DIMA CEO celebrates more than $2.5 billion paid out under the Music Modernization Act and highlights importance of modern and efficient licensing for music industry growth and innovation
In November, as I approached the end of my first full year at the helm of DIMA, I was honored to give the keynote address to the 4th Artist Rights Symposium hosted by the American University in Washington, DC. Alongside remarks regarding streaming’s role in connecting artists and listeners, and the continuing challenges artists see with their remuneration from music in the digital age, the core plank of my speech was to highlight the ongoing importance of the Music Modernization Act (MMA), which was signed into law by President Trump in 2018.
The beginning of the new Congress, and President Trump’s inauguration, marks a natural point for reflection on how the MMA has progressed and the improvements it has sparked for the benefit of the music industry at large
Before the Music Modernization Act, the mechanical licensing system was broken. It was broken for songwriters; it was broken for music publishers; and it was broken for streaming services. The MMA brought certainty and efficiency, and it has benefited all stakeholders.
Prior to the passage of the Music Modernization Act in 2018, all industry participants were victims of the old status quo. The reality was that pre-MMA, there was no effective way for music publishers to license songs to streaming services at the scale required. The licensing of mechanical rights in musical compositions had always been cumbersome, but with the transition that streaming brought from licensing one album at a time to clearing the entire catalog of recorded music on an ongoing basis, the status quo became entirely unable to scale, and inadequate. This was exacerbated by a lack of certainty by mechanical rights holders around their ownership shares and the full scope of their catalogs.
The challenge stems from the nature of the mechanical right. In every piece of recorded music there are two rights, one for the recording itself, and one for the song (composition). The licensing of the recording by the record labels has largely always worked – in part because there is rarely much ambiguity over who owns the sound recording. This means the licensing process is relatively simple. By contrast, identifying and paying the correct rights holders on the composition side—where the mechanical right arises—is far more challenging, and under the pre-MMA system, became unworkable.
The complications with licensing composition rights begins with knowing who holds them. Unlike recorded music rights, which typically belong (or are payable) to the company that delivers the recording to the streaming service, the provenance of composition rights is difficult to convey in the digital supply chain. First, there’s a timing problem. There are often delays between the writing of a song and each of the writers notifying their individual publishers of its existence and their share of the work. Then there are timing delays for each of the publishers to notify their interest to the record labels. Furthermore, a song can, and most often does, have multiple songwriters, and each songwriter is generally represented by their own publisher. As a matter of industry practice, publishers generally only license their share of a composition, meaning that to clear rights in the whole song, a licensee must go to multiple and sometimes a dozen or more rights holders. There can also be disagreements among multiple writers over the shares of a song each writer contributed.
Add to this that many songs have the same or similar titles, that the ownership of publishing catalogs frequently changes hands, and that in circulating among a myriad of stakeholders throughout the industry with disparate IT systems, publishing data develops inconsistencies and gaps. It’s no wonder that the holders of these rights often don’t know what they own and are not able to administer the type of high-volume licensing that is required in the streaming age.
Simply put, the past system was not workable for the modern era.
In the pre-MMA days, both digital services and music publishers did the best they could – relying on existing mechanical licensing agents, direct licenses, and eventually a cumbersome method for providing bulk notices to the US Copyright Office. This system arose from the work-by-work clearing of maybe a dozen tracks for a physical album release, which in the past was manageable, but completely unworkable for the scale of digital streaming.
The whole industry recognized the system was not working, and agreed a legislative solution was required. Enter the MMA. The law established a single blanket mechanical license to be administered by a newly-created entity called the Mechanical Licensing Collective (MLC). The law required the MLC to develop a unified database of musical works and make it available at low or no cost to the entire industry, and provided for oversight of the MLC by Congress and the US Copyright Office to ensure all stakeholders were fairly and equitably served.
By creating a blanket license, administered by a single organization, the law created more certainty and efficiency for songwriters, publishers, and streaming services alike. These are fundamental components of the Music Modernization Act.
Uniquely, under the MMA, streaming services agreed to pay the reasonable costs of the new MLC.
Most collecting societies around the world deduct their costs from the revenues received, and then distribute the remaining royalties. Under the MMA, however, services agreed to fully fund the reasonable costs of the MLC, on top of royalty payments. This means that 100% of royalties paid by streaming services to the MLC can be paid to rights holders. Globally, collective management is intended to reduce transaction costs for all, and this is true with the MMA. The primary difference is that under the MMA, licensees foot the bill.
To date, music streaming services have paid more than $160 million to fund the operation of the MLC, which has allowed the MLC to distribute more than $2.5 billion in mechanical royalties paid by DIMA members and other music streaming services
The flow of royalties that streaming now provides is the economic engine that powers the modern music industry, accounting for the majority of music revenues annually. This is a remarkable success. And the certainty that the MMA provided has benefited licensees and rights holders alike, from major publishers, independent publishers and songwriters, to streaming services large and small.
As we embrace all that is ahead in 2025, we are proud to continue championing the MMA and celebrating the improvements it has brought about for all stakeholders.
While the MMA addressed the principal failures of mechanical rights licensing, ongoing Congressional oversight will be critical to ensuring the law’s continued success. And complexities remain in the broader music licensing system, including pervasive data issues.
As policymakers consider how to support more growth and innovation for the music industry, we encourage them to look to the success of the MMA.
It was a true demonstration of all sides of industry coming together, agreeing that a legislative solution was needed to address widespread challenges, identifying workable solutions to increase efficiency and certainty, and modernizing the system for the betterment of all stakeholders.
As we welcome the new Congress over the coming weeks, we look forward to exploring opportunities to continue to work together in support of a robust, modern, and efficient music licensing system.
