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What is the Mechanical Licensing Collective, and what does it do?

Musical insiders will likely deem last Thursday a seminal moment for the music royalty industry. A statement issued in concert by two principals on November 14 referred to a contractual outcome concerning a top-tier concern as “a landmark achievement for every facet of the music industry.”

The focal point of what is now stirring strong interest and excitement in the vast music industry is on music revenue management, specifically the agreed-upon system for distributing royalties.

That has been a material problem in the past, especially following the industry entrance of huge business players in the so-called streaming realm (think Apple Music and Spotify). Streaming now reportedly accounts for more than 60% of all music revenue, and intellectual property owners of songs have understandably been closely concerned with fairness when it comes to royalty payments for use of their music.

The streaming entities have been heavily criticized for royalty payment shortcomings that a recent media report states have “created a trail of unpaid musicians and lawsuits that left all parties seeking a legislative solution.”

That solution arrived under the umbrella of the 2018 federal Music Modernization Act, which mandated the creation of a music licensing collective to act as intermediary between the streaming firms and musicians. It has been standard practice for streamers to seek permission from rightsholders and pay them individually, a process that has led to sloppiness, inconsistent payments and legions of complaints alleging unfairness. The Mechanical Licensing Collective now in force will take over payment duties, collecting royalties directly from the streamers and distributing them to copyright holders.

There is widespread hope that the new royalty model will spell a marked upgrade in accountability and fairness. The MCL is slated to become active in 2021.

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