Notice2026-11117
Periodic Review of the Designations of the Mechanical Licensing Collective and Digital Licensee Coordinator
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 3, 2026
Effective
June 3, 2026
Issuing agencies
Library of CongressCopyright Office, Library of Congress
Abstract
The U.S. Copyright Office, as required by the Music Modernization Act, has completed its first periodic review of the existing designations of the mechanical licensing collective and digital licensee coordinator and has determined that both designations should be continued.
Full Text
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<title>Federal Register, Volume 91 Issue 106 (Wednesday, June 3, 2026)</title>
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[Federal Register Volume 91, Number 106 (Wednesday, June 3, 2026)]
[Notices]
[Pages 33208-33235]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-11117]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. 2024-1]
Periodic Review of the Designations of the Mechanical Licensing
Collective and Digital Licensee Coordinator
AGENCY: U.S. Copyright Office, Library of Congress.
[[Page 33209]]
ACTION: Notice of continuing designation.
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SUMMARY: The U.S. Copyright Office, as required by the Music
Modernization Act, has completed its first periodic review of the
existing designations of the mechanical licensing collective and
digital licensee coordinator and has determined that both designations
should be continued.
DATES: Effective June 3, 2026.
FOR FURTHER INFORMATION CONTACT: Rhea Efthimiadis, Assistant to the
General Counsel, by email at <a href="/cdn-cgi/l/email-protection#8dd8decec2cae8e3e8ffece1cee2f8e3fee8e1cdeee2fdf4ffe4eae5f9a3eae2fb"><span class="__cf_email__" data-cfemail="b9eceafaf6fedcd7dccbd8d5fad6ccd7cadcd5f9dad6c9c0cbd0ded1cd97ded6cf">[email protected]</span></a> or
telephone at (202) 707-8350.
SUPPLEMENTARY INFORMATION:
I. Introduction
Prior to the passage of the Orrin G. Hatch-Bob Goodlatte Music
Modernization Act (``MMA'') in 2018, there was ``a widespread
perception that our [music] licensing system [was] broken,'' \1\
especially as ``music copyright and licensing laws [were] too difficult
to comply with and d[id] not adequately reward the artists and
professionals responsible for creating American music.'' \2\ The
cornerstone of the MMA's reforms was the creation of the new section
115 statutory blanket license. To administer this license, the MMA
provided for the establishment of a ``mechanical licensing
collective,'' a new entity that could centralize the collection and
distribution of blanket license royalties and establish and maintain a
publicly accessible database of musical works, their owners, and the
sound recordings in which the musical works are embodied.\3\
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\1\ U.S. Copyright Office, Copyright and the Music Marketplace 1
(2015), <a href="https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf">https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf</a>.
\2\ Report and Section-by-Section Analysis of H.R. 1551 by the
Chairmen and Ranking Members of Senate and House Judiciary
Committees, at 1 (2018) (``Conf. Rep.''), <a href="https://www.copyright.gov/legislation/mma_conference_report.pdf">https://www.copyright.gov/legislation/mma_conference_report.pdf</a>.
\3\ A ``musical work'' is ``a song's underlying composition
along with any accompanying lyrics'' and a ``sound recording'' is
``a series of musical, spoken, or other sounds fixed in a recording
medium, such as a CD or digital file, called a `phonorecord.''' What
Musicians Should Know about Copyright, U.S. Copyright Office,
<a href="https://www.copyright.gov/engage/musicians/">https://www.copyright.gov/engage/musicians/</a> (last visited May 26,
2026); 17 U.S.C. 101.
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The MMA directs the Register of Copyrights (``Register'') to
designate an entity as the ``mechanical licensing collective''; it also
allows, but does not require, the Register to designate a ``digital
licensee coordinator'' to coordinate the activities of digital music
providers (``DMPs'').\4\ The Register is required to revisit these
designations every five years. In July 2019, the Register made her
initial designations; designating the entity ``Mechanical Licensing
Collective'' (``MLC'') as the statutory mechanical licensing collective
and the entity ``Digital Licensee Coordinator, Inc.'' (``DLC'') as the
statutory digital licensee coordinator.\5\
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\4\ 17 U.S.C. 115(d)(5)(B); see also id. at 115(d)(3)(D)(i)(IV),
(d)(5)(C). Under the MMA, DMPs bear the reasonable costs of
establishing and operating the collective through an
``administrative assessment,'' determined by the Copyright Royalty
Judges (``CRJs''). See id. at 115(d)(7).
\5\ 84 FR 32274, 32292, 32296 (July 8, 2019) (``Initial
Designation''); see also 37 CFR 210.23 (discussing the designation
of the MLC and DLC). In this notice, the currently designated
digital licensing coordinator will be designated as the ``Digital
Licensing Coordinator'' or ``DLC'' and the statutory digital
licensing coordinator will be designated in lowercase. Similarly,
the currently designated mechanical licensing collective will be
designated as the ``Mechanical Licensing Collective'' or ``MLC'' and
the statutory mechanical licensing collective will be designated in
lowercase.
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Despite general optimism that the MMA's reforms would improve the
section 115 license, some made the point that ``once the bill is signed
the real hard work begins,'' especially as ``build[ing] an industry-
wide, comprehensive public database that will match compositions to
recordings [would be] an ambitious undertaking that has yet to be
successfully completed in past industry attempts.'' \6\ From its
initial designation until it began operations, the MLC had the
formidable task of ensuring that it had all administrative and
technological capabilities in place to open for business on the
statutory ``license availability date'' of January 1, 2021. This
included establishing a governance structure, including bylaws, Board
membership, committee membership, policies, procedures, practices, and
guidelines, and building out technological services, including
establishing a musical works database, claiming portal, and payment and
other financial processes. It also had to hire staff, construct
physical space, engage in outreach and education, and invest in
vendors, to fulfill its statutory duties.\7\ The MLC completed all
these tasks and made its first royalty distribution, on time, in April
2021.
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\6\ Ed Christman, President Trump Signs Music Modernization Act
Into Law With Kid Rock, Sam Moore As Witnesses, Billboard (Oct. 11,
2018), <a href="https://www.billboard.com/pro/president-trump-signs-music-modernization-act-law-bill-signing/">https://www.billboard.com/pro/president-trump-signs-music-modernization-act-law-bill-signing/</a>.
\7\ 17 U.S.C. 115(d)(3(C).
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In January 2024, the Copyright Office initiated the first five-year
review of the MLC's and DLC's designations. The Office issued a
Notification of Inquiry (``NOI'') seeking public comment on whether the
existing designations should be continued, subject to certain statutory
criteria.\8\ The goal is to evaluate the efforts the MLC and DLC have
made to realize Congress's vision of improved efficiency, transparency,
and fair administration of the section 115 statutory blanket license.
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\8\ 89 FR 5940 (Jan. 30, 2024) (``NOI'').
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As discussed in detail below, the Register has determined that the
current designations for the entities operating as the digital licensee
coordinator and mechanical licensing collective should be continued.
Overall, the administration of the MMA's blanket mechanical license has
been a great success for publishers, songwriters, and DMPs. The MLC has
compiled ownership data for more than 53 million works, increased its
membership to over 80,000 copyright owners,\9\ and improved the ratio
of total royalties matched to royalties reported to approximately
92%.\10\ It has also implemented many of the Office's recommendations
of best practices to effectively identify and locate copyright owners
with unclaimed royalties of musical works, encourage copyright owners
to claim accrued royalties, and ultimately reduce the incidence of
unclaimed royalties.\11\ One of the MLC's most important success
metrics is its distribution of approximately $3.9 billion in royalties,
constituting a reliable and significant income source for songwriters
and publishers.
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\9\ The MLC Quarter Note: Q1 2026, MLC, <a href="https://emails.themlc.com/the-mlc-quarter-note-q1-2026">https://emails.themlc.com/the-mlc-quarter-note-q1-2026</a> (last visited May 26,
2026).
\10\ Blanket Royalties, MLC, <a href="https://www.themlc.com/blanket-royalties">https://www.themlc.com/blanket-royalties</a> (last visited May 26, 2026).
\11\ See U.S. Copyright Office, Unclaimed Royalties: Best
Practice Recommendations for the Mechanical Licensing Collective
(2021) (``Unclaimed Royalties Report''), <a href="https://www.copyright.gov/policy/unclaimed-royalties/unclaimed-royalties-final-report.pdf">https://www.copyright.gov/policy/unclaimed-royalties/unclaimed-royalties-final-report.pdf</a>.
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While most commenters expressed satisfaction with the MLC and DLC,
some suggested ways that the designees could improve their respective
services. In some cases, these comments reflected non-pervasive or
nascent areas of concern. In others, they offered immediate
opportunities for improvement. The Office appreciates the opportunity
to work with both designees to appropriately address the suggestions
and concerns. While the MLC and DLC have executed their statutory
duties well over the first five-year period, this redesignation process
provides an important opportunity for a comprehensive review. The
Office has considered commenters' concerns and suggested several areas
of improvement to ensure the continuance of the designees' successes
and assist them as they build upon them.
[[Page 33210]]
Finally, some commenters objected to certain provisions of the MMA
itself or its implementing regulations. Generally, those topics are
outside this proceeding's scope and will not be addressed here. While
the Office has adopted numerous regulations to implement the MMA, we
retain regulatory authority to administer many of its provisions and
will consider any potential regulatory changes separately from this
proceeding.
II. Statutory and Regulatory Background
A. Statutory Background
Title I of the MMA \12\ created a statutory blanket mechanical
license for the reproduction and distribution of nondramatic musical
works by DMPs in the form of digital phonorecord deliveries, including
permanent downloads, limited downloads, and interactive streams
(referred to in the statute as ``covered activity'' where such activity
qualifies for the blanket license), and eliminated the song-by-song
``notice of intention'' process for such uses.
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\12\ Public Law 115-264, 132 Stat. 3676 (2018).
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The MLC and DLC play important roles in the administration of this
license. To evaluate whether either's designation should be continued,
the Office considered each entity's separate statutory designation
criteria, authority, and functions.
1. The MLC's Designation Criteria, Authorities, and Functions
The entity designated as the MLC must be: (i) a single nonprofit
entity that is created by copyright owners to carry out its statutory
responsibilities that is (ii) ``endorsed by, and enjoys substantial
support from, musical work copyright owners that together represent the
greatest percentage of the licensor market for uses of such works in
covered activities, as measured over the preceding 3 full calendar
years,'' \13\ (iii) able to demonstrate to the Copyright Office that it
has the administrative and technological capabilities to perform the
required functions, and governed by a board of directors (``Board'')
which includes a mix of voting and nonvoting members as directed by the
statute.\14\
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\13\ 17 U.S.C. 115(d)(3)(A)(ii).
\14\ Id. at 115(d)(3)(A), (d)(3)(D)(i).
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The MMA enumerates several required functions for the MLC.\15\
Among other duties, its core functions include administering the
blanket statutory mechanical license, identifying musical works and
copyright owners, matching those works to sound recordings (and
addressing disputes), and ensuring that copyright owners are paid
correctly. To that end, the MMA requires the MLC to maintain a free,
public database of musical work and sound recording ownership
information and administer processes by which copyright owners can
claim ownership of musical works (and shares of such works).\16\ The
MLC also participates in proceedings before the Copyright Royalty
Judges (``CRJs'') to establish the administrative assessment that funds
its activities and in proceedings before the Copyright Office with
respect to activities related to the statutory license.\17\
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\15\ Id. at 115(d)(3)(C)(i), (iii) (enumerating thirteen
functions, in addition to permission to administer voluntary
licenses).
\16\ Id. at 115(d)(3)(E).
\17\ Id. at 115(d)(3)(C)(i)(IX)-(X).
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By statute, the MLC's Board consists of fourteen voting members and
three nonvoting members. Ten voting members must be representatives of
music publishers that have been assigned exclusive rights of
reproduction and distribution of musical works with respect to covered
activities, and four others must be professional songwriters who have
retained and exercise exclusive rights of reproduction and distribution
for musical works they have authored. There are also three nonvoting
members that represent the interests of songwriters, music publishers,
and digital licensees via representatives of relevant trade
associations or, in the case of licensees, the DLC.\18\
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\18\ Id. at 115(d)(3)(D)(i).
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In addition, the Board must maintain three committees: an
Operations Advisory Committee, an Unclaimed Royalties Oversight
Committee, and a Dispute Resolution Committee. The Operations Advisory
Committee makes recommendations concerning the operations of the
collective, ``including the efficient investment in and deployment of
information technology and data resources.'' \19\ The Unclaimed
Royalties Oversight Committee establishes policies and procedures
necessary to undertake a fair distribution of unclaimed royalties.\20\
The Dispute Resolution Committee establishes policies and procedures to
address disputes relating to ownership interests in musical works,
including a mechanism to hold disputed funds pending the resolution of
the dispute.\21\
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\19\ Id. at 115(d)(3)(D)(iv). By statute, this committee has an
equal number of musical work copyright owners and DMP
representatives, respectively appointed by the MLC and DLC.
\20\ Id. at 115(d)(3)(D)(v), (d)(3)(J)(ii). By statute, this
committee of ten has an equal number of musical work copyright
owners and professional songwriters.
\21\ Id. at 115(d)(3)(D)(vi), (d)(3)(H)(ii), (d)(3)(K). By
statute, this committee consists of at least six members, again
equally divided among musical work copyright owners and professional
songwriters.
