MLC Defends Music Licensing Efforts in Face of Criticism

The “overwhelming majority” of copyright holders have a positive outlook about the Copyright Office-designated entity paying out digital streaming royalties, Mechanical Licensing Collective (MLC) CEO Kris Ahrend said in an interview last week. Critics say the MLC relies on faulty data that’s contributing to the accumulation of nearly half a billion dollars in unclaimed and unmatched royalties for songwriters and publishers.

President Donald Trump signed the Music Modernization Act into law in October 2018, establishing the MLC. The nonprofit organization, led by a board of 10 music publisher representatives and four songwriters, began administering blanket mechanical licenses to digital service providers (DSPs) in January 2021. The MLC issued its 2021 annual report in June, reporting more than $420 million in blanket royalties collected from services like Spotify, Apple Music and Amazon Music for the year.

Critics say the MLC’s database was built using a flawed dataset from its vendor, the Harry Fox Agency. HFA has worked as an administrator on behalf of major digital service providers like Spotify. Verifying claims with the MLC has been “quite challenging,” said Abby North, a board member of the Los Angeles Chapter of the Association of Independent Music Publishers and the International Association for Artists & Rightsholders. Based on the statute, the MLC was “supposed to have brand new, clean data,” she said: It’s not a “hidden fact” that HFA’s data “had been pretty bad. The part that is really hard is making corrections, making adjustments for claiming and matching.” HFA didn’t comment.

“It’s kind of strange to me that the same people who created the problem are now working supposedly to solve the problem they created,” said music industry attorney Chris Castle: It’s like hiring the “arsonist” to put out the fire.

Castle “has a perspective. I respect it, but it’s unique,” said Ahrend. “There’s a handful of professional critics, but they’re not reflective of the majority. The overwhelming majority of people in the industry feel positive about what we’re doing.”

The MLC launched its database with about 17.5 million works and has since increased to about 28 million, said Ahrend. In comparison, ASCAP and BMI handle performance rights data for about 20 million works combined. Ahrend noted the MLC’s match rate has increased from about 80% in its first distribution to about 85% now. The industry benchmark is about 80%, based on historical data, he said. “Our dataset today is vastly different than the dataset we essentially acquired from HFA when we started,” he said. “And all that new data has made the data we have far better than the data we started with.” HFA’s role as vendor only goes so far, he added: The MLC is the one contacting rights holders and cleaning up data. “The data shows it’s working,” he said. “It can obviously be better, and we certainly focus every day on how to make it better.”

The MLC has collected about $427 million in historical unmatched and unclaimed royalties. The statute provides a three-year window, half of which has elapsed, that allows the MLC to make a good faith effort to find rights owners. At the end of the three years, the collective determines when to pay out unclaimed royalties to songwriters and publishers. Royalties that remain unclaimed and unmatched are paid out to rights owners who were active during the corresponding time periods on a pro-rata basis. The MLC hasn’t made any plans for moving to that next stage yet, said Ahrend: “We are still actively working to get more data, get more people signed up. The board has not given us any edict about when that has to happen. We are 100% focused on matching more, finding missing people and paying out royalties.”

The MLC’s portal doesn’t allow for bulk data ingestion and data correction, said North: “It’s kind of tortuous because you have to do everything one by one. It’s like playing whack-a-mole. It’s not a scalable model for a rights administrator.” Manual matches and claims take a long time for the MLC to process, and multiple pay periods pass without collection, she said. “I know that the intention of those who drafted the MMA was for there to be a new database with new data.”

Starting the database from scratch was “never discussed,” said MLC board member Bart Herbison, executive director of Nashville Songwriters Association International. He said he has participated in major legislative meetings on the topic since they began in 2003: “There was no way to [start from scratch] and implement it with any accuracy within the time the legislation gave us.” He agreed the database and architecture aren’t perfect but said the MLC is working to improve claiming tools, software and technical aspects of the online portal.

The Music Modernization Act is an example of legislation where “virtually the whole industry” was “united,” said SoundExchange CEO Michael Huppe. The MLC was given a “big job” in a “short amount of time,” he said, noting the MLC spent a few years hiring staff and building software systems. “I think it’s a testament that they were able to get that money out so quickly,” he said, though he acknowledges: “A lot of people feel they should have done more to clean up the data before they threw it all up on the website.”