As best we can tell from the outside looking in, this chart has the dates for key events in the critical path to launch for the Mechanical Licensing Collective as required by the Music Modernization Act.  We have called the chart the “Countdown to Modernity.”  Obviously, this chart is not intended as legal advice, and you should consult your own attorney about any of these dates or events.  Note:  After 1/9/19, this chart, updates and analysis will be available to premium subscribers of MusicTechPolicy.

Recall that the Register of Copyrights gets to pick the entity to operate as the Mechanical Licensing Collective. The Tennessean reported that the first fully-formed candidate to emerge is the American Music Licensing Collective or the “AMLC”.  (AMLC’s website is songrights.net.)  Within days, Digital Music News also reported that two AMLC board members have left the organization for reasons that their source says were “directly tied to threats”.  Digital Music News continues to report on these alleged “threats.”

The appearance of multiple candidates for the yet to be designated MLC raises another question–what about any existing black box?  MTP and ARW readers will recall that the MLC is allowed to invade the black box to cover certain administrative costs that exceed the “administrative assessment” to be paid by the blanket licensees:

INTERIM APPLICATION OF ACCRUED ROYALTIES.—In the event that the administrative assessment, together with any funding from voluntary contributions…is inadequate to cover current collective total costs, the collective, with approval of its board of directors, may apply unclaimed accrued royalties on an interim basis to defray such costs, subject to future reimbursement of such royalties from future collections of the assessment.

Digital Music News also focuses on this issue:

According to the MMA’s language, mechanical licenses [presumably meaning royalties] that remain unclaimed after just one year will be largely mopped up by major publishers according to marketshare, an arrangement that has drawn protest.  The value of the initial unclaimed tranche of funds has been estimated to be as high as $1.5 billion, at least according to a report by Variety.

We’re not big believers in this $1.5 billion number and it’s not exactly right that Variety reported that number–the Variety story has changed several times and is still a bit murky.   Due to a later update to the article concerned it’s a bit unclear exactly what Variety meant in the original unsourced reporting.  The original story as reported in Artist Rights Watch stated the industry-wide black box was $1.5 billion:

The DSPs are holding some $1.5 billion in unmatched mechanical royalties. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.

Variety subsequently changed that language in the story at least twice that we know of, but never actually retracted the $1.5 billion number as far as we can tell, although they may have depending on your point of view of what constitutes a “retraction”.  In any event, the story now reads:

The DSPs are holding millions in unmatched mechanical royalties — the sum of all Notice of Intent (NOI) filings currently parked at the U.S. Copyright office, while unknown, is climbing. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers.

Note–there’s still no source for either the “$1.5 billion” or the “millions” or for the “update”.  Remember that in the MMA Senate Judiciary Committee hearing, Senator Feinstein said that the black box could be hundreds of millions.

Remember that the “initial administrative assessment shall be effective as of the license availability date” which is 1/1/21.  It is not clear whether the initial administrative assessment will cover the MLC’s prospective costs, its startup costs, or both.  One fair interpretation of the MMA is that the initial assessment shall be prospective and shall not cover startup costs, although the parties can, of course, agree to pay more than they are obligated to incur by statute.  It is unclear if those additional costs would be passed down to all blanket licensees (who may object to paying more than the statute requires).  You would think that this important issue would be clearly stated in the statute, but it is not.

The following chart is a work in progress, and if anyone sees anything wrong in it or something that should be clarified or corrected, please let us know.  It should be considered a draft, but we hope that it will solidify over the next few weeks.  We expect activity to pick up once the MLC filing deadline arrives.

Due to the formation of the AMLC, there are now two candidates for the MLC, there may be more coming.  The COUNTDOWN TO MODERNITY chart needs to distinguish AMLC from the competing NMPA/NSAI MLC which does not have a name as far as we know.  Until the NMPA/NSAI collective adopts a name, we will refer to it as the NMPA/NSAI collective.

The main takeaway from this chart should be the clock is ticking and time is going by.  Our prediction?  Time will become the MLC’s biggest enemy, if there isn’t already a time bomb in the drafting of the Music Modernization Act.  What we don’t see in the MMA is any discussion of what happens if a deadline is blown for whatever reason.

But mark your calendars–we see the first key date as January 9, 2019 when the Copyright Office will request filings from MLC candidates, which so far include the AMLC and the collective to be formed by NMPA/NSAI.  That’s 38 days from now and holidays count.  The countdown to the License Availability Date: 761 days from now.

