Before the
UNITED STATES COPYRIGHT OFFICE
LIBRARY OF CONGRESS
Washington, D.C.
In the Matter of
Periodic Review of the Designations of Mechanical Licensing Collective and Mechanical Licensing Collective and Digital Licensee Coordinator
Docket No. 2024-1
COMMENTS OF DIGITAL LICENSEE COORDINATOR, INC. AND DIGITAL MEDIA ASSOCIATION IN RESPONSE TO INITIAL PUBLIC COMMENTS.
Digital Licensee Coordinator, Inc. (“DLC, Inc.”) and Digital Media Association (“DiMA”) (collectively, along with their members, the “Services”) hereby submit the following supplemental comments in response to the initial public comments submitted in connection with the above-referenced matter.
I. Introduction
In their opening comments, the Services demonstrated that the principles of transparency, efficiency, and neutrality should guide Mechanical Licensing Collective, Inc. (“MLC, Inc.”) in its operations, and articulated several measures that the Copyright Office could impose to ensure that MLC, Inc. adheres to those principles. These themes were echoed and reinforced by the comments submitted by stakeholders across the industry, which called for similar reforms as well. In the following short reply comments, the Services highlight the common themes identified and shared by stakeholders, and observe that the characterization by the National Music Publishers Association (“NMPA”) of the Mechanical Licensing Collective as a partisan body serving as an extension of large music publishers and their trade association reinforces the need to establish safeguards along the lines of what the Services have already proposed in this proceeding. The Services also reiterate their position that MLC, Inc.’s enforcement authority is, and needs to remain, limited and focused pursuant to the statutory text, history and purpose of
the Music Modernization Act (“MMA”). The Services further propose that MLC, Inc. be subject to an external governance review to address the various issues raised by commenters and otherwise ensure that MLC, Inc. operates as intended by Congress.
II. Stakeholders Across the Music Industry Underscored the Importance of Neutrality, Transparency, and Efficiency in MLC, Inc.’s Operations
The Services’ opening comments were consistent with comments submitted from participants from all corners of the industry, which almost universally support the redesignation of MLC, Inc. (as the Services do), but also call for greater oversight in connection with the neutrality, transparency, and efficiency of MLC, Inc. By contrast, a much narrower contingency of participants – comprising the NMPA and the large publishers whose representatives sit on its board and/or MLC, Inc.’s board – argued that such oversight is not needed.
A. MLC, Inc. Should Act as a Neutral Administrator and Steward of the Blanket Licensing System
The MMA created a new licensing system that was intended to benefit all stakeholders – digital music providers (“DMPs”), publishers and songwriters alike. The statutory Mechanical Licensing Collective was designed to be a faithful steward of that system. Indeed, when the Services argue that MLC, Inc. should be “neutral,” they mean faithful to the laws and regulations under which it operates, not private interests.
In arguing that MLC, Inc. need not be neutral, the NMPA incorrectly suggests that the licensing system established by the MMA was designed to solve problems faced by DMPs alone, by highlighting that, prior to the MMA, DMPs were required to license music on a per-work basis and therefore faced increased business risk (1). The NMPA argues that, in the MMA grand bargain, the DMPs received the benefit of the new licensing system, and, in exchange, the publishers received the benefit of a partisan collective that serves the interest of music publishers (2). This is a mischaracterization. The MMA’s blanket licensing system provides important benefits to DMPs and publishers alike, and MLC, Inc.’s role is to serve that system, not the private interests of particular participants in it.
As an initial matter, many of the problems with the licensing system in place prior to the MMA negatively impacted publishers. In particular, publishers complained about inaccurate and/or delayed payments, lack of an authoritative ownership database, “bulk electronic” NOIs that were difficult to manage, and royalty-free mechanical licenses for works not yet registered with the Copyright Office. These problems were addressed by the MMA (3).