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2. The DLC's Designation Criteria, Authorities, and Functions
The DLC must be a single nonprofit entity created to carry out
certain statutory responsibilities, endorsed by DMPs and significant
nonblanket licensees (or ``SNBLs'') that together represent the
greatest percentage of the licensee market for uses of musical works in
covered activities (as measured over the preceding three years), and
possess the administrative capabilities to carry out its functions.\22\
Those statutory functions include: establishing a governance structure,
criteria for membership, and membership dues; enforcing notice and
payment obligations for the administrative assessment; participating in
certain proceedings before the Copyright Office or CRJs; and assisting
in publicizing the MLC's existence and the ability of copyright owners
to claim royalties with the MLC.\23\
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\22\ Id. at 115(d)(5)(A)(i)-(iii).
\23\ Id. at 115(d)(5)(C)(i).
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B. Regulatory Background
1. Initial Designation
In 2018, the Office published a notice in the Federal Register
soliciting proposals from parties who wished to be designated as the
mechanical licensing collective and digital licensee coordinator, and
requesting information pertaining to the criterion set forth above.\24\
The Office also requested public comments on the parties' proposals.
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\24\ 83 FR 65747 (Dec. 21, 2018).
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The Office received one proposal for designation as the digital
licensee coordinator and two proposals for designation as the
mechanical licensing collective. After reviewing the proposals along
with the statutory designation criteria, considering over 600 public
comments, and hosting ex parte meetings with interested parties,\25\ we
concluded that the entity ``Digital Licensee Coordinator, Inc.,''
incorporated in Delaware on March 20, 2019, ``me[t] each of the
statutory criteria required of the digital licensee coordinator,'' and
would be designated
[[Page 33211]]
as the DLC.\26\ With respect to the mechanical licensing collective, we
concluded that, while both candidates ``[met] the statutory criteria,''
the MLC ``made a better showing as to its prospective administrative
and technological capabilities'' and was the only candidate that met
the statute's ``endorsement'' criterion.\27\ Therefore, the Register
designated the entity ``Mechanical Licensing Collective, Inc.,''
incorporated in Delaware on March 5, 2019, as the mechanical licensing
collective.\28\
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\25\ Ex Parte Communications, U.S. Copyright Office, <a href="https://www.copyright.gov/rulemaking/mma-designations/ex-parte-communications.html">https://www.copyright.gov/rulemaking/mma-designations/ex-parte-communications.html</a> (last visited May 26, 2026) (hosting ex parte
meeting summary letters related to the Office's initial
designations).
\26\ Initial Designation at 32292, 32296; 37 CFR 210.23.
\27\ Initial Designation at 32276, 32296.
\28\ 37 CFR 210.23; Initial Designation at 32296.
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2. First Periodic Review
On January 30, 2024, the Office issued an NOI regarding the
periodic review of the designations.\29\ The currently designated
mechanical licensing collective and digital licensee coordinator
provided information regarding their past performance and capabilities,
as well as future plans, in support of their requests that their
current designations should be continued. The public was invited to
comment on these submissions and the Office received over 60 comments.
We also provided the currently designated entities an opportunity to
submit replies in response to the comments, and held ex parte meetings
with the MLC, DLC, and members of the public to address issues that had
been raised.\30\
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\29\ NOI.
\30\ All activity, including public submissions and comments,
can be accessed via navigation from <a href="https://www.copyright.gov/rulemaking/mma-designations/2024/">https://www.copyright.gov/rulemaking/mma-designations/2024/</a>. Records of ex parte
communications, including those referenced herein, along with
guidelines for such communications, are available at <a href="https://www.copyright.gov/rulemaking/mma-designations/2024/ex-parte-communications.html">https://www.copyright.gov/rulemaking/mma-designations/2024/ex-parte-communications.html</a>. References to the public comments are by party
name (abbreviated where appropriate), followed by ``Submission,''
``Reply Submission,'' ``Initial Comments,'' ``Reply Comments,'' or
``Ex Parte Letter,'' as appropriate.
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The NOI also explained that once the Office evaluated the record in
this proceeding, the Register would ``determine whether the current MLC
and DLC designations should be continued,'' and if she concluded that
either designation should be continued, she would publish that
determination in the Federal Register.\31\
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\31\ NOI at 5942. The NOI noted that if either designation would
not be continued, the Office explained that it intended to solicit
proposals for a new MLC or DLC designation in the Federal Register.
Id. As both designations are being continued, soliciting proposals
for new designees is unnecessary.
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III. Evaluation of the Mechanical Licensing Collective
The MMA tasked the mechanical licensing collective with significant
responsibility in administering a complex and novel licensing system.
In the seven years since its designation, the MLC has worked diligently
to develop one of the largest databases of musical work ownership in
the world, improve matching rates and quality, and educate the music
community regarding the MMA. In response to the NOI, most commenters
endorsed the MLC's continued designation, though some offered critiques
or made suggestions for improvement in particular areas. While the
Office has considered and addressed these comments in the sections
below, they do not affect our conclusion that the MLC has been a
success. We find that it has met the statutory qualifications and
possesses the administrative and technological capabilities to perform
the required functions to continue its designation as the mechanical
licensing collective.
A. Nonprofit Status
The MLC provided a ``Statement of Good Standing'' from the Delaware
Division of Corporations to demonstrate that it is a ``a single entity
that is a nonprofit entity, not owned by any other entity, that is
created by copyright owners to carry out responsibilities'' under the
MMA.\32\ No comments raised any issue about the MLC's nonprofit status.
Accordingly, the MLC has satisfied the first statutory criterion for
designation.
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\32\ 17 U.S.C. 115(d)(3)(A)(i); see MLC Initial Submission Ex.
1, at 1.
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B. Indicia of Endorsement and Support
As proof that it satisfies the second criterion for designation,
the MLC collected 1,129 endorsements from its current members, and
provided compiled market share data for covered activities over the
past 3 years for those endorsers.\33\ The MLC confirmed that the
endorsing members represent a clear majority of the market over the
past three years, as measured by their licensing revenue from covered
activities during this period.\34\ The MLC also provided Music &
Copyright's annual survey showing that endorsing members Sony Music
Entertainment, Universal Music Publishing Group, and Warner Chappell
Music together had an average combined global market share of 69.2% for
2024.\35\ The MLC noted that copyright owners have shown their
substantial support over the past three years through their willingness
to contribute their time and expertise as unpaid representatives on the
MLC's Board and various committees, and their involvement in campaigns
to build industry partnerships and improve the MLC's tools and
resources.\36\ No submitted comments contested the MLC's satisfaction
of the endorsement criterion.
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\33\ MLC Initial Submission at 7 and Ex. 2, at 1-28.
\34\ Id.
\35\ MLC Ex Parte Letter at 7-8 (July 21, 2025) (citing Market
share results reveal the 2024 recorded-music and music publishing
winners and losers, Music & Copyright (Apr. 23, 2025), <a href="https://musicandcopyright.wordpress.com/category/market-share-2/">https://musicandcopyright.wordpress.com/category/market-share-2/</a>).
\36\ MLC Initial Submission at 8.
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As the MLC has established that it is ``endorsed by, and enjoys
substantial support from, musical work copyright owners that together
represent the greatest percentage of the licensor market for uses of
such works in covered activities, as measured over the preceding 3 full
calendar years,'' \37\ it satisfies the second statutory criterion for
designation.
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\37\ 17 U.S.C. 115(d)(3)(A)(ii).
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C. Administrative and Technological Capabilities
The third criterion for designation involves evaluating the MLC's
administrative and technological capabilities to perform its statutory
functions, including its governance structure. The Office's NOI
requested a detailed description of the MLC's administrative and
technological capabilities as well as other aspects of its operations.
We also requested an update on the MLC's efforts to implement
recommendations contained in the Office's Unclaimed Royalties Report,
including which ones have been implemented to date, what efforts are in
progress, any plans to implement recommendations in the future, and any
recommendations it is not planning to implement.\38\
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\38\ NOI at 5942.
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1. Musical Works Database, Registering Works and Shares, and the
Claiming Portal
The statute requires the MLC to create and maintain a free online
database to publicly disclose information about musical works, their
owners, and the sound recordings in which they are embodied.\39\ The
database must include the following musical work information: the MLC's
standard identifier; the work's title and any alternative or
parenthetical titles; the international
[[Page 33212]]
standard musical work code (``ISWC''); the name(s) of the copyright
owner(s) and songwriter(s); International Standard Name Identifiers
(``ISNIs'') and Interested Parties Information (``IPIs'') for each
musical work copyright owner, and, if different, songwriter, and
administrator.\40\ The database must also include the following sound
recording information: the recording title; the international standard
recording code (``ISRC''); and any unique identifier(s) assigned by a
blanket licensee.\41\
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\39\ 17 U.S.C. 115(d)(3)(E), (e)(20).
\40\ Id. at 115(d)(3)(E)(ii)-(iii); 37 CFR 210.31(b)(1), (c)(1).
\41\ 17 U.S.C. 115(d)(3)(E)(ii)-(iii); 37 CFR 210.31(b)(2),
(c)(2).
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The statute also requires the MLC to create and maintain an
``online facility'' (what the MLC and stakeholders refer to as its
``claiming portal'') listing ``unmatched musical works (and shares of
works), through which a copyright owner may assert an ownership claim
with respect to such a work (and a share of such a work).'' \42\
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\42\ 17 U.S.C. 115(d)(3)(J)(iii)(I) (requiring the MLC to
``maintain a publicly accessible online facility with contact
information for the collective that lists unmatched musical works
(and shares of works), through which a copyright owner may assert an
ownership claim with respect to such a work (and a share of such a
work)'').
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The Office's NOI requested information about how the MLC is
fulfilling its statutory and regulatory requirements with respect to
its maintenance of the musical works database. We also requested an
update on the MLC's efforts to implement recommendations related to the
database's usability contained in the Unclaimed Royalties Report.\43\
These recommendations included establishing ``flexible and robust
searching, sorting, and filtering features,'' \44\ efficient song
registration processes that include bulk mechanisms,\45\ portal access
to represented songwriters,\46\ and quality assurance mechanisms to
review, verify, and quality-check data reported to the database.\47\
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\43\ NOI at 5942.
\44\ Unclaimed Royalties Report at 42.
\45\ Id. at 48.
\46\ Id. at 52-54.
\47\ Id. at 60-62.
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The MLC confirmed that it continues to satisfy the statutory
requirements, asserting that it ``maintains one of the largest
databases of musical work ownership information in the world, with data
for more than 35.5 million musical works.'' \48\ According to the MLC,
the database features identifying information for each registered
musical work including the work's title, the owner(s) of the work, the
percentage ownership shares claimed by each owner, owner contact
information, the MLC's standard identifier, or song code, assigned to
each work, the musical work's ISWC (if provided by rightsholders), and
``information for any associated sound recording uses The MLC has
matched to the work.'' \49\ The MLC also stated that it has built
``novel'' tools and features for users to ``(1) enhance their
individual user experience (e.g., structured search fields and filters)
and (2) support the needs of high-volume and power-user Members (e.g.,
on-demand bulk data export and submission tools).'' \50\
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\48\ MLC Initial Submission at 12.
\49\ Id.
\50\ Id.
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Some commenters praised the database as ``a definitive source
[that] allows . . . members (publishers, songwriters and
administrators) to easily and efficiently manage their works.'' \51\
For example, one called the database ``one of the most complete
repositories of musical work metadata that is available to the
public.'' \52\ Others offered specific critiques regarding the
database's tools and resources, songwriter access, and data
quality.\53\
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\51\ Big Machine Music Initial Comments at 1; NSAI Initial
Comments at 2 (describing the database as clear, concise, and easily
navigable).
\52\ Reservoir Initial Comments at 1 (describing the database as
``one of the most complete repositories of musical work metadata
that is available to the public'').
\53\ Abby North Initial Comments at 2, 5; A2IM Initial Comments
at 2; BMAC & MAC Reply Comments at 3; CleaRights Initial Comments at
2.
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a. Tools and Resources
In the NOI, the Office asked the MLC to describe any efforts it has
undertaken to enhance database and claiming portal functionality,
including with respect to searching the database, sorting and filtering
queries, and sharing and exporting results, as well as specific plans
to develop additional functionality over the next five years. We also
asked whether the MLC had any plans to address disputes and situations
where multiple claimants have claimed shares totaling over 100% on a
musical work via a module within its portal.\54\ In response, the MLC
highlighted several enhanced functionalities in tools available to its
members and the public.
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\54\ NOI at 5943.
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i. Member tools
Among the tools available to the MLC's members, the MLC highlighted
(1) its Member Portal, which allows members to ``register, edit and
review their musical works data, create and submit registrations for
any new musical works, manage and update their contact information,
banking details and tax forms, and associate one or more authorized
users with their MLC Member accounts''; \55\ (2) its Claiming Tool,
which allows members to search for unclaimed shares of works and claim
the shares they administer; (3) various work registration tools, which
provide for individual registrations, bulk registrations, and
registration via Common Works Registration (``CWR'') format; (4) its
Matching Tool, which allows members to search data derived from monthly
usage reports about recordings the MLC has been unable to match to
registered musical works, and propose matches; (5) its Catalog Export
Tool, which allows members to download all, or a portion of, their
musical works data registered with the MLC; \56\ and (6) its Overclaims
Tool, which allows members to resolve overclaims and disputes regarding
newly registered works for which the total shares claimed by all
members amount to over 100%.\57\
---------------------------------------------------------------------------
\55\ MLC Initial Submission at 15.
\56\ Id. at 16-17.
\57\ MLC Reply Submission at 11.
---------------------------------------------------------------------------
ii. Public tools
The MLC identified the following publicly available tools and
resources that aid in matching. Its Public Work Search is a search tool
that ``allows anyone to retrieve ownership information for every
musical work contained in [t]he MLC's database.'' \58\ According to the
MLC, ``search results show ownership data for each rightsholder that
has claimed a share of the work concerned, the total percentage of
shares of the work that each owner has claimed, the represented
songwriters (where rightsholders have provided it), and the sound
recording products that [t]he MLC has matched to each musical work.''
