“The MLC has engaged with more than 50 DSPs so far, both to make sure they aware of their new legal responsibilities and to preview the resources we’ve created for them, including reporting specifications and the templates for notices to The MLC,” said Kris Ahrend, CEO of The MLC. “These resources are all on The MLC’s website, and our DSP Relations Team is available to answer any questions about them that DSPs might have. All of this should ensure that currently-operating DSPs are in a position to begin operating under the new blanket license starting on January 1, 2021.”

The MLC’s DSP outreach efforts have been led by Richard Thompson (Chief Information Officer), Abel Sayago (DSP Onboarding Consultant), Joya Carmichael (Head of Operations) and consultant Vickie Nauman. In addition to its outreach efforts aimed at individual DSPs, The MLC, in conjunction with the DLC, has also held a series of webinars for DSPs aimed at providing them with more information about the new obligations imposed on them by the MMA and offering them an opportunity to ask any questions they might have.

In addition to The MLC’s efforts, the DLC has also conducted its own outreach activities.  “As we approach this watershed moment in digital music licensing, DLC has spent countless hours working with DSPs to ensure they understand and are able to successfully navigate this new licensing regime. Through individual outreach sessions, educational programming and collaborative outreach coordinated with The MLC and Copyright Office, we have laid the groundwork for The MLC to efficiently and effectively fulfill its mandate,” said Garrett Levin, representative for DLC. “With the launch date for the new blanket license just weeks away, our team is standing by to answer questions, share helpful resources, and ensure that DSPs are prepared as we enter this new era in licensing.”

The new blanket license offers a host of benefits to DSPs that opt to secure it, including helping to make the administration and payment of mechanical royalties much easier and more effective and providing services with a way to ensure that they are properly licensed to use all of the musical works that they make available on their services. DSPs that secure the blanket will also avoid the costly liability that would arise from using works that were not properly licensed. Finally, even if a service elected not to secure the blanket despite its many benefits, the MMA still imposes a number of reporting obligations on all but the smallest of those services, even though they would not enjoy any benefits.  For this reason, The MLC and DLC hope that any service eligible to operate under the new blanket license will choose to do so.

A detailed guide outlining the requirements, timelines, and legal foundation for the new blanket license can be found here. DSPs with questions should contact The MLC at dsp.relations@themlc.com.

The MMA’s New Blanket License at a Glance

• The new blanket license will become available on January 1, 2021, a date referred to in the text of the MMA as the “License Availability Date”.
• DSPs that wish to operate under the blanket license must submit their Notice of License to The MLC using the form provided by The MLC as soon as possible, but no later than February 15, 2021.
• DSPs that begin operating under the new blanket license in January must begin submitting monthly usage reports to The MLC (for both voluntary and blanket licensed works) on February 15, 2021 (i.e., 15 days after the end of January) if they want The MLC to invoice them for the mechanical royalties that they owe; or on March 17, 2021 (i.e., 45 days after the end of January) if they do not need The MLC to provide them with an invoice.
• By U.S. law, DSPs that provide more than 5,000 unique works to U.S. consumers via interactive streaming or downloads on any given day in a given month or earn more than $50,000 a month (or $500,000 over 12 months) from such activities must report their usage data to The MLC, whether or not they choose to obtain the new blanket license.
• DSPs can find report formats and other resources here on The MLC’s website. DSPs can also find additional information on the DLC’s website: digitallicenseecoordinator.org.

About The Mechanical Licensing Collective (MLC)

The Mechanical Licensing Collective (The MLC) was designated by the U.S. Register of Copyrights in July 2019 pursuant to the Music Modernization Act of 2018. The MLC is responsible for administering the new blanket compulsory license for the use of musical works by digital music services. Starting in January 2021, mechanical royalties from streaming in the U.S. will be processed and paid out by The MLC at no cost to songwriters or music publishers. The MLC is governed by a Board of Directors comprised of songwriters and representatives of music publishers.  For more background on The MLC and its Board and Committee members, go to TheMLC.com.

About Digital Licensee Coordinator (DLC)

Digital Licensee Coordinator (DLC) is the representative of digital music services in the new music licensing system in the United States created by the Music Modernization Act. Working with The Mechanical Licensing Collective (The MLC), DLC will share the knowledge and experience of digital music services, support educational efforts for licensees and copyright owners, and collaborate to ensure The MLC efficiently and effectively fulfills its mandate as we move closer to the launch of the new blanket license for the mechanical reproduction and distribution of musical works by digital music services that will occur on January 1, 2021. Find out more at DigitalLicenseeCoordinator.org.