As the Recording Industry Association of America (“RIAA”) explained in 2014, the “broken musical work licensing systems” needed to change because they “[were] not working well for any stakeholders.” (4) In fact, mechanical licensing “has long been more complicated in the U.S. than it has been in many other countries,” as a result of the “work-by-work and shareby-share basis” on which those works were licensed (5). As the RIAA noted, the publishers’ inability to license their works effectively was “costing [publishers] business opportunities.” (6) And, the RIAA also candidly explained that the work-by-work statutory license was not a “viable, practical mechanism.” (7) “[E]ven with the best of intentions, a distributor trying to use the compulsory license [was] likely to be guilty of an occasional ‘gotcha’ infraction.” (8) That wasn’t the DMPs’ fault, and as the RIAA noted at the time, “musical work licensing is so broken that mass use of the compulsory license is the best of a lot of bad options.” (9)
Importantly, the data problems endemic to the work-by-work licensing system of the preblanket era were not of the licensees’ making. Instead, when it came to mechanical licenses, publishers, not DMPs, controlled the data needed to pay mechanical royalties for streaming. For decades before the passage of the MMA, publishers relied on—and referred licensees (including record companies, which faced similar problems to the DMPs) to—the NMPA-owned Harry Fox Agency (“HFA”) to match and locate musical work owners for mechanical licenses, and it was HFA’s inability over all those years to solve the accuracy and transparency problems of the existing system that eventually brought the publishers to the table to negotiate the MMA.(10)
Title I of the MMA was crafted to address problems impacting all participants in the publishing side of the music industry, and create a solution benefitting all stakeholders. (11) In light of that fact, it is incumbent on MLC, Inc. to ensure that it operates as a neutral administrator and steward of the new blanket licensing system created by the MMA, in order to ensure that stakeholders from all sides of the industry are able to enjoy the benefits of that system.
The mandate that MLC, Inc. act as a neutral administrator is reinforced by the Presidential signing statement confirming that board members of the designated Mechanical Licensing Collective are inferior officers of the United States appointed by the Librarian of Congress. (12) The official nature of those appointments carries with it an obligation to act in a manner that is faithful to the law itself, not private interests. (13) Certainly these government appointments are not designed to put an official imprimatur on a body acting only in the commercial interests of the largest music publishers and their trade association. Rather, MLC, Inc.’s fidelity should be to the licensing system itself, and its primary focus should be to fulfill its core statutory function of administering the blanket license by collecting and distributing royalties to rightsholders—including the limited enforcement authority associated therewith for objective violations of license obligations (e.g., non-payment of license fees). (14)
Independent publishers and other stakeholders have also expressed this view in this proceeding. Abby North, for example, explained that MLC, Inc. should be an “impartial passthrough entity.” (15) Word Collections likewise articulated the view that MLC, Inc. “must be independent and neutral.”1 (16) SONA similarly expressed concern about MLC, Inc.’s “outsized publisher representation” and emphasized the need for a “diversity of viewpoints about, and responsibility for, the overarching governing body of the MLC.” (17) On the whole, the comments filed demonstrate that the Services’ views on neutrality are widely held, and that even many in the rightsholder and creator community have concerns about how this neutrality is being exercised by MLC, Inc.
In its comments, the NMPA incorrectly insists that Congress did not intend for the statutory Mechanical Licensing Collective to be a neutral administrator of the blanket licensing system, and attempts to draw a false equivalence between the Mechanical Licensing Collective and the Digital Licensee Coordinator, observing that DLC, Inc. “is similarly not required to be neutral when it comes to representing the interests of its DMP members.” (18) But the Digital Licensee Coordinator and Mechanical Licensing Collective are not similar at all. Unlike the Mechanical Licensing Collective, the Digital Licensee Coordinator is not funded by anyone other than its members and has no authority over the licensing activity that powers the dominant recorded music distribution channel in the United States. The Digital Licensee Coordinator is what its name suggests: a “coordinator” of digital licensees, to help streamline DMPs’ participation in the new blanket license system. Far from having board members appointed as inferior officers of the government, by statute, the Digital Licensee Coordinator does not even have to exist at all. (19) Conversely, the Mechanical Licensing Collective is a “collective,” that has representatives, on its board and committees, from all sides of the industry—and was put in place by statute in order to address problems faced by all sides of the industry. Publishers were given the majority of the seats on the MLC’s board in order to assist with the collective’s primary task of matching and distributing royalties. The statute did not provide for such allocation of board seats in order to convert MLC, Inc. into an extension of the largest music publishers (20) (a conclusion also bolstered by the fact that the MLC’s board must also include self-published songwriter representatives and a representative of the Digital Licensee Coordinator). Further, with respect to enforcement of the terms of the blanket license (which is discussed in further detail below), the MMA even contemplates that MLC, Inc. may act in coordination with DLC, Inc., (21) a proposition that would make no sense under a structure in which MLC, Inc. is designed solely to protect the interests of certain copyright owners.
