US to audit Amazon, Spotify, Apple in post-MMA push to collect music streaming royalties
The Mechanical Licensing Collective will conduct audits of music streaming activity and payments under blanket licence from 2021 to 2023 | Any underpayments discovered in audits of nearly 50 service providers will be distributed to rights holders.
Music streaming service providers including Amazon, Apple and Spotify are to be audited for the first time to ensure they have been paying royalties and accurately reporting their usage under a compulsory blanket license in force in the US from 2021.
Last week (January 17), The Mechanical Licensing Collective (The MLC), which administers the licence, said it had notified 49 digital service providers (DSPs) of its intent to conduct the audits.
The non-profit organisation will look at the service providers’ usage of music under the license between January 1, 2021 and December 31, 2023—the first three years of The MLC’s full operations.
MMA leads to blanket licence
The MLC was appointed in 2019 following the Music Modernization Act (MMA) to administer a blanket compulsory licence for the use of musical works by digital music services, and process royalties from streaming in the US at no cost to songwriters or music publishers.
The organisation is responsible for ensuring digital service providers report their usage and submit royalty payments accurately and uses several methods to do this, including examining monthly reports.
Auditing is another avenue for checking royalty payments are correct and represents “a key right granted by Congress” to The MLC under the MMA.
CEO of The MLC Kris Ahrend said: “Ensuring DSPs have reported royalties accurately is one of The MLC’s statutory responsibilities under the MMA.”
“The MLC has tapped music industry audit veteran, Jane Bushmaker, a member of The MLC’s analytics and automation team, to oversee DSP audits, which will be conducted by experienced outside audit firms,” he continued.
If an audit reveals an underpayment, The MLC stated it would distribute the full amount of any recovery to the impacted rights holders, without deducting any audit costs or fees. The cost of the audit is covered by The MLC’s operational budget.
Music service providers to be audited include Amazon, Apple, Beatport, Google ( YouTube), iHeart Radio, Soundcloud, Spotify and Tidal.
Alisa Coleman, chair of The MLC, said: “The MLC’s audit right is a first in the 115-year history of the US compulsory mechanical license and provides enhanced protection for songwriters and music publishers. The audit notices filed by The MLC mark the beginning of its fulfilment of this important function.”
In February 2021, streaming platforms handed over almost half a billion dollars in unmatched royalties (that had not yet been matched to the copyright owner) to The MLC, Music Week reported. This included a $152 million payout from Spotify.
The MLC said it would update its members on the results of the audits and identify any impact on royalties due.
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