\59\ This tool enables searching by work title, songwriter, and
publisher, and also ``allows users to filter results by additional
criteria, including ISWC, MLC Song Code, writer IPI, and Publisher
IPI.'' \60\
---------------------------------------------------------------------------
\58\ MLC Initial Submission at 13.
\59\ Id. at 13.
\60\ Id.
---------------------------------------------------------------------------
Its Public Search API is an additional search tool that ``allows
any member of the public to retrieve information about musical works in
[t]he MLC database'' through the use of an application program
interface (``API'').\61\
---------------------------------------------------------------------------
\61\ Id. at 14. Users can register for access on the MLC's
website. Data Programs, MLC, <a href="https://www.themlc.com/dataprograms">https://www.themlc.com/dataprograms</a>
(last visited May 26, 2026).
---------------------------------------------------------------------------
Its Missing Member Lookup resource is a public, searchable database
containing the names of rightsholders
[[Page 33213]]
that are not members of the MLC, but that may be entitled to
royalties.\62\
---------------------------------------------------------------------------
\62\ MLC Initial Submission at 14.
---------------------------------------------------------------------------
Its Distributor Unmatched Recording Portal (``DURP'') is a tool
that allows music distributors, aggregators, and other eligible sound
recording distributors to view data derived from monthly usage reports
about recordings the MLC has been unable to match to registered musical
works. The MLC explained that it created this tool ``to address the
unique challenges related to matching and distributing works written by
independent or DIY artists.'' \63\
---------------------------------------------------------------------------
\63\ Id. at 14-15.
---------------------------------------------------------------------------
iii. Additional resources
In addition to these tools, the MLC created additional resources to
assist in matching. It provides its members its ``Top Unmatched
Recording List,'' which is a spreadsheet of the top 3,000 unmatched
sound recording uses as reported to the MLC by DMPs based on calculated
royalty value.\64\ To the public, and as required by the statute, the
MLC offers a Bulk Data Access Subscription, which provides access to
the MLC's musical work database in a bulk, machine-readable format.\65\
It also created a Data Quality Initiative (``DQI''), which, as
discussed further below, is a service that ``provides participants with
reports that highlight the discrepancies between the two sets of data
so that they can more easily address those discrepancies and improve
the quality of [t]he MLC's data related to their works.'' \66\
---------------------------------------------------------------------------
\64\ Id. at 17.
\65\ Id. at 13; see also 17 U.S.C 115(d)(3)([IEcy])(v) (``The
mechanical licensing collective shall make such database available
in a bulk, machine-readable format . . . .'').
\66\ MLC Initial Submission at 14.
---------------------------------------------------------------------------
iv. Commenters' Views and MLC Response
Several commenters praised the MLC's tools and resources,
describing the mechanisms for ``registering and managing catalogue
information'' as ``user-friendly and efficient.'' \67\ Reporting its
experience, Big Machine Music stated that ``efficiency of submitting
the matches, the approval process of our claims and the timely manner
in which they are then tied back to our account is yet another positive
change'' the MLC has delivered.\68\
---------------------------------------------------------------------------
\67\ NMPA Initial Comments at 4 (``NMPA members have found the
MLC's tools for registering and managing catalogue information to be
user-friendly and efficient.''); Big Machine Music Initial Comments
at 1 (stating that the MLC's ``centralized database of song
ownership information . . . has become a definitive source and
allows for members (publishers, songwriters and administrators) to
easily and efficiently manage their works''); NSAI Initial Comments
at 2 (``The MLC built a publicly accessible database that is clear
and concise, easily navigable and provides as much information as
the MLC can publicly disclose.''); Peermusic Initial Comments at 3
(``In the areas in which we felt there was room for The MLC to build
upon its initial successes, progress has to date been quick and
highly visible: in the services provided to members, for example,
including iterative improvements in portal access, client services,
and new and creative methods to improve the quality of the musical
works database.'').
\68\ Big Machine Music Initial Comments at 1.
---------------------------------------------------------------------------
Other commenters were more critical. Some expressed general concern
regarding the registration process and the length of time it took the
MLC to register and claim works.\69\
---------------------------------------------------------------------------
\69\ Word Collections Initial Comments at 10 (``The MLC's
workflows for submitting and claiming works are woefully
inefficient, unwieldy, unreliable, non-intuitive, and appear to vary
in execution based on member creating a veritable black hole that
negates the entire purpose of submitting works to The MLC in the
first place.''); George Johnson Initial Comments at 1 (describing
the MLC's bulk song registration process as ``almost impossible and
time consuming''); see also A2IM Initial Comments at 3 (``Limits on
API access, registration, and claims create bottlenecks that hinder
the efficiency,'' thus, ``[t]he MLC should expand API access and
simplify the registration and claiming processes to facilitate
easier and faster transactions that will benefit the entire music
ecosystem, not just those with greater resources.''); Abby North
Initial Comments at 5 (encouraging the Office to provide guidelines
for the MLC ``regarding reasonable times from delivery of a match or
claim by a member to processing'').
---------------------------------------------------------------------------
Others highlighted certain inefficiencies in the MLC's Matching
Portal.\70\ The A2IM stated that ``the current matching tool is not
versatile enough to effectively match many titles, leaving a
significant number of songs unmatched and contributing royalties to the
black box.'' \71\ Hameys Songs reported that it has had to submit its
catalog ``multiple times'' to claim unmatched songs, and that ``[m]any
of these attempts have been unsuccessful and many of the titles are
still in the unclaimed section of [t]he MLC website.'' \72\
---------------------------------------------------------------------------
\70\ Abby North Initial Comments at 5; Go to Eleven
Entertainment Initial Comments at 1 (``With regard to submitting
matches to unmatched works, their system is not ideal in any way as
you cannot print out a complete excel list of such works by title,
but can only make a claim on a song-by-song basis''); Lindvall,
Lowery & Morgan Initial Comments at 13 (``[I]t appears that in order
to use the Matching Tool, one must first be a Member and have
registered your catalog. This slows down the matching process.'').
\71\ A2IM Initial Comments at 2.
\72\ Hameys Songs Initial Comments (``By resubmitting, we mean
sending in the same titles and metadata information over and over
again!'').
---------------------------------------------------------------------------
Commenters also took issue with certain aspects of the Overclaims
Tool. Some noted that it only permits resolution of claims made within
the last 90 days.\73\ Another called the tool ``rudimentary for newly
registered works,'' calling for ``further enhancements that includes
all overclaims and disputes.'' \74\
---------------------------------------------------------------------------
\73\ Go to Eleven Entertainment Initial Comments at 5; Abby
North Initial Comments at 3.
\74\ Spirit Music Group Initial Comments at 2.
---------------------------------------------------------------------------
Finally, commenters offered several suggestions regarding the MLC's
public tools and resources. For example, while Spirit Music Group
praised the MLC's Missing Member Lookup resource's usefulness to
``identify members that have not claimed royalties, and to identify
errors for the writers and publishers'' it represents, they suggested
that there should be a way to also identify and quantify the
corresponding recordings.\75\ One commenter noted issues with the
royalty report format,\76\ although another praised the ease of
processing such reports.\77\
---------------------------------------------------------------------------
\75\ Id.
\76\ Hameys Songs Initial Comments at 1 (explaining that the MLC
uses .tsv files while other collective management organizations
(``CMOs'') use PDF, Excel, or CSV). Relatedly, another commenter
expressed concern that, although the bulk data access service is
public, the data is provided in DDEX format such that, according to
her, ``there is no way you can use the bulk list unless you pay to
convert it to a CSV'' format. Go to Eleven Entertainment Initial
Comments at 1-2.
\77\ Warner Chappell Music Reply Comments at 2-3 (``The MLC
provides members with detailed electronic statements via the portal.
These statements are easier to process than many of the other CMO
statements received by Warner Chappell around the world.'').
---------------------------------------------------------------------------
In its reply comments, the MLC reiterated its commitment to making
continued enhancements to its tools and resources, noting upgrades to
its ``Claiming Tool, improvements to the individual and bulk
registration tools, and refinements to the Matching Tool.'' \78\
Related to its work registration process, the MLC reported that it
``consistently processes between 80% and 90% of the incoming
registrations it receives in any given month within 21 days after the
end of the month during which they are received,'' and ``now provides
detailed rejection reasons for any incoming registration that it does
not approve directly in the Registration History section of its Member
Portal.'' \79\ Finally, while the MLC defended its bulk data format
choice (DDEX), by stating that it is the most accessible and industry-
standard format for bulk data, it encouraged members to contact
customer service for formatting and accessibility concerns.\80\
---------------------------------------------------------------------------
\78\ MLC Ex Parte Letter at 3 (July 21, 2025).
\79\ Id. at 6.
\80\ MLC Ex Parte Letter at 5 (Nov. 20, 2025) (``The MLC's
support team is trained to assist Members unfamiliar working with
these and other formats and The MLC's Help Center already includes
related step-by-step technical guidance.'').
---------------------------------------------------------------------------
The Office supports the MLC's continued efforts to improve its
database tools and resources. In light of commenters' suggestions, we
encourage
[[Page 33214]]
it to make its data as accessible as resources permit for users of all
levels of sophistication.
b. Songwriter Access
The Office also asked the MLC to describe its efforts to develop
portal access for songwriters who are not self-administered (e.g.,
those represented by a publisher, administrator, or collective
management organization (``CMO'')), to permit them to access, provide,
or correct information about themselves and their works, including the
ability to flag data issues with their publisher or other
representative, to provide data directly to the MLC, and to have
permissions-based access to view information such as stream counts and
revenue.\81\ This inquiry built upon the Office's earlier
recommendations in our Unclaimed Royalties Report.\82\ Multiple
comments echoed the Office's recommendation, urging the MLC to develop
``a portal within its website for published and/or administered
songwriters to deliver data regarding their works.'' \83\
---------------------------------------------------------------------------
\81\ NOI at 5943.
\82\ Unclaimed Royalties Report at 50-51 (recommending that
``represented songwriters be able to sign up with the MLC to gain
appropriate access to the portal (or a tailored version of the
portal), through which they can easily view and interact with
information about their works, including the ability to alert [the
MLC and] their publishers, administrators, or other representatives
to have them register with the MLC (if they have not already done
so) and/or to have them address any potential data issues flagged by
the songwriter, including where information is missing, outdated, or
incorrect'').
\83\ Abby North Initial Comments at 2; Artist Rights Alliance
Reply Comments at 2; BMAC & MAC Reply Comments at 3-4.
---------------------------------------------------------------------------
In October 2025, the MLC released its new Songwriter Hub, which is
available to any songwriter with registered works. In this portal,
songwriters are able ``to construct a catalog of their registered
works, filter and search their catalog for specific works, and export
the data for their catalogs on demand in a variety of formats.'' \84\
Songwriters may also submit correction requests to update writer names
and IPI numbers. While the Songwriter Hub does not appear to permit
alerts or corrections to any other data, the MLC reports that it
``plans to develop additional tools and functionality tailored for
songwriters to enable them to participate more easily in the
administration of their songs.'' \85\
---------------------------------------------------------------------------
\84\ MLC Ex Parte Letter at 3 (July 21, 2025).
\85\ Id.
---------------------------------------------------------------------------
The Office appreciates the MLC's responsiveness to member concerns
and looks forward to the ongoing enhancements that will be made to the
Songwriter Hub during the MLC's continued designation.
c. Data Quality and Management
Data quality is foundational to the MLC's ability to perform its
statutory role successfully. Accordingly, the NOI asked several
questions related to the MLC's data management. It also asked the MLC
to provide an update on its progress implementing the Office's
recommendations from the Unclaimed Royalties Report, which instructed
the MLC to develop mechanisms for error and fraud detection, employ
third-party uses of data beyond DMP reporting to ensure that its data
is in sync with the data held and submitted by authoritative sources,
and incorporate broad use of standard unique identifiers.\86\
---------------------------------------------------------------------------
\86\ Unclaimed Royalties Report at 56-71.
---------------------------------------------------------------------------
Addressing the accuracy of its repertoire data, the MLC highlighted
its DQI. It explained that the DQI ``provide[s] a streamlined way for
music publishers, administrators, self-administered songwriters and
foreign CMOs to compare large schedules of their musical works' data
against'' the MLC's data.\87\ The MLC provides participants with
reports that highlight discrepancies between two sets of data so that
users can resolve those discrepancies and improve the quality of the
MLC's data. In addition to working with participating publishers, self-
administered songwriters, and administrators, it created a Data Quality
Initiative Partner Program to partner with organizations that
specialize in different aspects of music data services.\88\
---------------------------------------------------------------------------
\87\ MLC Initial Submission at 14.
\88\ Data Programs, MLC, <a href="https://www.themlc.com/dataprograms">https://www.themlc.com/dataprograms</a>
(last visited May 26, 2026).
---------------------------------------------------------------------------
Regarding fraud detection, the MLC affirmed that it ``proactively
investigates instances of potential streaming fraud and pursues
collaboration with [DMPs], distributors, aggregators, and other
stakeholders within the music industry ecosystem to combat'' such
conduct.\89\ While it noted that it must keep specific detection and
prevention strategies confidential to preserve their effectiveness, the
MLC explained that it engages with third-party vendors with fraud
detection expertise and pursues collaboration with other industry
stakeholders to bolster prevention and detection efforts.\90\
---------------------------------------------------------------------------
\89\ MLC Initial Submission at 29.
\90\ Id. at 29-30.
