The MLC Is Auditing Streaming Services for the First Time

The Mechanical Licensing Collective (the MLC) has issued notices of intent to audit all digital service providers (DSPs) that operate under the compulsory blanket license administered by the MLC since its inception in 2021.

This includes a slew of different companies that license music, including on-demand streaming services (like Spotify, Apple Music, Amazon Music, Tidal and Deezer), the interactive streaming side of internet radio companies (like Pandora, Mixcloud and iHeart Radio) and music apps (like Ultimate Guitar, PianoTrax and WeavRun). The audits are intended to ensure the accuracy of reported and paid royalties beyond the measures already taken by the MLC.

A representative for the MLC says that it will update its members on the results of any DSP audits that it conducts and will “clearly identify any monies recovered in audits on the royalty statements it provides to members.”

The right for the MLC to audit (and to be audited itself) is stipulated in the Music Modernization Act (MMA). The landmark 2018 law created a new blanket license for musical work mechanicals, replacing the previous song-by-song licensing system that proved to be complicated and ineffective for both digital services and the music business. Because of issues with the old piecemeal licensing system, a pool of $427 million in unmatched and unpaid publishing royalties had formed. The MMA also established the MLC to divvy up these royalties — often nicknamed “blackbox” royalties — and administer the new blanket license moving forward.

The news of the MLC’s auditing plans arrives a month after Bridgeport Music, the company that represents George Clinton and Funkadelic, opted to exercise its right to audit the MLC. Bridgeport Music is best known for its bullish approach to copyright enforcement, once accusing more than 800 artists and labels of infringement in one lawsuit in the early 2000s. It was also a defendant in the controversial Blurred Lines lawsuit along with Marvin Gaye‘s estate, which is believed to have greatly widened what elements of a song are considered protected under copyright law.

A representative for the MLC says that the decision to send notices of intent to audit DSPs was entirely independent of the Bridgeport news.

“Ensuring DSPs have reported royalties accurately is one of the MLC’s statutory responsibilities under the MMA,” says Kris Ahrend, CEO of the MLC. “The MLC has tapped music industry audit veteran, Jane Bushmaker, a member of the MLC’s Analytics & Automation team, to oversee DSP audits, which will be conducted by experienced outside audit firms.”

“The MLC’s audit right is a first in the 115-year history of the U.S. compulsory mechanical license and provides enhanced protection for songwriters and music publishers,” adds Alisa Coleman, chair of the board of directors at the MLC. “The audit notices filed by the MLC mark the beginning of its fulfillment of this important function.”

See below for a full list of companies the MLC intends to audit: