Perhaps passing the Music Modernization Act (MMA) was the easy part.
It was a momentous success for a previously fragmented music industry.
The Music Modernization Act, signed into law by President Trump last October, marked a whole new level of collaboration between music publishers, streaming platforms, the radio industry and the broader tech community.
Champagne bottles were uncorked as we gazed at the vast blue sky ahead.
But now that the law has been passed, a whole new chapter in the power struggles has begun. This includes a heated row between publishers and Spotify, Google, Amazon and Pandora over mechanical royalties. And when it comes to the critical functions of MMA itself, there’s a big fight brewing as well.
The focus of the latter debate is the still founded “Mechanical Licensing Collective” (MLC).
The MLC, outlined in MMA language, will be tasked with tracking, collecting and disbursing billions in mechanical royalties from platforms like Spotify and Apple Music.
But who gets the presidency of the MLC?
On this edition of the Digital Music News Podcast, we speak to a board member of one of two candidates, the American Mechanical Licensing Collective (AMLC). Ricardo Ordoñez, leader of Miami-based Union Music Group, is a board member of AMLC and an outspoken critic of major publishers such as Sony/ATV Music Publishing and Universal Music Publishing Group (UMPG).
These mega-publishers also have their own MLC contender. Perhaps presumptuously, the larger group simply called themselves “MLC” and declared themselves the winners of this competition in the “industry consensus”. But Ordoñez thinks that’s unfair, claiming that AMLC actually represents a broader consensus among indie publishers and songwriters, a group that would lose billions in royalties if major publishers ran the show.
How many billions?
Ordoñez says streaming services are withholding at least $1.2 billion in unmatched royalties. But that’s only for royalties through 2017 — and 2018 was the most successful year yet for streaming services.
“It’s about $1.2 billion,” Ordoñez shared. “It’s the so-called ‘black box’ of outstanding royalties because these titles, these songs are not identified.”
So what is the easiest way to double and cash out those royalties? According to Ordoñez, there’s a major conflict of interest here, with the biggest companies already receiving direct payments from mega-streamers like Spotify.
They have their own offerings and hardly ever need the MLC.
“All the big companies, all the big publishers already have a direct collection license on Spotify,” Ordoñez noted. “They already collect the copyrights they own directly from Spotify.”
“So why do the big publishers want to raise that $1.2 billion in unmatched funding when they’ve already been paid for?”
I asked how the two candidates should be evaluated.
But as of this writing, it’s not even clear if the US Copyright Office will conduct a bidding process. In fact, the deeper we delve into this whole process, the more chaotic and unclear it seems to us.
Not exactly what the industry had in mind when MMA first came into force.