Digital streaming companies such as Spotify and Apple Music have reached an agreement to fund a new music licensing collective that will collect royalties from them and distribute the money to songwriters, publishers, and other music copyright holders.
The streamers will pay $33.5 million for startup costs and anticipates $28.5 million for costs in 2021, the first year that the Mechanical Licensing Collective (MLC) will be active, the collective and the streamers, represented by a newly designated nonprofit Digital Licensee Coordinator, said in a Nov. 14 statement.
“Today’s agreement between the LMC and DLC represents a landmark achievement for every facet of the music industry,” MLC Board Chair Alisa Coleman and DLC Board Chair James Duffett-Smith said in the statement.
The accord is a critical step toward ensuring rightsholders receive their share of streaming revenue, which now composes 63 percent of all music revenue, according to the Recording Industry Association of America. The existing system, where streaming services must seek permission from individual rightsholders to use their songs, created a trail of unpaid musicians and lawsuits that left all parties seeking a legislative solution.
That solution was the 2018 Music Modernization Act, which established a licensing regime designed for the digital age. It created a compulsory license that allowed streamers to pay one source for all its music, at a per-stream set rate, and the collective to distribute the revenue.
The funding for the collective fits the lower end of ranges proposed by the coalition of music publishers and songwriters that submitted the winning bid to create the collective. They projected a startup cost between $26 and $48 million and annual operating budget between $25 and $40 million. The money will pay for staff, contractors, and technology needed to collect data and revenue, create an online database of unclaimed royalties, and distribute payments.
The Copyright Office had taken steps in July to determine a budget in case the MLC and DLC couldn’t reach an agreement. Preliminary talks, before the office tabbed the only DLC bidder and industry backed MLC favorite, had broken down in March when the streamers balked at proposed costs.
Under the new agreement, the largest streaming services will pay a greater share of all costs. The parties also created a new budget advisory committee—half each from the MLC and DLC—to evaluate ongoing costs and limit the need to ask the Copyright Royalty Board to hear future funding disputes.