Spotify and other streaming services face audits by the MLC for royalty accuracy

New York, USA: The Mechanical Licensing Collective (MLC) has initiated a significant move in the music industry by issuing notices of intent to audit various digital service providers (DSPs), including prominent names like Spotify, Apple Music, Amazon Music, Tidal, and Deezer. This action, marking a first in the history of the U.S. compulsory mechanical license, aims to ensure the accuracy of reported and paid royalties, a responsibility vested in the MLC by the Music Modernization Act (MMA) of 2018.

The MMA, a landmark law, revolutionized the licensing system for musical works. It replaced the cumbersome song-by-song licensing approach with a new blanket license, addressing the challenges faced by both digital services and the music business. This shift was crucial in managing the accumulated pool of $427 million in unmatched and unpaid publishing royalties, often referred to as “blackbox” royalties.

The MLC’s decision to audit comes in the wake of its responsibility to distribute these royalties and administer the new blanket license. The audits cover a range of companies that license music, extending beyond streaming services to include internet radio companies and music apps. The comprehensive list of companies slated for audit reflects the MLC’s commitment to transparency and accuracy in royalty distribution.

A representative from the MLC emphasized that the audits are independent of any external influences, such as the recent decision by Bridgeport Music to audit the MLC. Bridgeport Music, known for its assertive copyright enforcement, has been a notable player in the industry, involved in significant lawsuits like the controversial Blurred Lines case.

The MLC has appointed Jane Bushmaker, a veteran in music industry audits, to oversee this process. The audits will be conducted by experienced external firms, ensuring an unbiased and thorough examination. The MLC’s board chair, Alisa Coleman, highlighted the significance of this auditing right, underscoring its role in protecting songwriters and music publishers.

In terms of financial implications, the MLC has assured that its members will not bear any audit costs. These costs will be covered by the MLC’s operational budget, funded by DSPs. Any uncovered underpayments will be fully distributed to the impacted rightsholders, without deductions for audit costs or fees.