ARTIST RIGHTS WATCH
COUNTDOWN TO MECHANICAL LICENSING COLLECTIVE LAUNCH
WEEK 7

KEY DATES SCHEDULE FROM ENACTMENT DATE (10/11/18)

TO LICENSE AVAILABILITY DATE (1/1/21)

EVENT	ACCOMPLISH	WHO OWNS?	TIME EXPIRED   BEFORE LAD	TIME REMAINS TO LAD
REQUEST FILING TO BE MLC	STATUS UNKNOWN—Deadline  1/9/2019	COPYRIGHT OFFICE	90 DAYS AFTER ENACTMENT	723 DAYS FROM DEADLINE
DESIGNATION OF MLC	STATUS UNKNOWN—Deadline  7/8/2019	COPYRIGHT OFFICE	270 DAYS AFTER ENACTMENT	543 DAYS FROM DEADLINE
FORMATION OF MLC NONPROFIT	AMLC nonprofit formed NMPA/NSAI STATUS UNKNOWN	MLC	STATUS UNKNOWN	543 DAYS FROM LAD
SUBSTITUTION OF BLANKET LICENSE FOR ALL VALID EXISTING COMPULSORY LICENSES	AUTOMATIC 10/11/2018	COPYRIGHT OFFICE		761 days
MLC BUDGET	STATUS UNKNOWN (Assume deadline of 1/9/19)	MLC/DLC/CRJ	45 days	770 days
INITIATE ASSESSMENT PROCEEDING w/CRJs	[MUST COMMENCE NO LATER THAN 7/8/2019] STATUS UNKNOWN	MLC/DLC/CRJ	219 days	545 days
ASSESSMENT RULING	[PUBLISHED IN FR NO LATER THAN 7/8/2020]	MLC/DLC/ CRJs	585 days	179 days
APPEAL OF ASSESSMENT RULING	30 DAYS AFTER PUBLICATION OF ASSESSMENT RULING	MLC/DLC/ CRJ/ DCCOA	616 days	149 days
MLC BUSINESS PLAN	STATUS UNKNOWN (Assume deadline of 1/9/19)	MLC/CO	39 DAYS	723 days
ANNOUNCED BOARD NOMINEES	AMLC board announced (see DMN and above) NMPA/NSAI called for nominations. The deadline for NMPA nominations passed on November 15  see NMPA.  NSAI are accepting nominations for songwriter board member seats with a December 15 deadline.  (these are nonstatutory deadlines) Songwriter board selection by Steve Bogard (NSAI), Rick Carnes (SGA), Lynn Gillespie Chater (SGA), Dallas Davidson (BMI), Chris DeStefano (NSAI), Bob DiPiero (BMI), Dan Foliart (ASCAP), Adam Gorgoni (SONA), Michele Lewis (SONA), Paul Williams (ASCAP) (Assume final deadline of 1/8/19)	MLC	39 DAYS	723 days
APPOINTED BOARD	AMLC Board Announced (DMN reports Howard and Mestel depart): John Barker (founder, president & CEO of ClearBox Rights, LLC). Brownlee Ferguson (founder, Bluewater Music). George Howard (co-founder of both Music Audience Exchange and TuneCore and CIO of Riptide Publishing). Lisa Klein Moberly (founder and president of Optic Noise). Benji Rogers (singer-songwriter, founder of PledgeMusic and co-founder of dotBlockchain Media) Jeff Price (founder of Audiam and co-founder of TuneCore) Henry Gradstein (music industry attorney at Gradstein & Marzano, P.C.) Larry Mestel (founder, Primary Wave) Ricardo Ordoñez (founder and president of Union Music Group) NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/9/19)	MLC/CO	39 DAYS	723 days
APPOINTED DLC	STATUS UNKNOWN—Deadline  7/8/2019	COPYRIGHT OFFICE	270 days AFTER ENACTMENT	545 days
ENGAGED  MLC VENDORS	AMLC:  Clearbox Rights, Audiam (others?) NMPA/NSAI: STATUS UNKNOWN (Assume deadline of 1/9/19)	MLC	39 DAYS	723 days
PAID MLC VENDORS	AMLC: See board members above NMPA/NSAI: STATUS UNKNOWN (ASSUME 7/8/2020 IF NO APPEAL OF ASSESSMENT)	MLC	270 days	545 days
ANNOUNCE MLC DATA STANDARDS	STATUS UNKNOWN	MLC/DLC
REGULATIONS*	STATUS UNKNOWN	COPYRIGHT OFFICE
COMMENTS AND REPLY COMMENTS ON REGULATIONS	STATUS UNKNOWN	ALL
EXPLANATION OF OPERATIONS: HOW TO REGISTER WITH MLC AND COST OF REGISTRATION	STATUS UNKNOWN (Assume deadline of 1/9/19)	MLC/CO	39 DAYS	726 days
REGISTRATION START DATE	STATUS UNKNOWN

 

MLC=Mechanical Licensing Collective

DLC=Digital Licensee Coordinator

CRJ=Copyright Royalty Judges

DCCOA=District of Columbia Circuit Court of Appeals

CO=Copyright Office

LAD=License Availability Date

*Topic areas to be updated as announced