---------------------------------------------------------------------------
Finally, the MLC confirmed that it ``employs standard unique
identifiers to the broadest extent reasonably appropriate, including in
the works registration, share claiming, and matching processes, and for
general data maintenance activities.'' \91\ This includes employing
ISWC numbers, ``if provided by rightsholders.'' \92\
---------------------------------------------------------------------------
\91\ Id. at 10.
\92\ Id. at 12.
---------------------------------------------------------------------------
While some commenters praised the MLC's data management,\93\ others
proposed specific improvements. Chiefly, commenters called for the MLC
to require and prioritize use of standard identifiers, like the ISWC
and the IPI, in their work registrations.\94\ Spirit Music Group
asserted that ``[e]xpanding the identification process using song
titles and CISAC codes, i.e., the IPI and ISWC can enhance matching,
improve results, and reduce unmatched recordings.'' \95\ Another
commenter suggested the MLC should require ``publishers to use IPI
numbers of songwriters in their registrations'' to prevent duplicate
registrations.\96\
---------------------------------------------------------------------------
\93\ Peermusic Initial Comments at 2 (``On an operational level,
the transparency, reliability, and accuracy of reporting has been
exceptional, opening new opportunities for peermusic to understand,
analyze, and build on the data we receive''); see also Warner
Chappell Music Reply Comments at 2 (calling the database ``best in
class'').
\94\ Abby North Initial Comments at 6; BMAC & MAC Reply
Comments; Christian Castle Reply Comments; Spirit Music Group
Initial Comments at 2.
\95\ Spirit Music Group Initial Comments at 2.
\96\ Go to Eleven Entertainment Initial Comments at 4.
---------------------------------------------------------------------------
In response, the MLC agreed that unique identifiers like ISWC and
IPI numbers are valuable, and clarified that it requests ISWC and IPI
information from all DMPs who report usage and from all members who
register their works.\97\ It confirmed that it ``utilizes a number of
data points and identifiers in its matching processes, including ISWC,
ISRC, and IPI numbers.'' \98\ It does not, however, ``exclusively rely
on these identifiers for a variety of reasons, including the fact . . .
that not all of the data it receives from [DMPs] in their usage reports
and/or in the works registrations data it receives from rightsholders
includes these identifiers, and sometimes the identifiers submitted to
[t]he MLC by [DMPs] and rightsholders are not accurate.'' \99\
---------------------------------------------------------------------------
\97\ MLC Reply Submission at 19.
\98\ Id. at 21.
\99\ Id.
---------------------------------------------------------------------------
The Office believes that the MLC's approach strikes the appropriate
balance between the goal to reduce the number of unmatched works by
employing standardized metadata and the goal of maintaining broad
access to the database by not making such metadata a prerequisite for
engagement. As the MMA's legislative history notes, ``[u]sing
standardized metadata such as ISRC and ISWC codes, is a major step
forward in reducing the number of
[[Page 33215]]
unmatched works.'' \100\ With that aim, the Office had encouraged the
MLC to employ standardized metadata ``to the broadest extent reasonably
appropriate, including in its registration and claiming processes,
matching processes, and general data maintenance activities.'' \101\ We
agree, however, that some flexibility remains necessary in the context
of registration and claiming, as requiring members to submit ISWCs, or
other standard identifiers, may inhibit broader participation by
publishers or songwriters who do not know or have access to that
information.
---------------------------------------------------------------------------
\100\ Conf. Rep. at 7.
\101\ Unclaimed Royalties Report at 65.
---------------------------------------------------------------------------
i. Matching Practices
One of the MLC's statutory duties is to match the sound recordings
used by DMPs to their underlying musical works and match those musical
works to their copyright owners, who must be identified and
located.\102\ To assist our review of the MLC's execution of this duty,
the Office requested detailed information about its matching practices,
including how it measures match accuracy. Specifically, the NOI asked
how the MLC has worked to improve automated and manual matching since
the blanket license became available, and how it plans to further
enhance matching over the next five years, both matching sound
recordings to musical works and matching musical works to identified
and located copyright owners. We also asked it to explain how it is
using quantifiable measurements to monitor its match rate confidence,
and how it adjusts confidence levels without using numerical
metrics.\103\
---------------------------------------------------------------------------
\102\ 17 U.S.C. 115(d)(3)(C)(i)(III).
\103\ NOI at 5943; see The Mechanical Licensing Collective, 2022
Annual Report 9 (2023) (``MLC 2022 Annual Report''), <a href="https://www.themlc.com/hubfs/The%20MLC%202022%20Annual%20Report.pdf">https://www.themlc.com/hubfs/The%20MLC%202022%20Annual%20Report.pdf</a> (stating
that the MLC ``does not use numerical metrics to monitor match rate
confidence'').
---------------------------------------------------------------------------
The MLC's response described a ``multilayered'' matching
methodology, which includes automated and manual matching, a dedicated
Matching Team, a quality-assurance process, and additional matching
initiatives.\104\ Its methodology begins with employing automated
``elastic search'' technology provided by one or more of its vendors to
match sound recording information received from DMPs to musical work
information in the MLC's database.\105\ In its automated process,
unmatched sound recordings are also rerun against subsequent monthly
snapshots, which incorporate newly submitted registration data, to see
if new data results in new matches.\106\
---------------------------------------------------------------------------
\104\ MLC Initial Submission at 18-21.
\105\ Id. at 18.
\106\ Id. at 19.
---------------------------------------------------------------------------
Sound recordings that are not matched during this process are
manually reviewed by the Matching Team, which uses ``custom-built
technology and public resources to research missing data elements and
make manual matches.'' \107\ During this process, MLC staff conducts
quality assurance, using ``CMO databases, music credit databases, DMP
websites, content owner websites, and other niche and genre-specific
sources'' to cross-reference multiple sources to validate manual
matches.\108\
---------------------------------------------------------------------------
\107\ Id.
\108\ The Mechanical Licensing Collective, 2024 Annual Report 53
(2025) (``MLC 2024 Annual Report''), <a href="https://www.themlc.com/hubfs/The%20MLC%202024%20Annual%20Report.pdf">https://www.themlc.com/hubfs/The%20MLC%202024%20Annual%20Report.pdf</a>.
---------------------------------------------------------------------------
Any sound recordings that remain unmatched are presented in the
MLC's Matching Tool ``to allow [m]embers to search for and identify
sound recordings and independently propose matches. The Matching Team
then manually verifies the accuracy of each [m]ember-proposed match.''
\109\ The MLC also highlighted additional matching initiatives. For
example, it pointed to its Supplemental Matching Network, which is a
network of vendors that use ``complementary technologies'' to
supplement its internal matching activities.\110\ Currently, the
network consists of organizations that specialize in: music data and
licensing (Blokur); compiling music credits from record labels,
distributors, publishers and industry associations (Jaxsta); audio
recognition technology (Pex); and data matching and administration
(Salt and SX Works).\111\
---------------------------------------------------------------------------
\109\ MLC Initial Submission at 19.
\110\ Id. at 19-20.
\111\ Id. at 19, 31-32.
---------------------------------------------------------------------------
According to the MLC, this methodology has resulted in high match
rates. It reported that, as of its initial submission date, its
``current overall match rate across all usage periods stands at 91.6%,
with year-specific match rates of 93.7% for 2021, 93.0% for 2022, 91.9%
for 2023, and 90.3% for 2024.'' \112\ These rates are based on ``the
total amount of royalties matched to registered musical works compared
to the total royalties reported to [t]he MLC by [DMPs].'' \113\
---------------------------------------------------------------------------
\112\ MLC Ex Parte Letter at 2 (July 21, 2025).
\113\ MLC Initial Submission at 20.
---------------------------------------------------------------------------
To measure the accuracy of its match rates, the MLC explained that
it routinely ``runs a number of different analytical processes of the
matches it has made and conducts systematic, regular testing of its
matches.'' \114\ Its Matching Team regularly examines random sample
sets of automated matches and analyzes the results.\115\ The MLC stated
that its match rate confidence is further bolstered by comparing the
matches produced by its internal processes with the matching data
provided by its Supplemental Match Network vendors.\116\
---------------------------------------------------------------------------
\114\ Id. at 22.
\115\ Id.
\116\ Id.
---------------------------------------------------------------------------
Finally, the MLC highlighted other planned efforts to improve its
match rate confidence and its ability to match sound recordings to the
musical works they embody. For example, it noted that it is ``working
with other large CMOs on pilot programs to exchange matching data, in
order to create yet another point of comparison that both organizations
can use to assess the accuracy of their respective matches and to
identify supplemental matches.'' \117\ It explained, ``[t]his approach
of assembling multiple points of comparison offers a compelling way for
[t]he MLC to monitor the efficacy and accuracy of its internal
processes.'' \118\ In addition, it noted that, in response to user
feedback, it is developing mechanisms for members with larger catalogs
to deliver proposed matches in bulk.\119\ These proposed matches would
then be reviewed by a supplemental matching vendor for automated
verification.\120\
---------------------------------------------------------------------------
\117\ Id.
\118\ Id.
\119\ Id. at 20.
\120\ Id. at 20, 22.
---------------------------------------------------------------------------
Many commenters highlighted the match rate as evidence that the
MLC's matching methodology has been successful.\121\ The NMPA commented
that ``[t]he MLC has . . . worked diligently to reduce the incidence of
unmatched and unclaimed royalties through better ownership data, the
use of manual matching and partnerships with other technology vendors,
resulting in an historically high average match rate of over 90%.''
\122\ One coalition of music publishers stated that they ``believe that
there is a direct correlation between the tools offered by the MLC . .
. and our respective publishers' Song Match Rate.'' \123\
---------------------------------------------------------------------------
\121\ CMPA Initial Comments at 2.
\122\ NMPA Initial Comments at 4-5.
\123\ CMPA Initial Comments at 2.
---------------------------------------------------------------------------
Other commenters, however, took issue with how the MLC defines its
match rate.\124\ Attorney Gwendolyn Seale stated, ``As the most popular
musical works are the ones generating the bulk of mechanical royalties
over a
[[Page 33216]]
given month and are typically owned and/or controlled by the major
music publishers with the resources and capabilities to constantly
monitor activities concerning their clients' musical works and engage
in manual matching, the current definition of match rate (i.e., the
royalty-based definition) does not mean very much by itself.'' \125\
Seale continued, ``It would be useful for the MLC to also provide the
monthly match rate on a recordings-to-musical works-matched basis,'' or
a works-based calculation,\126\ and argued that such data would ``shine
a light on the efficacy of the MLC's and its vendors' matching
technology and would help to ensure the musical works of countless
self-published songwriters are being matched to reported sound
recordings.'' \127\
---------------------------------------------------------------------------
\124\ Gwendolyn Seale Initial Comments at 3-4; George Johnson
Initial Comments.
\125\ Gwendolyn Seale Initial Comments at 3-4.
\126\ Id.
\127\ Id.
---------------------------------------------------------------------------
The MLC explained that a royalties-based calculation is standard
for most CMOs. While it disagreed that a works-based calculation was
warranted, in light of commenter concerns the Office requested further
information regarding its match rate by royalty value. In response, the
MLC defined five royalty tiers representing the cumulative amount of
mechanical royalties earned by a given work since it began operating in
January 2021: (1) greater than $5,000; (2) between $1,000 and $5,000;
(3) between $500 and $1,000; (4) between $100 and $500; and (5) under
$100.\128\ The MLC's current average match rates for the top three
tiers are each above 90%, and for the highest tier it is over 99%. For
works with a cumulative royalty value between $100 and $500, it is
approximately 83%. And for works with a cumulative royalty value under
$100, it is 63%.\129\
---------------------------------------------------------------------------
\128\ MLC Ex Parte Letter at 5 (July 21, 2025).
\129\ Id.
---------------------------------------------------------------------------
The Office asked whether the MLC has identified any notable trends
or patterns in reported usage that it has been unable to match through
its efforts to date. It also asked the MLC about its attempts to
address these trends or patterns, and specifically, to describe any
targeted efforts it has undertaken or plans to undertake in the next
five years.\130\
---------------------------------------------------------------------------
\130\ NOI at 5943.
---------------------------------------------------------------------------
In response, the MLC explained, ``[s]ound recordings with high
stream counts that generate higher royalties are more likely to be
matched to a work registered with [t]he MLC, while sound recordings
with low stream counts and minimal royalties . . . are less likely to
be matched--often because the works featured in those recordings have
not been registered with [t]he MLC.'' \131\ The MLC's data appears to
validate this trend. According to the data, over 500 million unmatched
reported sound recordings have less than one dollar in accrued
mechanical royalties across all blanket periods to date (with the
average being approximately five cents).\132\ The MLC reasoned that
rightsholders of these ``long tail'' works \133\ ``have less of a
financial incentive to complete the work registration process since
those works generate minimal royalties.'' \134\
---------------------------------------------------------------------------
\131\ MLC Initial Submission at 23.
\132\ Id. at 23 n.46.
\133\ The MLC refers to ``long tail'' works as those works
``with low stream counts and minimal royalties . . . [that] are less
likely to be matched.'' Id.
\134\ Id.
---------------------------------------------------------------------------
The MLC further stated that it created the DURP program to address
the ``unique challenges related to matching and distributing works
written by independent or DIY artists,'' e.g., ``songs with lower
stream counts and royalties.'' \135\ As noted above, the DURP program
engages independent distributors, aggregators, and other eligible sound
recording distribution companies to identify the rightsholders for the
works embodied in sound recordings with lower stream counts.\136\ As of
May 2026, the initiative includes at least 125 enrolled
distributors.\137\
---------------------------------------------------------------------------
\135\ MLC 2024 Annual Report app. at 53; MLC Initial Submission
at 14, 23.
\136\ MLC Initial Submission at 23.