In addition, the fact that the administrative assessment proceeding is potentially adversarial in nature (22) does not prove that MLC, Inc.’s role is to serve the interests of music publishers—instead of being a neutral collective. The purpose of the administrative assessment proceeding is for the Copyright Royalty Board (“CRB”) to determine what reasonable collective costs are associated with MLC, Inc.’s core statutory functions which, again, are to administer a blanket license system and associated royalty payments that works effectively and efficiently for all participants. Similarly, MLC, Inc.’s ability to negotiate interim rates where no royalty rate has been set by the CRB does not reflect an intention that MLC, Inc. act on behalf of copyright owners; it simply reflects the potential need for royalties to flow even where the rate has not yet been determined by the CRB. Indeed, if MLC, Inc. were truly a representative of copyright owners in the manner suggested by the NMPA and publishers whose representatives sit on its board, it would be able to negotiate royalty rates that actually govern licenses between the copyright owners and the DMP licensees. Instead, any interim rates are, by law, of no precedential value whatsoever, automatically expire, and are substituted retroactively when rates are established by the CRB—in proceedings in which MLC, Inc. is prohibited from participating. (23)
B. MLC, Inc. Should Operate with a Consistent Focus on Transparency and Efficiency
In addition to raising concerns about MLC, Inc.’s neutrality, many other stakeholders joined the Services in emphasizing the need for additional transparency with respect to MLC, Inc.’s operations. For example, multiple parties expressed concern over the lack of transparency surrounding MLC, Inc.’s relationships with its vendors, including whether MLC, Inc. sets performance criteria and conducts periodic evaluations of those vendors’ performance. (24) Commenters also called for increased transparency regarding MLC, Inc.’s investment policies, as well as the revenue generated from its investments, reflecting concerns regarding broader governance issues with MLC, Inc. (25) Further, many stakeholders highlighted MLC, Inc.’s handling of accrued but unmatched royalties as another area where MLC, Inc. has not provided sufficient transparency. (26) Taken together, these comments reinforce the Services’ position that MLC, Inc. should operate in a manner that is consistently transparent to all stakeholders, and further emphasize the need for increased oversight by the Copyright Office to ensure that MLC, Inc. makes improvements in this area going forward as a condition of redesignation.
The Services also emphasized in their initial comments the need for MLC, Inc. to maintain focus on efficiency. This is not a controversial opinion—no stakeholder can reasonably disagree that efficiency must be a central tenet of the administrator’s operations. (27) And while a low administrative fee ratio, which the Services are glad to see MLC, Inc. report, is one indicator of efficiency, that data point alone is insufficient. Given the considerable systems and data required to properly match a composition to a recording and pay the royalty to the appropriate rightsholder, which are fixed costs, the ratio of costs to royalties processed would naturally decrease significantly with increased volume of royalty flows, and a large collective like MLC, Inc.—which has a relatively small number of licensees and only a single license type to administer—would be expected to have significantly lower administrative fee ratios than other societies. Furthermore, as previously outlined, the high fixed costs of administering the blanket license should cause marginal costs to decrease substantially with the volume of usage processed as MLC, Inc. becomes more efficient in its operations over time. However, since MLC, Inc.’s initial designation, the costs of implementing the blanket license have continued to grow. Far from enjoying a “bargain,” (28) the DMPs collectively pay far more to administer their mechanical licenses now than they did prior to the MMA. It is important to look beyond MLC, Inc.’s administrative fee ratio in determining whether MLC, Inc. has operated efficiently during its initial designation period and ensuring that it does so in future periods.
