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$424 MILLION in unmatched royalties sent to MLC, what does this mean for you?

It was announced last week that over $424 million in accrued unmatched royalties were delivered from twenty digital service providers (DSP) to the Mechanical Licensing Collective (MLC). Let's break down what this all means:

What is the Mechanical Licensing Collective?

The MLC is a nonprofit organization created pursuant to the Music Modernization Act. Its sole purpose is to collect and distribute mechanical royalties owed via streaming and digital downloads.

When a song a streamed or downloaded, a mechanical royalty is owed for the use of the composition. DSP's have had a difficult (if not impossible) time finding the right publisher/songwriter for the millions of songs streamed and downloaded. In an effort to create an easy, centralized system to track this information and properly distribute royalties to the proper parties, the MLC was created.

The Digital "Black Box"

Prior to the creation of the MLC, the DSP's placed the unmatched royalties into what has been called a "Black Box." The money has simply been sitting in bank accounts with nowhere to go.

We now know these black boxes across all DSP's accrued over $424 million. This money has been sent to the MLC for distribution.

Pursuant to the MMA, there will not longer be a Black Box where unmatched money will sit forever. Instead, the MLC will first distribute all royalties (both the prior unmatched royalties of $424 million and all future digital mechanical royalties) to those that have properly registered. It will then distribute the unmatched royalties to all registrants on a pro rata basis. The timing of these payouts can be found here.

What do you need to do?

Either you or your publisher/administrator needs to register with the MLC by visiting their website here. This is another stream of revenue you are missing out on if you don't do so. These royalties are separate from your Performance Rights Organization, SoundExchange and your distributor/digital aggregator.

Once registered, you will be entitled to (1) what is rightfully owed to you of the $424 million in currently unmatched royalties, (2) future royalties going forward that can now be matched to you as the rightsholder and (3) a pro rata share of all future unmatched royalties.

What questions remain unanswered?

The largest question looming over the $424 million in unmatched royalties sent to the MLC is the way the MLC will handle prior settlements with the DSP's.

DSP's were already sued by publishers for failure to pay mechanical royalties, and DSP's paid large settlements to those publishers. So the question remains: Will the MLC avoid paying these publishers again when they have already received a major payout from the DSP for claims of unpaid mechanical royalties?

As stated by the Artist Rights Alliance, "the major publishers that already settled with digital services and received payment from them should not be allowed to claim a further share of the monies transferred to The MLC today."

We will have to wait and see how it all shakes out.

Colin P. Maher, Esq. is the found of Whiskey Ghost Entertainment Law based in Nashville, Tennessee. Colin is the Lawyer for the New Music Industry, and can help you or your business in every aspect related to the music industry. Find out more about WGEL on the web, or schedule a free 15-minute introductory phone call.

Legal services discussed are provided by Colin Maher, Attorney at Law, as a sole proprietor. he foregoing materials contain abbreviated and generalized information presented purely for educational, promotional and general information purposes only and shall not be deemed either legal advice given by or a solicitation for business by Colin P. Maher, Attorney at Law nor shall it create an attorney-client relationship. The materials should not be relied upon or construed as legal advice and may be out of date. Always secure legal consultation with a qualified attorney. Colin P. Maher, Esq. neither assume nor bear any liability or responsibility for errors or omissions in the contents of these materials.

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