\137\ DURP Partners, MLC, <a href="https://www.themlc.com/durp-partners">https://www.themlc.com/durp-partners</a>
(last visited May 26, 2026).
---------------------------------------------------------------------------
Based on the Office's review of the MLC's submissions, its matching
processes and quality assurance analysis appear to function well. In
accordance with our Unclaimed Royalties Report recommendations, the MLC
reports employing both automated and manual matching processes that
engage a broad array of resources. Its efforts include searching public
and private third-party databases and leveraging its membership and
industry partners. The Office supports the expansion of initiatives
that contribute to improving the MLC's methodology and match rate
confidence, including DURP and the Supplemental Matching Network.
The Office applauds the MLC's efforts to improve match rates for
``long tail'' works. Its disclosure of match rates by the royalty value
tiers provided during this proceeding provides a helpful additional
metric. If the MLC were to provide this information going forward, it
would better assist with gauging the effectiveness of its matching
methodology and initiatives for works earning different ranges of
royalties.
ii. Collection and Distribution of Royalties, Including Unclaimed
Accrued Royalties
To assess the MLC's performance related to its duty to collect and
distribute royalties, the Office requested information about its
royalty distributions. Specifically, we asked the MLC for an update on
its efforts to implement Unclaimed Royalties Report recommendations,
which included the recommendation to adopt transparent, practical, and
equitable policies, practices, and procedures, especially with respect
to holding and distributing unclaimed accrued royalties.\138\
---------------------------------------------------------------------------
\138\ NOI at 5942 n.36 (citing the Unclaimed Royalties Report).
---------------------------------------------------------------------------
The MMA makes the MLC responsible for ``[c]ollect[ing] and
distribut[ing] royalties from [DMPs]'' using the statutory mechanical
license.\139\ Any ``royalties that cannot be distributed due to'' ``an
inability to identify or locate a copyright owner of a musical work (or
share thereof)'' or ``a pending dispute before the [D]ispute
[R]esolution [C]ommittee of the [MLC],'' must be ``deposit[ed] into an
interest-bearing account.'' \140\ For those works for which royalties
have accrued but the copyright owner is unknown or not located, the MLC
holds such royalties for a minimum time period, as designated by the
statute. In general, this period is ``not less than 3 years after the
date on which the funds were received by the [MLC].'' \141\ At the end
of the statutory minimum holding period, accrued royalties for musical
works (and shares) that remain unmatched become eligible for
distribution by relative market share ``to copyright owners identified
in the records of the collective,'' at which point they become
``unclaimed accrued royalties.'' \142\
---------------------------------------------------------------------------
\139\ 17 U.S.C. 115(d)(3)(C)(i)(II).
\140\ Id. at 115(d)(3)(G)(i)(III).
\141\ Id. at 115(d)(3)(H)(i); see also Conf. Rep. at 11 (``For
unmatched works, the collective must wait for the prescribed holding
period of three years before making such distribution. This is
intended to give the collective time to actively search for the
copyright owner.'').
\142\ 17 U.S.C. 115(d)(3)(J)(i), (e)(34).
---------------------------------------------------------------------------
The statute also includes a ``transition period'' for the period
following the MMA's enactment in October 2018, and before the blanket
license became available on January 1, 2021.\143\ During the transition
period, if the musical work copyright owner was unknown, anyone seeking
to obtain a compulsory license to make digital phonorecord deliveries
could rely on a limitation on liability that required the DMP to
``continue[ ] to search for the musical
[[Page 33217]]
work copyright owner'' using good-faith, commercially reasonable
efforts and bulk electronic matching processes.\144\ If the musical
work copyright owner was not found before the end of the transition
period, the DMP had to account for and transfer the accrued royalties
(called ``historic royalties'') to the MLC in 2021 for further
processing. According to the MLC, twenty-one DMPs submitted reporting
and transferred royalties related to streaming activities that took
place between 2007 and 2020.\145\ Unclaimed historic royalties are
subject to a future market-share distribution, like unclaimed blanket
license royalties.
---------------------------------------------------------------------------
\143\ H.R. Rep. No. 115-651, at 10 (2018); S. Rep. No. 115-339,
at 10 (2018).
\144\ 17 U.S.C. 115(b)(2)(A), (d)(9)(D)(i), (d)(10)(A)-(B); see
H.R. Rep. No. 115-651, at 4, 10; S. Rep. No. 115-339, at 3, 10, 22.
\145\ Historical Unmatched Royalties, MLC, <a href="https://www.themlc.com/historical-unmatched-royalties">https://www.themlc.com/historical-unmatched-royalties</a> (last visited May 26,
2026).
---------------------------------------------------------------------------
The MLC provided an overview of its relevant metrics and
achievements in response to the Office's inquiry. First, it provided
distribution metrics for blanket license royalties, historical
royalties, and voluntary licenses. As of its June 2025 distribution,
the MLC reported processing ``over $3.11 billion in total royalties,
comprising approximately $2.865 billion in blanket royalties directly
distributed by [t]he MLC and $246 million in voluntary royalties
(valued at the applicable statutory rates) processed by the MLC, but
distributed by DMPs to licensors under voluntary license
arrangements.'' \146\ Each year since its inception, the MLC has
completed every royalty distribution ``on time or early'' for the usage
that took place in each relevant year.\147\ It reports that it has
``matched nearly $314 million of the $397.20 million in historical
unmatched royalties that DMPs transferred in February 2021 (or 79% of
the total amount transferred) and distributed approximately $223.42
million (or more than 56% of the total transferred).'' \148\
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\146\ MLC Ex Parte Letter at 1-2 (July 21, 2025).
\147\ The Mechanical Licensing Collective, 2021 Annual Report 1
(2022), <a href="https://www.themlc.com/hubfs/Marketing/23856%20The%20MLC%20AR2021%206-30%20REFRESH%20COMBINED.pdf">https://www.themlc.com/hubfs/Marketing/23856%20The%20MLC%20AR2021%206-30%20REFRESH%20COMBINED.pdf</a>; MLC 2022
Annual Report at 2; The Mechanical Licensing Collective, 2023 Annual
Report 2 (2024), <a href="https://www.themlc.com/hubfs/2023%20MLC%20Annual%20Report.pdf">https://www.themlc.com/hubfs/2023%20MLC%20Annual%20Report.pdf</a>; MLC 2024 Annual Report at 1.
\148\ MLC Ex Parte Letter at 2 (July 21, 2025).
---------------------------------------------------------------------------
The MLC previously reported that, of the $568,945,432.36 in
royalties held related to 2021-2024 usage, $243,856,456.84 is related
to unclaimed royalties.\149\ And, of the $397,196,646.86 in historical
unmatched royalties collected, $195,779,461.26 remain unmatched and
$74,473,413.08 remain unclaimed.\150\
---------------------------------------------------------------------------
\149\ MLC 2024 Annual Report app. at 17.
\150\ Id. at 18.
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The MLC has not yet distributed unclaimed royalties. In early 2026,
however, it announced that it has begun developing a policy to
distribute the remaining unmatched and unclaimed blanket
royalties.\151\ While the MLC has, to date, prioritized the growth and
engagement of its membership and the continued improvement of data
necessary to facilitate accurate matching, it also recognizes that
Congress did not contemplate the indefinite retention of blanket
royalties.
---------------------------------------------------------------------------
\151\ Looking One Year Ahead: Market Share Distributions, MLC,
<a href="https://pages.themlc.com/looking-one-year-ahead-market-share-distributions">https://pages.themlc.com/looking-one-year-ahead-market-share-distributions</a> (last visited May 26, 2026).
---------------------------------------------------------------------------
Starting in early 2027, the MLC plans to start making market share
distributions of unmatched and unclaimed royalties on a monthly, per-
song and ``pro rata basis for each [DMP] and offering''; in other
words, ``[e]very song that earned monthly royalties . . . will receive
its pro rata share of the remaining royalties for that month.'' \152\
The MLC reports that the ``current amount of remaining unmatched and
unclaimed royalties from January 2021 that would be eligible to be
included in [the] first monthly distribution in 2027 is less than $7
million.'' \153\ Due to continued reprocessing, along with its
continued matching efforts focused on the remaining 2021 royalties, it
estimates that the remaining amount will likely be lower by January
2027. It plans to begin processing the remaining historical (i.e., pre-
January 2021) unmatched royalties at a later date.
---------------------------------------------------------------------------
\152\ Id.
\153\ Id.
---------------------------------------------------------------------------
Many commenters praised the MLC's collection and distribution of
blanket royalties, noting that it ``has distributed monthly royalty
payments for all [DMPs] on time or early every month since the first
distribution in April 2021,'' which ``has allowed U.S. mechanical
streaming income to become one of the most predictable and transparent
revenue sources in the music industry.'' \154\ Certain other
commenters, however, reported payment delays due to processing errors
and frivolous ownership disputes.\155\ While the Office acknowledges
the reported payment delays and alleged errors, it appears the MLC
maintains an infrastructure capable of troubleshooting such issues. It
has established common sense policies that address disputes and catalog
transfers through a thoughtful and deliberate process. When a copyright
owner believes that there has been a payment error, we expect the MLC
to review and resolve any issues in a timely and fair manner.
---------------------------------------------------------------------------
\154\ Big Machine Music Initial Comments at 2; see NMPA Initial
Comments at 3 (``Since its inception, the MLC has distributed over
$2 billion in royalties to thousands of rightsholders, making every
monthly royalty distribution on time.''); NSAI Initial Comments at
2; Recording Academy Reply Comments; Reservoir Initial Comments.
\155\ See, e.g., Word Collections Initial Comments at 17
(stating that MLC's Dispute Policy favors those claimants who
``show[] up first,'' to the detriment of ``uneducated songwriters''
less familiar with how the MLC operates''); Music Copyright
Consultant Group II Initial Comments (reporting payment errors and
delays due to MLC's method of calculating royalties for medleys and
music works that include interpolations and samples); Go to Eleven
Entertainment Initial Comments at 4-5 (claiming that the MLC does
not freeze payments for works in dispute until resolution, and
suggesting that to avoid payment issues'' ``[t]he minute [t]he MLC
is served notice of via a Catalog Transfer Form, all royalties
should be put on hold until the transfer is confirmed and set up by
[t]he MLC'').
---------------------------------------------------------------------------
Overall, the Office applauds the MLC's collection and distribution
efforts, which have resulted in over $3.9 billion in royalties paid to
copyright owners. These efforts have had a significant and measurable
impact on songwriters' and publishers' income, providing increased
revenue reliability and predictability.
The Office also supports the MLC in commencing a process to develop
policies governing the distribution of unclaimed royalties pursuant to
the statute. We look forward to working with the MLC to ensure that its
policies and processes are transparent, fair, and equitable for all
songwriters and publishers.
iii. Fraud and Frivolous Disputes
Next, the Office requested information about the MLC's efforts to
combat fraudulent ownership claims, frivolous ownership disputes, and
streaming fraud, specifically: (1) ``any steps that the [MLC] is taking
to protect against the incidence of fraudulent ownership claims and
frivolous ownership disputes''; (2) ``whether these steps have been
successful''; and (3) ``whether and to what extent the [MLC] is working
with DMPs, distributors, aggregators, or others to protect against
streaming fraud and the status of such efforts, including their success
or failure.'' \156\
---------------------------------------------------------------------------
\156\ NOI at 5943.
---------------------------------------------------------------------------
Regarding frivolous ownership disputes, the MLC asserted that its
Ownership Dispute Policy is designed to ``efficiently address ownership
disputes between or among copyright owners'' and ``deters'' frivolous
claims because it ``require[s] parties that initiate disputes to
provide written documentation substantiating their
[[Page 33218]]
claim(s) within a fixed time frame.'' \157\ It explained that this
requirement ``reduces the likelihood that parties without legitimate
ownership claims can affect timely distribution of related royalties.''
\158\
---------------------------------------------------------------------------
\157\ MLC Initial Submission at 29.
\158\ Id.
---------------------------------------------------------------------------
Concerning fraudulent ownership claims, the MLC states that it
``has implemented a multi-faceted strategy for identifying and
mitigating fraudulent ownership claims'' that involves multiple
internal teams monitoring incoming data for signs of fraud at every
stage of the MLC's royalty distribution process.\159\ When MLC staff
observe data anomalies, they escalate those observations for greater
scrutiny.\160\
---------------------------------------------------------------------------
\159\ Id. at 28-29.
\160\ Id. at 29.
---------------------------------------------------------------------------
Finally, regarding streaming fraud, the MLC confirmed that it
``proactively investigates instances of potential streaming fraud and
pursues collaboration with [DMPs], distributors, aggregators, and other
stakeholders within the music industry ecosystem to combat streaming
fraud.'' \161\ While the MLC kept its specific detection and prevention
strategies confidential ``to preserve their effectiveness,'' it
explained that its strategies include, in addition to its own internal
efforts, ``engaging third-party vendors with expertise in detecting
fraud'' and ``actively pursuing collaboration with other industry
stakeholders.'' \162\
---------------------------------------------------------------------------
\161\ Id.
\162\ Id. at 29-30.
---------------------------------------------------------------------------
The Office supports the MLC's proactive work to combat fraud. Its
collaborative initiatives in this area are important and appear to be
contributing to improved data accuracy and integrity. We will continue
to monitor these efforts as they progress.
2. Investment in Resources and Vendor Engagement
As noted above, to perform its statutory duties, the MLC invests in
relevant resources and arranges for services of outside vendors. The
NOI inquired about these activities, including the MLC's reliance on
third-party vendors to support its operations and fulfill its statutory
obligations.\163\ The Office also asked the MLC to provide information
about its Supplemental Matching Network vendors, ``including the
specific functions that they perform, or have been asked to perform,
the vendors' relevant experience with clients and projects involving
similar scale and type, or their industry-specific knowledge.'' \164\
---------------------------------------------------------------------------
\163\ NOI at 5941.