III. MLC, Inc.’s Enforcement Role Under the MMA is Narrow and Focused
The Services would like to reiterate and clarify their position regarding the proper scope of MLC, Inc.’s enforcement role in response to certain comments submitted on this topic. In particular, the NMPA falsely asserted that DiMA is “attempting to re-envision the deal [stakeholders] struck by trying to limit the important benefits provided to copyright owners” and hyperbolically cautioned the Copyright Office against “bad-faith proposals by DMPs and their representatives to erode the MLC’s authority to enforce against noncompliance with the terms of the blanket license.” (29) Contrary to the NMPA’s comments, the Services actually agree that MLC, Inc. has a proper role in enforcing the terms of the blanket license and have not argued otherwise. However, it is important to note that MLC, Inc. has no power to change the operative statute or regulations. Instead, it is tasked with administering the license for licensors and licensees alike under rules established by others. As such, MLC, Inc.’s enforcement role is intended to be narrow and focused, and the MMA explicitly limits that enforcement role to those efforts to “enforce rights and obligations under this subsection” (emphasis added), meaning subsection 115(d). (30) That subsection, in turn, does not pertain to all uses of musical works, or even all reproductions of musical works. Instead, it is focused squarely on the terms and conditions of the blanket license administered by the statutory Mechanical Licensing Collective. As such, MLC, Inc.’s enforcement activities should be limited to ensuring compliance with the terms of the blanket license. (31) As noted in the Services’ opening comments, this requires certain procedural steps to understand the facts and circumstances of any potential compliance issue that might arise before engaging in any sort of “enforcement” action, which steps should include—at a bare minimum—communication with the relevant DMP and DLC, Inc. (32)
Accordingly, the measures proposed by the Services in their opening comments are intended to ensure that MLC, Inc. only engages in enforcement activities when due pre-litigation process has been followed and there is a clear violation of the terms of the blanket license, and MLC, Inc. does not conduct itself as an arbiter of the Copyright Act more generally. (33) The measures and dispute resolution mechanisms that the Services have proposed are also designed to ensure that enforcement is measured and litigation is pursued only when other preliminary dispute resolution efforts have been exhausted, as litigation is an expensive and time-consuming process for all parties involved. The Services’ proposals would not “undermine the MLC’s ability to fulfill its statutory responsibilities.” (34) Instead, the Services’ proposals seek to ensure that MLC, Inc.’s activities do not exceed the proper scope of its enforcement role, as contemplated by the statute. The Services’ proposals, like those of stakeholders across the industry, are designed to fulfill the promise of the MMA, not erode it.
IV. The Copyright Office Should Require MLC, Inc. to Undergo an External
Governance Review
In their opening comments, stakeholders across the spectrum—including those, like the Services, who support redesignation—raised concerns about the governance of MLC, Inc. (35) For example, one stakeholder expressed apprehension about the “outsized publisher representation” on MLC, Inc.’s board, and observed that, while the composition of MLC, Inc.’s board is fixed by statute, due to its uneven composition, “if a conflict arises where songwriters and publishers are on different sides, the resulting MLC policy favors the publishers.” (36) Similarly, a songwriter advocate and publishing administrator noted that “there is grave concern in the independent music publishing and songwriting community that [the MLC, Inc. board] is not representative of small, boutique music publishers, nor of truly independent songwriters.” (37) That same stakeholder also highlighted that, with respect to MLC, Inc.’s three advisory committees, “it is unclear how one nominee is selected over another [and] it is unclear what process (if any) is followed to implement (or not implement) Committee recommendations. It is unknown to the membership at large how often the Committees meet and what they discuss during their meetings.” (38)
In light of these concerns, the Services believe it is appropriate for the Copyright Office, as part of the redesignation process, to require MLC, Inc. to conduct a governance review supervised by an independent outside consultant with expertise in governance of bodies such as MLC, Inc.
This should not be controversial. As a general matter, all non-profit organizations should conduct periodic governance reviews to ensure their governing body is effective. In the case of MLC, Inc., this is especially true given the fact that it is carrying out a statutory function, handling billions of dollars in royalties and associated rights, and doing so with a unique funding mechanism.
Nor are governance reviews uncommon in the collective management of music publishing rights. To name just one example, PRS for Music conducted a governance review several years ago and published the findings on its website. (39) Moreover, there is an extensive body of history of best practices for CMOs and organizations that oversee them. (40) At this point in the development of MLC, Inc., it is a good time for an externally facilitated review of governance, properly collating input from stakeholders, looking to the mandate given to MLC, Inc. by the MMA, and referencing the best practice guides that exist across the industry.
The review would be funded out of the administrative assessment. To ensure all stakeholders are represented, the review should be overseen by a three-person Board committee, with equal roles and input. The Services recommend that this committee be composed of a publisher representative, a songwriter representative, and the DLC, Inc. representative. The goal of the review would be to assess MLC, Inc.’s overall governance, including the role of its board and its committees; both those required by law and those established in the bylaws. The overarching purpose would be to provide guidance to MLC, Inc.—and the Copyright Office in its oversight capacity—about areas that are functioning well and those that could use improvement, and to provide greater insight to all stakeholders regarding MLC, Inc.’s internal governance and its core function of administering the blanket license effectively and efficiently.
The Services invite MLC, Inc. to voluntarily embark on a neutral third-party facilitated governance review under the parameters outlined above, but, failing that, propose that the Copyright Office make this a requirement of the redesignation mandate.
V. Conclusion
The Services believe the current designation process is an important opportunity for stakeholders to reflect on the first five years of the MMA and propose improvements, where needed, to ensure that MLC, Inc., if redesignated, is successful in the next five years and beyond. As such, the Services appreciate the opportunity to submit these supplemental comments, welcome further engagement with the Copyright Office regarding the topics discussed herein, and look forward to a productive working relationship with MLC, Inc.
Respectfully submitted,
/s/ Allison L. Stillman
Allison L. Stillman
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY 10020
Sarang Vijay Damle
LATHAM & WATKINS LLP
555 Eleventh Street NW
Washington, DC 20004
Counsel for Digital Licensee Coordinator,
Inc. and Digital Media Association
Dated: June 28, 2024
Footnotes
1 See National Music Publishers Association, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 1-2, 5, https://www.regulations.gov/comment/COLC-2024-0002-0037.
2 See id. at 5-6.
3 See Peermusic, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 3, https://www.regulations.gov/comment/COLC-2024-0002-0025 (noting that, prior to the MMA and the creation of the Mechanical Licensing Collective, “publishers had at best an obscure view into the administration of the Section 115 compulsory license”); Big Machine Music, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 1, https://www.regulations.gov/comment/COLC-2024-0002-0033 (stating that, before the MMA, “publishers had much less control over the accuracy of [their] information and had to manage catalog information across multiple databases to ensure [their] works could be identified by digital service providers”).
4 Recording Industry Association of America, Inc., Comments on Music Licensing Study (May 23, 2014) at 6, https://www.copyright.gov/policy/musiclicensingstudy/comments/Docket2014_3/Recording_Ind
5 Id. at 10.
6 Id. at 11.
7 Id. at 24.
8 Id.
9 Id. at 23.
10 See CleaRights, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 2, https://www.regulations.gov/comment/COLC-2024-0002-0039 (noting that “[t]he HFA system… has been known for years to have old, outdated and/or incorrect data”); Gwendolyn Seale, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 5, https://www.regulations.gov/comment/COLC-2024-0002-0032 (describing HFA’s track record for matching works and paying out mechanical royalties as “lackluster”).
11 This intent is reinforced by remarks made by Rep. Goodlatte, the sponsor of the MMA, during a House Judiciary Committee meeting in 2018 pertaining to the markup of the legislation. See Markup of H.R. 5283, H.R. 5335, H.R. 5344, and H.R. 5447, YOUTUBE (Apr. 11, 2018), https://www.youtube.com/watch?v=NLPBjqagmtg&t=2106s (“During the course of [this committee’s review of our nation’s copyright laws], we learned that our music licensing laws were no longer working as intended for songwriters . . . or for the companies that deliver the
music in innovative ways to consumers.”).
12 See Presidential Statement on Signing of the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (Oct. 11, 2018), available at https://www.govinfo.gov/content/pkg/DCPD-
201800692/pdf/DCPD-201800692.pdf.
13 “[T]he term ‘Officers of the United States,’ . . . since it had first appeared in [the draft Constitution,] had been taken by all concerned to embrace all appointed officials exercising responsibility under the public laws of the Nation,” Buckley v. Valeo, 424 U.S. 1, 131 (1976).
14 Indeed, Chairman Issa noted during the field hearing on the MMA held by the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet last year that the Mechanical Licensing Collective is a “neutral arbitrator . . . designed to be not in anyone’s pocket, but in fact to fairly match up the places where the dollars should go.” See Five Years Later – The Music
Modernization Act, YOUTUBE (June 27, 2023), https://www.youtube.com/watch?v=J0VF4ZfABQs&t=6052s.
15 Abby North, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 7, https://www.regulations.gov/comment/COLC-2024-0002-0041.
