Attention songwriters and publishers: did you know that under the Music Modernization Act, you may be owed royalties for the use of your musical works on interactive streaming services? You don’t have to be a chart-topping star to make sure you are getting the royalties you are owed for your songs. Read on to learn the difference between the types of “mechanical” royalties and what you need to know to receive all the money you may be owed.
What’s the Deal with Mechanical Royalties?
A song involves two types of works protected by copyright: musical works (think compositions, sheet music, or lyrics) and sound recordings (the recording of the musical work). Digital music providers license the use of musical works and sound recordings when they are played online. Mechanical licenses are a type of license for the use of musical works.* Prior to 2021, digital music providers obtained mechanical licenses on a song-by-song basis, by either obtaining a license from the copyright owner or by using what is called a “statutory” or “compulsory” license. As you can imagine, this song-by-song system was complicated and time consuming, especially in the digital age. Think about all the songs you listened to online in the past year alone and multiply that by all the listeners in the country!
The Music Modernization Act, or “MMA,” addressed this issue. Now, instead of relying on song-by-song licenses, digital music providers can pay royalties for interactive streams and downloads to a new nonprofit, called The Mechanical Licensing Collective, or “The MLC.” The MLC then distributes the royalties for the musical works back to copyright owners. The royalties The MLC collects are different from those that SoundExchange and performing rights organizations (PROs) like ASCAP, BMI, SESCAC, and GMR collect. If you are a self-published songwriter and want to collect all of your mechanical royalties for interactive streams and downloads, you must register with The MLC. If you have a publisher, they should do this for you—although it’s always a good idea to check your data in The MLC to make sure it matches your records.
What about Unmatched Royalties?
Before distributing mechanical royalties, The MLC needs to know who to pay. To do that, The MLC maintains a database containing information relating to musical works and sound recordings. The database includes, to the extent known, the identity and location of the copyright owners of these musical works and any sound recordings matched to the musical works, including any cover songs others might have recorded. Some of this data comes from digital music providers, who must report certain information to The MLC about the songs being used on their services. The MLC also has a way for copyright owners to claim ownership of their musical works and contribute to the database in the process.
Despite this robust database, The MLC sometimes receives royalties but is unable to identify or locate the right person or entity to pay. These royalties are called unmatched royalties. The MLC’s most important job is to identify and locate musical work copyright owners and match their musical works to sound recordings in The MLC’s database. Why?
The reasons are twofold: first, because royalties should be paid to the appropriate musical work copyright owner, but they cannot be paid until that owner is identified and located (and copyright owners deserve to be paid for the use of their works). And second, because The MLC cannot hold onto royalties for unmatched works forever. If the appropriate copyright owner never claims ownership of their works, The MMA requires The MLC to eventually distribute the unclaimed musical work royalties that it’s been holding to those copyright owners it has been able to identify in its database.
What are Historical Unmatched Royalties?
Prior to 2021, things were different. The former song-by-song licensing system often led to missing licenses and copyright infringement liability for digital music providers and missing royalties for copyright owners. Because of this, the MMA gave digital music providers a one-time option to avoid liability for past copyright infringement. To take advantage of it, the digital music providers had to (among other things) try to identify and locate copyright owners and, if found, pay them royalties they were due. If the digital music provider could not identify or locate those copyright owners, it was required to transfer all accrued royalties for unmatched uses of musical works that occurred prior to January 1, 2021, to The MLC. The MLC now tries to identify, locate, and pay the correct copyright owner. Those pre-2021 royalties are called “historical unmatched royalties.” In February 2021, The MLC announced that twenty digital music providers initially transferred over $424 million in historical unmatched royalties to The MLC, for them to try to match to copyright owners.
What Do You Need to Do?
The MLC is now working to identify the copyright owners of both historical unmatched royalties and monthly unmatched royalties under the blanket statutory mechanical license. To receive these royalties, songwriters and their music publishers need to sign up to become a member of The MLC. The service is free for songwriters, publishers, and other copyright owners, because The MLC’s budget is paid for by the digital music providers themselves.
If you’re a self-published songwriter or a music publisher, you need to act. The sooner you register with The MLC, the sooner you’ll start receiving mechanical royalties for the interactive streaming of your songs under the blanket statutory mechanical license. Registering your musical works with The MLC may allow you to be eligible receive a portion of any unclaimed royalties distributed by The MLC in the future as well. You can also sign up for MMA updates from the Copyright Office and visit TheMLC.com for more information.
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* Did You Know: The statutory license for the reproduction and distribution of nondramatic musical works is called a “mechanical” license, because it dates back to 1909, when music was played on mechanical instruments, like a player piano.