\164\ Id. at 5943. Office regulations also require the MLC to
provide in its annual report the MLC's ``selection of new vendors
during the preceding calendar year, including the criteria used in
deciding to select such vendors, and key findings from any
performance reviews of the mechanical licensing collective's current
vendors.'' 37 CFR 210.33(b)(10). The information must ``include a
general description of any new request for information (RFI) and/or
request for proposals (RFP) process, either copies of the relevant
RFI and/or RFP or a list of the functional requirements covered in
the RFI or RFP, the names of the parties responding to the RFI and/
or RFP.'' Id.
---------------------------------------------------------------------------
The MLC's initial response provided general information about its
third-party vendors' business capabilities.\165\ DIMA, the DLC, and
other commenters advocated for greater transparency,\166\ and in
subsequent meetings with the MLC, the Office requested further
information. In response, the MLC elaborated that it ``evaluates vendor
performance through multiple, standard mechanisms that establish
expectations for responsiveness, turnaround times, fulfillment, and
consistency.'' \167\ It explained that ``the vendors that comprise its
Supplemental Matching Network provide a range of matching-related
services'' and ``collectively assist [t]he MLC with matching tasks
(with the specific allocation of work among them subject to adjustments
to meet [t]he MLC's evolving matching needs).'' \168\ These ``matching
tasks'' include ``(a) supplementing [t]he MLC's core matching by
applying independent work-to-recording and recording-to-work matching
services; (b) validating and expanding matches between sound recordings
and musical works; (c) finding additional versions of the same
recordings across [DMPs] so all related uses are captured and tied to
works already matched; [and] (d) identifying non-musical content so it
can be removed from the royalty pool.'' \169\
---------------------------------------------------------------------------
\165\ MLC Initial Submission at 30-32.
\166\ See, e.g., DLC & DIMA Initial Comments at 15; Gwendolyn
Seale Initial Comments at 7; Spirit Music Group Initial Comments at
3.
\167\ MLC Ex Parte Letter at 5 (Nov. 20, 2025).
\168\ Id.
\169\ Id.
---------------------------------------------------------------------------
The Office understands the MLC's need to maintain flexibility as it
allocates matching tasks among its vendors. The information provided is
sufficient for purposes of this designation proceeding. To the extent
additional transparency is warranted, we will address those
considerations elsewhere, including in the context of the MLC's annual
reporting obligations. We will continue to monitor how the MLC
evaluates vendor performance and determines whether to continue
engagement.
3. Funding
The MMA directs the MLC to report on procedures ``to guard against
fraud, abuse, waste, and the unreasonable use of funds.'' \170\ In
evaluating whether the current MLC designation should be continued, the
MMA's legislative history directs the Office to consider any ``evidence
of fraud, waste, or abuse, including the failure to follow the relevant
regulations adopted by the Copyright Office.'' \171\ Accordingly, the
Office requested information about the MLC's ``procedures to safeguard
its use of the assessment funds against abuse, waste, and other
unreasonable expenditures.'' \172\ We also asked the MLC to discuss
``whether it ha[s] become more efficient over time[,] . . .
address[ing] with specificity any expenditure categories (e.g.,
personnel costs, information technology, professional fees, outreach,
education, communication & events, insurance, rent, computer equipment,
& office expenses) that have significantly increased since January
2021,'' and providing a detailed explanation for any such
increase.\173\ In addition to the MLC's submission in this proceeding,
its annual reports aid in the Office's evaluation.\174\ They include
information on the MLC's ``[b]udgeting and expenditures,'' ``total
costs for the preceding calendar year,'' projected annual budget, and
``[e]xpenses that are more than 10 percent of the annual mechanical
licensing collective budget.'' \175\
---------------------------------------------------------------------------
\170\ 17 U.S.C. 115(d)(3)(D)(ix)(II)(bb)(BB) (directing the MLC
to ensure that periodic audit reports address the implementation and
efficacy of certain procedures). As noted above, the DMPs fund the
MLC's operations through an administrative assessment that is
established by the Copyright Royalty Judges.
\171\ H.R. Rep. No. 115-651, at 6.
\172\ NOI at 5944. Note that the MMA requires the MLC to retain
a qualified auditor to examine its books, records, and operations
and prepare a report on these topics for the MLC's Board. See 17
U.S.C. 115(d)(3)(D)(ix)(II). The auditor's letter to the MLC's Board
can be found on the MLC's website. Letter from WithumSmith+Brown,
P.C. to the Board of Directors of the MLC (Dec. 22, 2023), <a href="https://www.themlc.com/hubfs/Auditor%20Letter%20to%20Board%20re%20MMA%20Audit%20Provision%20">https://www.themlc.com/hubfs/Auditor%20Letter%20to%20Board%20re%20MMA%20Audit%20Provision%20</a>(115(d
)(3)(D)(ix)(II)).pdf.
\173\ NOI at 5944.
\174\ The MLC's annual reports and public financial statements
are available at <a href="https://www.themlc.com/governance">https://www.themlc.com/governance</a>.
\175\ 37 CFR 210.33(b)(3)-(5), (7).
---------------------------------------------------------------------------
a. Safeguarding Use of Assessment Funds and Efficiency
The MLC identified internal and external controls that ensure
responsible use of assessment funds.\176\ Its internal controls include
``structured approval
[[Page 33219]]
processes for expenditures and payments, emphasizing checks at multiple
levels to ensure accountability.'' \177\ According to the MLC,
monitoring mechanisms are in place to review vendor payments, employee-
related financial transactions, and budgeting.\178\ It stated that its
Budget and Performance Advisory, Audit, and Compensation committees
provide further ``oversight to ensure judicious use of resources and
prevention of abuse, waste, and unreasonable expenditures.'' \179\
---------------------------------------------------------------------------
\176\ MLC Initial Submission at 33-35.
\177\ Id. at 33.
\178\ Id.
\179\ Id. at 34.
---------------------------------------------------------------------------
The MLC also described its external controls, which include the
statutorily required quinquennial outside audit, which was last
completed in 2023.\180\ The external auditor concluded that it had ``
`obtained reasonable assurance that the financial statements as a whole
were free from material misstatements, whether caused by fraud or
error, in accordance with AU-C Section 240 Consideration of Fraud in a
Financial Statement Audit, as issued by [the American Institute of
CPAs].' '' \181\ Additionally, the MLC has ``engage[d], on a voluntary
basis, a qualified and independent outside auditor to examine its books
and records,'' and each year since 2021, ``[e]ach audit has resulted in
an unqualified opinion (typically known as a `clean audit report') that
the financial statements presented fairly the position of [t]he MLC in
all material aspects in accordance with accounting principles generally
accepted in the U.S. (`GAAP').'' \182\
---------------------------------------------------------------------------
\180\ Id. at 33-34.
\181\ Id. at 34 (quoting Letter from WithumSmith+Brown, P.C. to
the Board of Directors of the MLC (Dec. 22, 2023)).
\182\ Id.
---------------------------------------------------------------------------
Finally, the MLC noted that it ``publicly discloses detailed
analysis of its annual budget, annual collective total costs, and
annual expenditures applied against assessment fees collected, as well
as publicly disclosing copies of each annual IRS Form 990 filings.''
\183\
---------------------------------------------------------------------------
\183\ Id. at 34-35.
---------------------------------------------------------------------------
Very few commenters addressed the MLC's handling of administrative
assessment funds.\184\ The DLC and DIMA, however, questioned its
expenditure of resources to match sound recordings that have less than
one dollar in accrued mechanical royalties across all blanket periods
to date.\185\ They argued that ``it is highly inefficient for MLC[] to
expend substantial resources to match these works, with what can't even
be described as marginal benefits to creators.'' \186\ Finally, they
raised concerns related to transparency and access to information about
certain vendor contracts and administrative assessment data.\187\
---------------------------------------------------------------------------
\184\ See, e.g., Abby North Initial Comments at 3-4 (stating
that the MLC should ``spend more money on correcting incorrect party
data and mismatched recording data so that the correct parties
receive the distributed royalties''); NMPA Initial Comments at 7-8
(highlighting that ``the deal struck between music publishers and
DMPs during the drafting of the MMA was the agreement that DMPs
would fund `the collective total costs' of the MLC'' (emphasis
omitted)).
\185\ See DLC & DIMA Initial Comments at 19.
\186\ Id.
\187\ Id. at 15.
---------------------------------------------------------------------------
With regard to its efforts to match ``long tail'' works, the MLC
noted the Office's previous encouragement to ``be careful in adopting
and applying thresholds or cost/benefit analyses to appropriately
balance the need to be cost-effective and fiscally responsible with the
core duty to vigorously match.'' \188\ It explained that ``[i]t is
precisely [the DMP's] disregard for the value of robust and
comprehensive matching efforts that caused many of the problems that
the MMA sought to address, and it validates the prescient decision of
Congress to take control over the royalty administration process away
from [DMPs] and give it instead to a statutory collective governed by a
Board consisting almost entirely of rightsholders.'' \189\
---------------------------------------------------------------------------
\188\ MLC Reply Submission at 25 n.66 (quoting Unclaimed
Royalties Report at 82).
\189\ Id. at 24.
---------------------------------------------------------------------------
As further evidence of its fiscal efficiency, the MLC highlighted
administrative fee ratios it publishes in its annual reports. These
ratios ``are calculated by dividing the respective administrative
assessment for the calendar year by royalty metrics, with the metric
most relevant for comparison with industry benchmarks being total
royalty pools reported to [t]he MLC.'' \190\ In its initial submission,
the MLC reported administrative fee ratios at 4.23% in its first year
of operation, 3.97% in 2022, and 3.07% in 2023.\191\ For the 2024
calendar year, the MLC reported an administrative fee ratio at
3.86%.\192\ These ratios are comparable to or lower than those of other
collective management organizations.\193\
---------------------------------------------------------------------------
\190\ MLC Initial Submission at 35.
\191\ Id. at 35.
\192\ MLC 2024 Annual Report app. at 15.
\193\ According to the MLC's CEO, ``no other collective
management organization has ever reported an administrative cost
percentage less than 5%, and most similar organizations around the
world report percentages between 10% and 20% or more.'' MLC Initial
Submission at 35-36 (quoting Five Years Later--The Music
Modernization Act Before the Subcomm. on Courts, Intell. Prop. & the
internet of the H. Comm. on the Judiciary, 118th Cong. (2023)
(responses to questions on the record of Kris Ahrend, CEO,
Mechanical Licensing Collective)). The Office notes that
SoundExchange has reported administrative rates between four and six
percent. Why should I register with SoundExchange?, SoundExchange,
<a href="https://www.soundexchange.com/faq/why-should-i-register-with-soundexchange/">https://www.soundexchange.com/faq/why-should-i-register-with-soundexchange/</a> (last visited May 26, 2026).
---------------------------------------------------------------------------
Some commenters rejected the MLC's assertion that administrative
fee ratios are appropriate measures of efficiency in the context of the
blanket license.\194\ The DLC and DIMA argued that ``[g]iven the high
fixed costs of administering the section 115 license, focusing only on
the administrative expense ratio leads to the conclusion that MLC[] is
more efficient or less efficient merely because DMPs generated more or
less revenues.'' \195\ The DLC and DIMA contended that the MLC's
spending should correlate to the advancement of its statutory duties,
such as ```matching' tracks to underlying musical works, and setting up
systems to receive usage reports and make payments,'' notwithstanding
how much revenue the services generate.\196\
---------------------------------------------------------------------------
\194\ DLC & DIMA Initial Comments at 17; Abby North Initial
Comments at 3-4.
\195\ DLC & DIMA Initial Comments at 17-18.
\196\ Id. at 17; see also Abby North Initial Comments at 3-4
(``The goals should be to have the highest match and claim rate, the
cleanest data, and the most accurately paid members, not the lowest
admin fee.'').
---------------------------------------------------------------------------
Fiscal responsibility and efficiency remain core values in the
Office's assessment of the MLC's past performance, especially as
Congress envisioned the MLC ``operat[ing] in a transparent and
accountable manner.'' \197\ The Office acknowledges the MLC's efforts
to function accordingly. Indeed, since its initial designation, it has
delivered to the Office an annual report detailing all budgeting
information required under the statute and the Office's regulations. In
addition to the MLC's internal efforts to guard and expend funds
responsibly, such public reporting permits stakeholders to remain
vigilant against waste.
---------------------------------------------------------------------------
\197\ S. Rep. No. 115-339, at 7.
---------------------------------------------------------------------------
The Office recognizes that there may be a point at which
expenditures associated with matching activity could become
disproportionate to the value of royalties distributed. At present,
however, the record does not indicate that the MLC is approaching such
a threshold. To the contrary, its continued efforts to match works,
including those with low accrued royalties, are consistent with its
statutory obligation to identify and pay rightsholders, particularly
prior to making any market-based distribution of unmatched funds.
The Office further concludes that commenters have not established
that
[[Page 33220]]
the MLC's current metrics for assessing efficiency are unreasonable.
While there are multiple ways to evaluate efficiency, administrative
fee ratios are a commonly used and informative metric among CMOs. The
MLC's reported ratios fall within a range that supports a finding of
responsible stewardship. Therefore, we find no basis to disturb the
MLC's designation for that reason.
b. Increased Expenditures
Next, the Office asked the MLC to provide information on any
expenditure categories that have significantly increased since January
2021. In response, the MLC addressed two expenditure increases. First,
it explained that ``overall staffing expenses have significantly
increased since January 2021 as [t]he MLC has continued to build out
its internal teams by hiring new team members.'' \198\ Second, it
explained that expenses related to education and outreach increased
after 2022, because ``the COVID-19 pandemic prevented [t]he MLC from
conducting numerous activities that [t]he MLC would have otherwise
conducted from the outset,'' and during that time it engaged in
educational programs and activities exclusively on a virtual
basis.\199\ As pandemic-related restrictions relaxed, the MLC pivoted
to add more outreach and education through hosting and participating in
in-person events, which increased costs.\200\
---------------------------------------------------------------------------
\198\ MLC Initial Submission at 37.