16 Word Collections, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 8, https://www.regulations.gov/comment/COLC-2024-0002-0047 (“To effectively administer the MMA blanket compulsory license ensuring that all accrued royalties be paid to the songwriters who earned them, the Collective must be independent and neutral.”).
17 Songwriters of North America, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 6, 7, https://www.regulations.gov/comment/COLC-2024-0002-0043.
18 See National Music Publishers Association, Comments on Periodic Review of the
Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 6, https://www.regulations.gov/comment/COLC-2024-0002-0037 (“Congress did not intend for the MLC to be ‘neutral’ when it comes to protecting the interests of copyright owners.”).
19 17 U.S.C. § 115(d)(5)(B)(iii).
20 See, e.g., Songwriters of North America, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 6, https://www.regulations.gov/comment/COLC-2024-0002-0043 (criticizing the “outsized
publisher representation” on MLC, Inc.’s board).
21 See 17 U.S.C. § 115(d)(3)(C)(VIII) (noting that the Mechanical Licensing Collective may “engage in legal and other efforts to enforce rights and obligations under this subsection, including by filing bankruptcy proofs of claims for amounts owed under the licenses, and acting in coordination with the digital licensee coordinator”).
22 “Potentially” adversarial in that the Services have thus far settled this budget issue with MLC, Inc. every time it has arisen.
23 See 17 U.S.C § 115(d)(8).
24 See, e.g., Gwendolyn Seale, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 7, https://www.regulations.gov/comment/COLC-2024-0002-0032 (“In furtherance of transparency, the MLC should state whether it: (1) sets performance criteria for its vendors, (2) conducts evaluations of its vendors’ performances, and if the answer to both questions are ‘yes,’ then it should disclose the performance criteria and results of such evaluations.”); Spirit Music Group, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and
Digital Licensee Coordinator (May 29, 2024) at 3, https://www.regulations.gov/comment/COLC-2024-0002-0044 (noting that, with respect to the vendors that comprise MLC, Inc.’s “Supplemental Matching Network,” MLC, Inc. has not provided detail regarding “the tasks [those vendors] have been asked preform [sic] or how the MLC plans to use these companies to improve the royalties that will ultimately be paid to rightsholders”); Go To Eleven Entertainment, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29,
2024) at 2, https://www.regulations.gov/comment/COLC-2024-0002-0038 (noting that MLC, Inc. has “not explained to publishers how [the Supplemental Matching Network vendors] are going to work with The MLC”).
25 See, e.g., American Association of Independent Music, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 3-4, https://www.regulations.gov/comment/COLC-2024-0002-0034 (“The MLC must
disclose how they invest funds, the revenue generated, and how they will disburse those revenues to rightsholders.”); Songwriters Guild of America, Society of Composers & Lyricists, Music Creators North America, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 10, https://www.regulations.gov/comment/COLC-2024-0002-0024 (expressing disappointment at the apparent lack of authority or ability of MLC, Inc.’s administrators to provide details concerning the investment of held royalties); Go to Eleven Entertainment, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 4, https://www.regulations.gov/comment/COLC-2024-
0002-0038 (questioning why MLC, Inc.’s board of directors has not made its investment policy documents available to the public).
26 See, e.g., Music Answers, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 1, https://www.regulations.gov/comment/COLC-2024-0002-0042 (requesting that the Copyright Office compel MLC, Inc. to disclose the amount of so-called “black box” royalties); Spirit Music Group, Comments on Periodic Review of the Designations of the Mechanical Licensing
Collective and Digital Licensee Coordinator (May 29, 2024) at 3,
https://www.regulations.gov/comment/COLC-2024-0002-0044 (“[T]here should be more transparency regarding [royalties] that are still unclaimed. The MLC should be reporting the total of unclaimed funds at the close of every quarter.”).
27 See, e.g., Songwriters of North America, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 2, https://www.regulations.gov/comment/COLC-2024-0002-0043 (noting that the administration of the blanket license should be “efficient, effective, and transparent”); American Association of Independent Music, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 4, https://www.regulations.gov/comment/COLC-2024-0002-0034 (“Ensuring accurate matching, transparency, and efficient processes is essential to fair distribution [of royalties].”).
28 See National Music Publishers Association, Comments on Periodic Review of the
Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 9, https://www.regulations.gov/comment/COLC-2024-0002-0037.
