Since its founding in 2021, the Mechanical Licensing Collective, or MLC, has
sent letters of intent to audit all digital service providers (DSPs) that use the
mandatory blanket licence that the MLC oversees. This covers a wide range of
businesses that licence music, such as music apps, internet radio providers like
Pandora, Mixcloud, and iHeart Radio, and on-demand streaming services like
Spotify, Apple Music, Amazon Music, Tidal, and Deezer (like Ultimate Guitar,
Piano Trax and WeavRun). In addition to the steps the MLC has already taken,
the audits are meant to guarantee the accuracy of royalties that are reported and
paid.
According to an MLC official, the organisation will “clearly disclose any
amounts recovered in audits on the royalty statements it delivers to members”
and will notify its members of the outcomes of any DSP audits it undertakes.
The Music Modernization Act specifies the MLC’s ability to audit as well as be
audited (MMA).
The historic 2018 law replaced the existing song-by-song licencing scheme,
which was shown to be convoluted and unproductive for digital services as well
as the music industry, with a new blanket licence for musical work mechanicals.
A mismatched and underpaid publishing royalties pool of $427 million had
developed as a result of problems with the previous piecemeal licencing regime.
In order to distribute these payments, which are also referred to as “Blackbox”
royalties, and to manage the new blanket licence going forward, the MMA also
established the MLC.

A month after Funkadelic and George Clinton’s record label, Bridgeport Music,
decided to use its right to audit the MLC, word of the MLC’s auditing plans
breaks. Bridgeport Music gained notoriety for its aggressive copyright
enforcement strategies, having filed a lawsuit in the early 2000s accusing over
800 companies and artists of infringement. Along with Marvin Gaye’s estate, it
was a defendant in the contentious Blurred Lines lawsuit, which is said to have
significantly expanded the range of song elements that are protected by
copyright laws. According to an MLC official, the choice to send letters of
intent to audit DSPs was made completely apart from the Bridgeport news.
According to Kris Ahrend, CEO of the MLC, “one of the MLC’s statutory tasks
under the MMA is ensuring DSPs have declared revenues appropriately.” “Jane
Bushmaker, a seasoned audit professional in the music industry and a member
of the MLC’s Analytics & Automation team, has been assigned to supervise
DSP audits, which will be carried out by seasoned external audit companies.
According to Alisa Coleman, head of the MLC board of directors, “the audit
right offered by the MLC is a first in the 115-year history of the compulsory
mechanical licence in the United States and offers increased security for
songwriters and music publishers.” “The MLC’s filing of audit notices signifies
the start of its performance of this crucial role.

The complete list of businesses that the MLC plans to audit is provided
below:

• Amazon Media Venture LLC (AMP)
• Amazon.com Services LLC (Amazon Music)
• Anghami FZ LLC (Anghami)
• Appcompanist, LLC (Appcompanist)
• Apple Inc. (Apple Music)
• Artist Technology Group DBA PANTHR Music (PANTHR Music)
• Audio Mack Inc. (Audio Mack)
• Avail LLC (The Cover Foundry)
• Beat port LLC (Beat port)
• Bill Graham Archives, LLC (Wolfgang’s Music)
• Boxine GmbH (Tonies)
• Choral Tracks LLC (Choral Tracks)
• Classical Archives, LLC (Classical Archives)
• Da Capo Music, LLC (Yes! Fitness Music)
• Deezer S.A. (Deezer)
• Fan Label, LLC (Fan Label)
• Global Tel*Link Corporation (GTL)
• Google, LLC (Google Play Music/YouTube)
• GrooveFox Inc. (Groove Fox)
• IDAGIO GmbH (Idagio)
• iHeartMedia + Entertainment, Inc. (iHeart Radio)
• M&M Media, Inc. (Trebel)
• Midwest Tape, LLC (hoopla)
• Mixcloud Ltd (Mixcloud)
• MONKINGME S.L. (MonkingMe)
• Music Choice (Music Choice)
• Napster Group PLC (Napster)
• Naxos Digital Services US Inc. (NAXOS)
• Pacemaker Music AB (Pacemaker)
• Pandora Media, LLC (Pandora)
• PianoTrax LLC (PianoTrax)
• Power Music, Inc. (Power Music)
• PRIMEPHONIC B.V. (Prime phonic)
• Recisio SAS (Karaoke Version)
• Saavn Media Limited (Jiosaavn)
• Securus Technologies, LLC (Securus)
• Slacker, Inc. (Slacker/LiveXLive)
• Smithsonian Institution (Smithsonian Folkways Recordings)
• Sonos, Inc. (Sonos)
• SoundCloud Operations Inc. (Soundcloud)
• Spotify USA Inc. (Spotify)
• TIDAL Music AS (Tidal)
• Transsnet Music Limited (Boomplay)
• TRIBL, LLC (Tribl)
• Ultimate Guitar USA LLC (GuitarBackingTrack.com)
• Weav Music, Inc. (Weav Run)
• XANDRIE USA (QOBUZ)
• Yoto Ltd (Yoto)

According to the MLC, it already takes a variety of measures to guarantee that
the DSPs report appropriately, such as carefully examining the monthly usage
statistics that the DSPs produce through both automated and manual checks. In
order to further investigate particular facets of DSP usage reports, the MLC
states that it “also leverages the records of use mechanism established by the
U.S. Copyright Office’s regulations. In the press release announcing the audit
notices, the organisation notes that its members “will not bear any of the audit
fees” and that the charges will be paid by The MLC’s operating budget, which is
supported by DSPs at no cost to music publishers or composers in accordance
with the MMA.
Furthermore, the MLC claims it will pay the full amount of any recovery to the
affected rightsholders in the event that an audit of a DSP reveals any
underpayment, without deducting any fees or costs associated with the
examination. The MLC further states that it will “clearly indicate any money
recovered in audits on the royalty statements it delivers to Members” and that it
will notify Members of the outcomes of any DSP audits it does. In December,
Billboard revealed that Bridgeport Music is auditing The Mechanical Licensing
Collective (MLC).
One of The MLC’s legislative obligations under the MMA is to make sure DSPs
have reported royalties truthfully, according to Kris Ahrend, CEO of the MLC.
He goes on, The MLC has selected Jane Bushmaker, a veteran of the music
industry audit field and a member of The MLC’s Analytics & Automation team,
to oversee DSP audits, which will be carried out by skilled outside audit firms.

The MLC’s audit right is a first in the 115-year history of the U.S. compulsory
mechanical licence and provides increased security for songwriters and music
publishers,” stated Alisa Coleman, Chair of the Board of Directors of the MLC.
The MLC’s filing of audit notices signifies the start of its performance of this
crucial role.