\199\ Id.
\200\ Id.
---------------------------------------------------------------------------
Based on the information provided, the Office finds that the MLC
has reasonably explained the identified increases in expenditures,
including those related to staffing and outreach activities. These
explanations are consistent with its ongoing efforts to build
operational capacity and engage with stakeholders pursuant to its
statutory duties. At the same time, the Office emphasizes the
importance of continued attention to the efficient use of assessment
funds, particularly as certain expenditures have grown. Thus, we
encourage the MLC to consider whether additional or more granular
metrics may assist in evaluating the effectiveness and efficiency of
such spending, with particular focus on education and outreach
activities. The Office will continue to monitor these issues, including
through review of the MLC's annual reports and other disclosures.
4. Governance
In the NOI, the Office requested information related to the MLC's
governance, including, inter alia: a copy of the MLC's bylaws; an
explanation of how it approaches dispute resolution with interested
parties ``regarding interpretation of the MMA or the Office's
regulations''; an explanation of how it has been ensuring that ``its
policies, procedures, and practices are transparent and accountable''
and ``that all board and committee members have equal access to
information in the [MLC's] possession''; the ``status of any policies
or procedures related to the distribution of unclaimed accrued
royalties and accrued interest''; and any other ``policies addressing
its statutory duties, procedures, practices, and guidelines.'' \201\
---------------------------------------------------------------------------
\201\ NOI at 5944.
---------------------------------------------------------------------------
Overall, the Office finds that the MLC's governance meets the MMA's
requirements and supports the MLC's continued designation. On this
topic, comments noting concerns or improvements focused on the MLC
Board's composition, the Board's Songwriter Trade Group Director, the
MLC's authority to interpret the MMA or Copyright Act, transparency,
and certain MLC policies.
a. Bylaws, Board, and Committees
The MLC's Board and statutory committee members are selected in
accordance with its bylaws.\202\ When a nonvoting MLC Board member is
selected, that candidate ``is then referred to the Register of
Copyrights for evaluation, along with an explanation of how the
candidate satisfies the MMA's eligibility requirements'' and becomes
elevated to the Board only after the Librarian of Congress's
appointment.\203\ The MLC provided a copy of its bylaws and detailed
information on its Board and statutorily required committee
members.\204\ It also provided information on its non-statutory
committees, including their purposes, members, and selection
processes.\205\ These additional committees are the Budget Performance
Advisory Committee, Audit Committee, Compensation Committee, Songwriter
Nominating Committee, and Publisher Nominating Committee.\206\
---------------------------------------------------------------------------
\202\ MLC Initial Submission Ex. 3, secs. 6.1, 6.2, 7.2 (``MLC
Bylaws'').
\203\ MLC and DLC Contact Information, Boards of Directors, and
Committees, U.S. Copyright Office, <a href="https://www.copyright.gov/music-modernization/mlc-dlc-info/">https://www.copyright.gov/music-modernization/mlc-dlc-info/</a> (last visited May 26, 2026).
\204\ MLC Initial Submission at 39-60 and Ex. 3.
\205\ Id. at 60-64.
\206\ Id.
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i. Board and Committees
The Office received several comments addressing the statutory
composition of the MLC's voting directors, which is divided between
four self-published songwriters and ten music publisher
representatives.\207\ The Office appreciates these comments, but does
not have the power to change the Board's statutory composition by
regulation.
---------------------------------------------------------------------------
\207\ See BMAC & MAC Reply Comments at 2; Gwendolyn Seale
Initial Comments at 8; Lindvall, Lowery, & Morgan Initial Comments
at 17; SGA, SCL & MCNA Initial Comments at 4; SONA Initial Comments
at 7.
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Other comments raised concerns about current Board and committee
membership, with some suggesting that members do not adequately
represent the publishing and songwriting community, especially smaller
publishers and independent songwriters.\208\ The Office agrees that
participation on the MLC's Board or committees is a serious
responsibility and that these positions should, as a whole, represent
the varied interests of the greater publishing and songwriting
community. Although, other than the Songwriter Trade Group Director
position (discussed below), commenters did not make specific proposals
to this end, we encourage the MLC to consider ways to address concerns
regarding adequate representation of stakeholder groups on its Board
and committees.
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\208\ See Abby North Initial Comments at 6-7; BMAC & MAC Reply
Comments at 2; George Johnson Reply Comments at 12; SONA Initial
Comments at 7. For example, Go to Eleven Entertainment suggested
that the MLC would benefit from having members on the MLC's
Nominating Committees (committees not required by the MMA) who are
not on the MLC's Board, because ``the [B]oard controls the makeup of
new members indefinitely and they often do not pick people who would
challenge [the Board's] opinions.'' Go to Eleven Entertainment
Initial Comments at 3-4.
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ii. Bylaws Governing the Songwriter Trade Group Director
Songwriter groups specifically addressed how the MLC's bylaws
implement the statutory nonvoting Board seat for ``a representative of
a nationally recognized nonprofit trade association whose primary
mission is advocacy on behalf of songwriters in the United States''
\209\ (the ``Songwriter Trade Group Director''). According to the
bylaws, this director is ``elected by a vote of all Class A Members
[i.e., the Board's voting ``Songwriter Directors''], with each Class A
Member having one (1) vote. A tie vote shall be broken by a vote of the
full Board, or if still tied after such vote, by the vote of the Chair
of the Board.'' \210\ The Songwriter Trade Group Director's term
``shall continue
[[Page 33221]]
until a vote of the majority of the Class A Members at any Annual
Meeting of Members (or by a unanimous written consent of all Class A
Members delivered to the full Board) calls for election of a
replacement, at which point the term of the Songwriter Trade Group
Director shall expire at the next Annual Meeting of Members.'' \211\
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\209\ 17 U.S.C. 115(d)(3)(D)(i)(V).
\210\ MLC Bylaws sec. 4.2(c)(1).
\211\ Id. sec. 4.3. The bylaws also state that ``if a vacancy
arises with respect to the Songwriter Trade Group Director, the
Songwriter Directors shall appoint a replacement Director.'' Id.
sec. 4.4.
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Since the MLC's formation, the Songwriter Trade Group Director has
been a representative from NSAI. BMAC, MAC, and SONA suggested that
having varying songwriter group representatives fill the role would be
beneficial for songwriters as a whole.\212\ BMAC and MAC stated that
the MLC's bylaws ``make it challenging for different songwriter trade
groups to be considered for this position.'' \213\ SONA echoed this
claim.\214\ These groups also asked for ``clarification'' related to
the ``eligibility, nominating process, term length, and term limits''
for the Songwriter Trade Group Director position.\215\
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\212\ BMAC & MAC Reply Comments at 1-2 (``While we appreciate
the intent behind this role, we believe the current implementation
falls short of providing adequate representation for the diverse
songwriter community.''); SONA Initial Comments at 7; see also SGA,
SCL & MCNA Initial Comments at 4; Letter from Rep. Scott Fitzgerald
to Shira Perlmutter, Register of Copyrights and Director, U.S.
Copyright Office at 3-4 (Aug. 29, 2024) (noting stakeholder concerns
on this topic).
\213\ BMAC & MAC Reply Comments at 2.
\214\ SONA Initial Comments at 7 (``Due to a lack of clarity,
the nature of the bylaws of The MLC make it virtually impossible for
any other songwriter trade group to be contemplated.'').
\215\ BMAC & MAC Reply Comments at 1-2; SONA Initial Comments at
7.
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It is important to emphasize that neither BMAC, MAC, nor SONA
criticized the current Songwriter Trade Group Director or NSAI, the
Director's trade group. In fact, SONA expressed its ``gratitude for all
the work that NSAI has dedicated to the position.'' \216\ The Office
echoes the appreciation for NSAI's work to support the MMA's goals,
including through its participation on the MLC's Board.
---------------------------------------------------------------------------
\216\ SONA Initial Comments at 7.
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The Office does, however, recommend some changes to the MLC's
bylaws governing the Songwriter Trade Group Director. We believe that
the bylaws' current provision governing the Songwriter Trade Group
Director's term is inconsistent with the statute, as the term does not
have a fixed duration, but continues until the Songwriter Directors
call for the election of a replacement Songwriter Trade Group
Director.\217\ The MMA gives the MLC the authority to establish rules
governing ``the length of the term for each member of the board of
directors,'' \218\ and that phrase suggests a fixed duration.\219\
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\217\ MLC Bylaws sec. 4.3. The bylaws also state that ``if a
vacancy arises with respect to the Songwriter Trade Group Director,
the Songwriter Directors shall appoint a replacement Director.'' Id.
sec. 4.4.
\218\ 17 U.S.C. 115(d)(3)(D)(ii)(I)(aa) (emphasis added).
\219\ See Term, Black's Law Dictionary (12th ed. 2024) (defining
``term,'' in part, as a ``fixed period of time'').
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While the rules governing the Songwriter Trade Group Director's
nomination and election provisions do not conflict with the letter of
the law, as the MMA gives the MLC discretion in their implementation,
the Office believes that there would be significant benefits to
expanding the pool of songwriters who could nominate and elect the
Songwriter Trade Group Director. Amending the bylaws to allow for
greater songwriter input also would be consistent with the MMA's
legislative history, which states ``that songwriters should be
responsible for identifying and choosing representatives that
faithfully reflect the entire songwriting community on the Board.''
\220\
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\220\ Conf. Rep. at 4.
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The Office encourages the MLC's Board to make these changes as soon
as reasonably practicable.
iii. Authority To Interpret the MMA or Copyright Act
Some commenters questioned the MLC's authority to establish various
policies, including those that interpret the MMA or Copyright Act. For
example, Artist Rights Institute and Abby North noted their concern
over ``appeal rights in the policies and practices of [t]he MLC . . .
that effectively make the MLC a [rulemaking] body not authorized by the
Music Modernization Act.'' \221\ Attorney Gwendolyn Seale stated that
``[a]dditional transparency regarding some of the MLC's positions taken
since 2021 is warranted, particularly with respect to its (1)
investment policy, (2) copyright terminations policy, and (3)
historical royalties distributions decisions.'' \222\
---------------------------------------------------------------------------
\221\ Artist Rights Institute & Abby North Reply Comments at 1.
\222\ Gwendolyn Seale Initial Comments at 8 (noting also that
``the MLC should be disclosing its organizational meeting minutes to
the public, so the public is aware of the rationale behind its
decisions'').
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Nothing in the statute gives the MLC authority to interpret the
Copyright Act or MMA.\223\ Moreover, it is the Office, with the
Librarian of Congress's approval, that has the authority to promulgate
regulations to effectuate the mechanical license and the CRJs who have
the authority to set the statutory mechanical license's rates and
terms, establish the administrative assessment, and promulgate
regulations related to that assessment.\224\ At the same time, Congress
granted the MLC its own specified authorities and functions, including
the ability to establish its own bylaws.\225\ While not every decision,
practice, or dispute involving the MLC requires the Office's legal
guidance,\226\ we have made clear that we will provide such guidance
when there is a dispute over the correct interpretation of the
Copyright Act or MMA.\227\ To the extent that stakeholders have
concerns about specific MLC practices or legal interpretations, we
encourage them to bring those concerns to our attention.
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\223\ Cf. 17 U.S.C. 702 (``The Register of Copyrights is
authorized to establish regulations not inconsistent with law for
the administration of the functions and duties made the
responsibility of the Register under this title.''); 89 FR 56586,
56610 (July 9, 2024).
\224\ 17 U.S.C. 801(b)(1), (b)(8); id. at 115(c)(1)(E)-(F),
(d)(12)(A).
\225\ Id. at 115(d)(3)(C), (d)(3)(D)(ii).
\226\ The Office also recognizes that Congress intended that the
Office's regulations would ``balance[] the need to protect the
public's interest with the need to let the new collective operate
without over-regulation.'' Conf. Rep. at 12.
\227\ The CRJs are responsible for clarifying any confusion over
their own regulations. See, e.g., 85 FR 22518, 22529-30 (Apr. 22,
2020) (noting, in the context of a dispute over the CRJ's regulatory
definition of ``offering,'' that ``[t]his issue does not seem
appropriate for the Office to opine on one way or the other . . .
[and] concerns should be addressed to the CRJs'' and on the issue of
the CRJ's late fee regulations, ``any clarification should come from
[the CRJs]'').
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b. Transparency, Accountability, and Access
As Congress observed, the MLC ``is expected to operate in a
transparent and accountable manner'' and that the MMA ``specifically
requires that the [MLC] shall ensure that its policies and practices
are transparent and accountable.'' \228\ The NOI asked for an
explanation of how the MLC has been ensuring that ``its policies,
procedures, and practices are transparent and accountable'' and ``that
all board and committee members have equal access to information in the
[MLC's] possession.'' \229\
---------------------------------------------------------------------------
\228\ Conf. Rep. at 6.
\229\ NOI at 5944.