29 Id. at 5. It is the NMPA, not the Services, that is attempting to “re-envision” the MMA by seeking to eliminate the “blanket license”—a foundational component of the MMA and the very license which MLC, Inc. is designed to administer— altogether. See Murray Stassen, Amid Spotify ‘Bundling’ Dispute in the US, NMPA Calls on Congress to Let Music Publishers Opt Out of Compulsory License and Negotiate with Streamers ‘In a Free Market,’ MUSIC BUSINESS WORLDWIDE (May 21, 2024), https://www.musicbusinessworldwide.com/amid-spotify-bundlingdispute-in-the-us-nmpa-calls-on-congress-to-let-music-publishers-opt-out-of-compulsorylicense-and-negotiate-with-streamers-in-a-free-market/; See also Songwriters Guild of America, Society of Composers & Lyricists, Music Creators North America, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 2, https://www.regulations.gov/comment/COLC-2024-0002-0024 (noting that the NMPA is seeking to “eliminate statutory mechanical licensing via an opt-out system (which predictably favors the major music publishing conglomerates over creators and small music publishers)”).
30 17 U.S.C. § 115(d)(3)(C)(VIII).
31 In its litigation against Pandora, MLC, Inc. has clearly exceeded this role. Without opining on the merits of the pending litigation, based on the pleadings, that dispute is not about Pandora’s calculation of royalties owed under its section 115 blanket license. Instead, the dispute is about whether Pandora needs a mechanical license at all for non-interactive digital transmissions on its free tier. MLC, Inc.’s argument appears to be that Pandora does not qualify to use an entirely separate statutory license—17 U.S.C. § 114—for the sound recordings performed on its free tier. It should be non-controversial that it is not within MLC, Inc.’s statutory function to police the boundaries of Section 114. The Pandora action undoubtedly falls outside of MLC, Inc.’s statutory functions, is improper, and should not be funded by the administrative assessment it collects.
32 MLC, Inc.’s recent lawsuit against Spotify is an example of MLC, Inc. commencing a lawsuit without exhausting other avenues of dispute resolution first—or any communication at all. Instead, MLC, Inc. went to court with a complaint challenging Spotify’s accounting for its Premium Bundle (of music and audiobooks), with incomplete factual information and no dialog to assert that challenge to, or resolve any perceived issue with, Spotify in the first place. Again, without opining on the merits of pending litigation, this rush to sue does not connote a considered approach to the economic and other costs that litigation entails.
33 Relatedly, to reiterate a point made in the Services’ opening comments, when MLC, Inc. perceives an ambiguity in the MMA’s regulations, it is not MLC, Inc.’s role to resolve that perceived ambiguity unilaterally by creating rules based on its own preferred interpretation, or the preferred interpretation of its board or the NMPA.
34 National Music Publishers Association, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 5, https://www.regulations.gov/comment/COLC-2024-0002-0037.
35 See, e.g., Music Answers, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 1, https://www.regulations.gov/comment/COLC-2024-0002-0042 (“We note that the Board of Directors of the current MLC is comprised predominantly of employees of the same entities that would benefit most from the distribution of the accrued royalties. . . . That Board, having total control over the MLC’s procedures and decisions, lacks any incentive to identify and contact the rightful owners of those royalties.”); Go to Eleven Entertainment, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 2, https://www.regulations.gov/comment/COLC-2024-0002-0038 (noting that the publisher members of MLC, Inc.’s Nominating Committee are currently made up of board members of MLC, Inc. which presents potential conflicts, as “the board controls the makeup of new members indefinitely and they often do not pick people who would challenge opinions”);
36 Songwriters of North America, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 6, https://www.regulations.gov/comment/COLC-2024-0002-0043.
37 Abby North, Comments on Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator (May 29, 2024) at 6, https://www.regulations.gov/comment/COLC-2024-0002-0041.
38 Id.
39 See Governance Changes – Summary of the Mazar’s Report, PRS FOR MUSIC,
https://www.prsformusic.com/-/media/files/prs-for-music/corporate/governance/summary-ofkey-recommendations_mazars.ashx.
40 See, e.g., The Role of Collective Management Organisations, CISAC,
https://www.cisac.org/sites/main/files/files/2020-11/CISACUniversity_The_Role_of_CMOs_FINAL.pdf
