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US Copyright Office chooses establishment option for new mechanical rights society

By | Published on Monday 8 July 2019

US Congress

The US Copyright Office announced on Friday that it had chosen the establishment option for the new mechanical rights collecting society that is being established in America as a result of last year’s Music Modernization Act.

That means that the organisation calling itself the Mechanical Licensing Collective – backed by the likes of the National Music Publishers’ Association, the Nashville Songwriters Association International and the Songwriters Of North America – will take on the responsibility of distributing any mechanical royalties due to songwriters and music publishers whenever their songs are streamed.

America is unusual in not having a collecting society representing the mechanical rights in songs. It has meant that whenever labels or digital services have exploited those rights, they’ve had to find whoever controls the copyright in each song they record or stream, and then send those rights-owners the paperwork and payment that is due under a compulsory licence that covers mechanical rights Stateside.

Most labels and digital firms traditionally hired agents like the Harry Fox Agency to do that work, and those agencies have performed some of the roles of a collecting society in the past. But they weren’t a true collecting society able to offer a blanket licence to music users, so to provide companies like streaming services with a one-stop shop where they can license any song rights not otherwise covered by a direct music publisher deal.

That became an ever-increasing problem with the shift to streaming, where services need to license tens of millions of songs at launch, and thousands and thousands of new works every week. In most other countries the streaming platforms rely on the collecting societies to meet that licensing challenge. The lack of such a society in the US resulted in songwriters and music publishers going unpaid and streaming services getting sued.

A key element of last year’s MMA sought to address that problem by setting up this new collecting society, paid for by the streaming services, run by the music publishing sector.

But what does “run by the music publishing sector” actually mean? Once the new laws were passed, the US Copyright Office had to pick an organisation to set up the new society. The MMA said that that organisation should be “endorsed by, and enjoy substantial support from, musical work copyright owners that together represent the greatest percentage of the licensor market for uses of such works in covered activities”.

The MLC group claimed in February that it already enjoyed the “overwhelming support” of the music publishing sector, listing the trade groups, other societies and big music publishers backing its plan.

However, there was a rival bidder going by the name AMLC, which said that the MLC’s claim of “overwhelming support” was misleading. It argued that MLC did not have the support of the millions of grassroots music-makers who usually control their own copyrights. And, AMLC added, it was those grassroots songwriters who were most commonly missing out on payments under the existing mechanical royalties system, and who therefore needed the new society to work in their interest.

Ultimately, the Copyright Office decided that the MLC did best met the criteria set out by the MMA. It said on Friday that that decision was made after “an extensive public inquiry” in which it “received over 600 comments from stakeholders throughout the music industry, including numerous copyright owners who provided endorsements for one or more of the entities seeking designation”.

Needless to say, the trade groups that have led on the MLC bid welcomed the decision. NMPA boss David Israelite told reporters: “This has been a long, deliberative process and we are pleased with the result. The Copyright Office set a high bar and the team behind the MLC submission was transparent, thorough and representative of the entire music publishing and songwriting community”.

The NMPA worked closely with the streaming music companies in lobbying for the MMA to go through last year, in order to enable a revamp of the mechanical royalties system in the US. And those involved in the MLC will now have to work closely with the same streaming firms as they actually set the new collecting society up.

Of course, relations between the publishers and the streaming companies – Apple aside – have become somewhat frosty this year after Spotify et al decided to appeal the US Copyright Royalty Board ruling on exactly how much money streaming services should pay to song right owners (via the new society or otherwise).

That is possibly why Israelite had some stern words for the streamers on Friday, basically demanding that they don’t do anything to fuck up the creation on this big new rights organisation. “As we now move to the funding phase”, he said, “it is critical that the digital services commit to supporting the MLC properly and become more transparent, starting with disclosing the amount of unmatched money currently at their companies”.

It will be interesting to see how this now all progresses. And also, whether the new society will do any better a job of getting payments to the writers of songs that the streaming sector has done a rubbish job of identifying. Plus, whether any of the concerns raised by the AMLC team about the MLC’s proposals will prove justified. Who knew the processing of mechanical royalties could be so interesting? Watch this space.