Transition to The MLC: Timing & Cadence of Royalty Payments
One of the many things that will change as a result of the transition to The MLC is the timing of royalty distributions to rightsholders, and the U.S. Copyright Office has promulgated regulations that prescribe the frequency with which DSPs will be required to account to The MLC, the time DSPs will have to send their monthly usage reports and mechanical royalty payments to The MLC, and the frequency with which The MLC must account to its Members. See C.F.R. §§ 207.27 and 209.29(b).
Prior to January 1, 2021, DSPs operating under a compulsory license were required by law to account to rightsholders on a monthly basis, within 20 days after the end of each month. Starting on January 1, 2021, DSPs operating under the new blanket license will have 45 days after the end of each month to send their usage reports and royalty payments to The MLC. The MLC will then take 30 days to perform its matching functions and calculate the royalties due to each of its Members. That means that The MLC will send out royalty payments and statements to Members roughly 75 days after the end of each monthly period. Because the total duration of the new distribution process will be longer than the old process, there will be a two month gap at the beginning of 2021 between the time rightsholders receive their last monthly statements and payments from DSPs under the old process and the time when they receive their first monthly statements and payments from The MLC under the new process.
Prior to January 1, 2021, many DSPs operated under voluntary licenses that they negotiated directly with rightsholders. The terms of these voluntary licenses inevitably varied from DSP to DSP and from rightsholder to rightsholder. While DSPs have the right to maintain those voluntary licenses after the blanket license becomes available, some have announced their intent to terminate those voluntary licenses and instead operate under the new blanket license.
If those voluntary licenses provided for monthly accounting, there could be a payment gap under those voluntary licenses at the beginning of 2021 similar to the one described above for compulsory licenses. If, however, those voluntary licenses provided for quarterly accounting, it is likely that no such gap will occur, and because The MLC will be accounting to its Members on a monthly basis, Members will now receive statements and royalty payments more frequently than they did under those terminated voluntary licenses that provided for quarterly accounting.
Key Dates in The MLC’s Monthly Distribution Cycle
As explained above, eligible DSPs can begin operating under the new blanket license that The MLC will be administering as early as January 1, 2021, which is referred to in the Music Modernization Act as the “License Availability Date”. Those DSPs that elect to operate under the blanket license will be required to send mechanical royalty payments and usage reports for their services on a monthly basis. For DSPs that begin operating under the blanket license in January, their payments and usage reports for the month ending January 31, 2021 will be due to The MLC no later than 45 days after the end of January, though DSPs have the option of sending their payments and usage reports within 15 days after the end of the month if they would like The MLC to send them an invoice showing the amount in royalties they owe.
The MLC also account to our Members on a monthly basis, approximately 75 days after the end of each monthly period. So, for those DSPs that send The MLC usage reports and payments for January 2021, that means The MLC will be sending out royalty statements and payments to our Members in mid to late April 2021.
Here are some key dates during The MLC’s distribution cycle that our Members may find helpful to know. The example below shows these key dates for the distribution cycle that will cover the activity reported to us by DSPs for the January 2021 reporting period.
We recognize that as we begin distributing royalties there may be instances where a Member discovers situations where monies payable on a work they control were not being paid properly, and may have been paid to another Member. Where that occurs, we encourage Members to notify The MLC as soon as possible and to provide copies of any documentation that substantiates the Member’s claim. Once The MLC has confirmed the validity of the claim, we will debit the improperly paid amount from the other Member’s account and then credit that amount to the account of the Member making the claim.
The MLC will issue royalty payments and statements approximately 75 days following the end of each calendar month. When statements are made available, Members will receive a notification directing them to the Royalties section of The MLC Portal where they can access their statements. Royalty statements will be made available in the following two layout formats:
The MLC Royalty Detail Statement Layout: Provides royalty data corresponding with the individual sound recordings contained in DSP usage reports. Click here to view Royalty Detail Layout.
The MLC Work Summary Statement Layout: Provides royalty data summarized at the musical work level. Click here to view Work Summary Layout.
Statements will be provided in the Tab Separated Value (.tsv) file format which is compatible with most commonly available spreadsheet software.
Historical Unmatched Royalties
On February 16, 2021, The MLC announced that 20 DSPs had transferred a total of $424,384,786 in accrued historical unmatched royalties. Read The MLC’s press release on these transfers here. For more information on the Historical Unmatched Royalties click here.