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The MLC provided examples of how it meets this requirement. First,
it noted that copies of its policies, ``detailed information about its
procedures and practices,'' and ``Annual Reports and annual IRS
filings'' are all available on its website.\230\ It also noted that it
``has built and deployed numerous tools and resources to facilitate
access to and
[[Page 33222]]
usage of [t]he MLC's public data by its [m]embers and members of the
public,'' which ``provide users with significant transparency and
promote accountability.'' \231\ It stated that it ``provides detailed
royalty statements every month to [m]embers receiving royalty
payments'' and ``engages in diligent efforts to publicize throughout
the music industry the existence of The MLC and the ability for
rightsholders to register new works, claim shares in registered works,
and submit proposed matches to unmatched usage, providing transparency
and broad accountability on usage and ownership records.'' \232\
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\230\ MLC Initial Submission at 69-70.
\231\ Id. at 70-71; see also id. at 12-18 (describing tools and
resources).
\232\ Id. at 71.
---------------------------------------------------------------------------
Many commenters supported the MLC's efforts to enhance the
transparency of its policies, procedures, and practices.\233\ Some,
however, requested additional transparency concerning its matching
efforts,\234\ investment policy,\235\ vendors,\236\ and the process to
nominate its Songwriter Trade Group Director.\237\ Those topics are
discussed in other sections of this recommendation. Commenters also
sought increased transparency on various topics, including royalty
holds \238\ and voluntary licenses.\239\ Finally, some asked for the
MLC to use clearly defined terminology in its public-facing documents
\240\ and would like more information and the opportunity to provide
input into its policy-making process.\241\
---------------------------------------------------------------------------
\233\ AGM Initial Comments at 1-2 (``The MLC has set forth for
us a verifiable and exemplary track record of transparency,
efficiency, professionalism, and dependability.''); Big Machine
Music Initial Comments at 1-2 (noting that ``[t]he transparency of
song information at the MLC ensures that we and our songwriters are
able to keep accurate registration details of our songs, and
consequently receive accurate and complete royalty payments,'' ``the
MLC's regular Top Unmatched Sound Recordings Uses Report gives us a
new level of transparency than we have historically received, and
allows us to make sure our songs don't fall through the cracks,''
and ``has allowed U.S. mechanical streaming income to become one of
the most predictable and transparent revenue sources in the music
industry''); NMPA Initial Comments at 4-5; NMPA Reply Comments at 9-
11; NSAI Initial Comments at 2; Peermusic Initial Comments at 2
(``On an operational level, the transparency, reliability, and
accuracy of reporting [by the MLC] has been exceptional.'');
Recording Academy Reply Comments at 2, 4 (``[T]he MLC has provided
unprecedented transparency regarding the disposition of historical
unmatched royalties.''); Reservoir Initial Comments at 1.
\234\ A2IM Initial Comments at 2-3 (``It is crucial for the MLC
to provide clear statistics on fully matched, partially matched, and
unmatched titles to ensure transparency and build trust among rights
holders.''); Abby North Initial Comments at 5; Artist Rights
Alliance Reply Comments at 2 (``The MLC should increase transparency
around the amount and status of matched and unmatched royalties, so
that rightsholders are fully informed and included in the
process.''); Artist Rights Institute Ex Parte Letter at 3 (Aug. 22,
2025) (``There must be a formal mechanism for the U.S. Copyright
Office (USCO) or a designated independent representative experienced
in royalty accounting, database management and royalty compliance
examinations . . . to regularly review [t]he MLC's benchmarks for
matching, claiming, and distribution.''); CleaRights Initial
Comments at 1; George Johnson Reply Comments at 9; Music Answers
Initial Comments at 1; Spirit Music Group Initial Comments at 2.
\235\ A2IM Initial Comments at 3-4; Artist Rights Institute Ex
Parte Letter at 2, 5-8, 11-12 (Aug. 22, 2025) (calling for more
transparency around governance issues, including the Investment
Policy (MLC Initial Submission, Ex. 7)); BMAC & MAC Reply Comments
at 2; Go to Eleven Entertainment Initial Comments at 4; Gwendolyn
Seale Initial Comments at 8; SGA, SCL & MCNA Initial Comments at 10.
\236\ DLC & DIMA Initial Comments at 15 (stating that the MLC
``declined to disclose the names of a number of the vendors that it
works with, as well as its agreements with firms providing
accounting, audit and legal services, without any clear explanation
as to why that information is not being made publicly available''
and ``continues to limit [the DLC's] visibility into its contracts
that are under $500,000 in value, despite [the DLC's] requests for
transparency into those not-insignificant expenditures''); Go to
Eleven Entertainment Initial Comments at 2; Gwendolyn Seale Initial
Comments at 7 (``In furtherance of transparency, the MLC should
state whether it: (1) sets performance criteria for its vendors, (2)
conducts evaluations of its vendors' performances, and if the answer
to both questions are `yes,' then it should disclose the performance
criteria and results of such evaluations. . . . If the MLC is not
setting performance criteria and is not conducting evaluations of
its vendors, it should do so, and include the results in each annual
report going forward.''); SONA Ex Parte Letter at 2 (Aug. 18, 2024);
Spirit Music Group Initial Comments at 3.
\237\ BMAC & MAC Reply Comments at 2. Two comments also
addressed transparency of the MLC's annual report. Herman Rodriguez-
Bajandas Initial Comments at 2-3; Letter from Rep. Scott Fitzgerald
to Shira Perlmutter, Register of Copyrights and Dir., U.S. Copyright
Office at 3-4 (Aug. 29, 2024). The annual report's requirements,
however, are found in the statute and regulations. 17 U.S.C.
115(d)(3)(D)(vii); 37 CFR 210.33. Any adjustments to those
requirements would come from Congress or in a separate regulatory
proceeding.
\238\ Hameys Songs Initial Comments at 2.
\239\ Imbr Initial Comments at 2-3.
\240\ Gwendolyn Seale Initial Comments at 2; see also SGA, SCL &
MCNA Initial Comments at 5-8 (stating that certain data reported by
the MLC is ``confusing'').
\241\ DLC & DIMA Initial Comments at 14 (``[T]he MLC should
ensure that all stakeholders are made aware of its activities and
decision-making processes.''); Gwendolyn Seale Initial Comments at
2, 8 (``Additional transparency regarding some of the MLC's
positions taken since 2021 is warranted, particularly with respect
to its (1) investment policy, (2) copyright terminations policy, and
(3) historical royalties distributions decisions. . . . I believe
the MLC should be disclosing its organizational meeting minutes to
the public, so the public is aware of the rationale behind its
decisions.''); Recording Academy Reply Comments at 5; see also Abby
North Initial Comments at 8 (``When [t]he MLC envisions a new
policy, members should be provided a mechanism to provide input
related to this policy, prior to it being adopted.'').
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The Office appreciates the MLC's efforts to provide higher levels
of transparency into its policies, procedures, and practices. We also
appreciate that it has responded to our requests by providing
additional information in meeting summaries or in its annual
reports.\242\ The Office expects the MLC to seriously consider
commenters' requests for additional transparency on the topics noted
above. In particular, it should consider ways that songwriters and
publishers who are not on the MLC's Board or Committees can be better
informed of those groups' activities,\243\ and have the opportunity to
submit data or opinions relevant to policies, procedures, and practices
before they are finalized.\244\
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\242\ See, e.g., MLC Ex Parte Letter at 1-2, 5-6 (July 21, 2025)
(providing the Office with additional requested data); MLC 2024
Annual Report at 36-37 (reflecting the Office's request for the MLC
to clarify how it uses the terms ``unmatched royalties'' and
``unclaimed royalties'').
\243\ Unclaimed Royalties Study at v (``The MLC should be
transparent about its activities and should continue to engage
regularly with stakeholders. Toward this end, among other things,
the MLC should make relevant material publicly available on its
website, including: (1) full and complete copies of policies,
practices, and procedures (e.g., those concerning holding and
distributing royalties, data quality, and matching activities)
accompanied by clear layperson's explanations as well as discussions
of its decision-making processes. . . .'').
\244\ As Congress indicated in the context of discussing the
MLC's statutory committees, ``[g]iven their importance, the three
committees established by the collective must operate in a
transparent manner to the greatest extent possible in order to avoid
unnecessary litigation as well as to gain the trust of the entire
music community.'' Conf. Rep. at 4.
---------------------------------------------------------------------------
c. Unclaimed Royalties Policy
The MMA directed the MLC's Unclaimed Royalties Oversight Committee
to ``establish policies and procedures for the distribution of
unclaimed accrued royalties and accrued interest,'' in accordance with
the statute.\245\ In response to the Office's earlier request for a
status update,\246\ the MLC indicated that it had not yet adopted such
policies and that it intended to do so in advance of any
distribution.\247\ As discussed above, it has now announced that it is
developing a policy governing the distribution of unclaimed accrued
royalties and accrued interest, with distributions expected to begin in
January 2027.
---------------------------------------------------------------------------
\245\ 17 U.S.C. 115(d)(3)(J)(ii).
\246\ NOI at 5944.
\247\ MLC Initial Submission at 68.
---------------------------------------------------------------------------
The comments received provide useful context for the development of
that policy. Commenters generally
[[Page 33223]]
supported the MLC's decision to hold unclaimed royalties beyond the
minimum statutory period, so that it can improve its matching and
claiming efforts.\248\ At the same time, some emphasized the importance
of transparency and increased stakeholder engagement in advance of any
market share distribution.\249\ For example, the Recording Academy
stated, ``[w]hen the time does finally come to distribute unmatched
royalties, the MLC must proceed with the . . . spirit of full
transparency. A detailed explanation of the proposed process for
distribution should be circulated well in advance with ample
opportunity for stakeholders to weigh in.'' \250\ Similarly, while
Representative Scott Fitzgerald praised the MLC's work to identify
copyright owners of historical royalties, he noted that ``questions
remain about whether the eventual market share based distribution
serves as a disincentive to continue innovation'' and ``encourage[d]
the Copyright Office to define clear timeframes and transparency
measures in the distribution process as a condition of redesignation.''
\251\
---------------------------------------------------------------------------
\248\ See, e.g., A2IM Initial Comments at 2 (``The Copyright
Office should consider conditioning MLC redesignation on further
delay in the distribution of these funds . . . until the MLC fully
implements improvements to the system that result from this periodic
review.''); BMAC & MAC Reply Comments at 3 (``We strongly believe
that the distribution of unmatched royalties based on market share
should not occur until significant improvements are made to the
MLC's matching technology and processes.''); Recording Academy Reply
Comments at 4-5; SONA Initial Comments at 4.
\249\ NSAI Initial Comments at 3 (``NSAI believes that The MLC
needs to prioritize creating a strategy around its eventual market
distribution of historic unmatched royalties. There is a necessary
sequence of events that must begin in earnest in order to
appropriately fulfill the obligation of the law. . . . It will be
necessary to formulate and publish a written timeline of when and
how unclaimed royalties from specific periods will be distributed.
Public notice of an impending distribution will be the only way to
motivate owners who have not prioritized claiming their
royalties.''); SGA, SCL & MCNA Initial Comments at 5, 11 (requesting
the establishment of certain rules governing the distribution of
unclaimed royalties by market share and stating that ``[e]nsuring
fairness in market share-based distribution decision-making by the
MLC board has thus already become a challenge of overwhelming
importance that can only be met by genuine transparency . . . .'').
\250\ Recording Academy Reply Comments at 5.
\251\ Letter from Rep. Scott Fitzgerald to Shira Perlmutter,
Register of Copyrights and Director, U.S. Copyright Office at 4
(Aug. 29, 2024).
---------------------------------------------------------------------------
The Office supports the MLC's efforts to develop policies and
procedures governing the distribution of unclaimed accrued royalties
well in advance of the tentative January 2027 distribution. As those
policies are developed, we encourage the MLC to take into account the
considerations raised by commenters. Advance publication of policies
and procedures related to the distribution will provide rightsholders
an opportunity to offer input. The Office looks forward to working with
the MLC on this matter, and will continue to monitor its progress.
d. Other Statutory Policies, Procedures, Practices, and Guidelines
In addition to inquiries regarding the MLC's Unclaimed Royalties
Policy, the NOI requested ``[c]opies of all the [MLC's] policies
addressing its statutory duties, procedures, practices, and
guidelines,'' along with ``the location of these policies, procedures,
and practices on its website if they are currently available to the
public, and a summary of changes made, if any, from earlier versions of
these policies, procedures, practices, and guidelines.'' \252\ The
MLC's initial submission provided this information for its Conflict of
Interest Policy, Musical Work Ownership Dispute Policy, Statutory
Termination Policy, and Guidelines for Adjustments.\253\ It also
provided this information for its Investment Policy Statement and Cash
Management Policy Statement, which are discussed in depth below. After
the Office concluded our rulemaking on ``Termination Rights, Royalty
Distributions, Ownership Transfers, Disputes, and the Music
Modernization Act,'' \254\ the MLC updated its Statutory Termination
Policy.\255\ In September 2024, it established its Catalog Transfer
Policy, which it revised in November 2024.\256\
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\252\ NOI at 5944.
\253\ MLC Initial Submission at 64-65, 67 and Exs. 5, 6, 9.
\254\ 89 FR 56586.
\255\ See MLC Ex Parte Letter at 3 (July 21, 2025).
\256\ See id.
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i. Conflict of Interest Policy
Fewer comments addressed the MLC's Musical Work Ownership Dispute
Policy, Statutory Termination Policy, Catalog Transfer Policy, or
Guidelines for Adjustments.\257\ The DLC and DIMA, however, objected to
the MLC's Conflict of Interest Policy, stating that the MLC ``has
excluded [the DLC's] statutorily designated board member from its board
discussions, pursuant to [the] policy.'' \258\ They went on to state
that ``[s]uch exclusions are plainly improper, as the MMA specifically
and purposefully requires a [DLC] representative to serve on [the
MLC's] board of directors'' and that ``[e]ven as a non-voting member,
that representative should, as a rule, be entitled to participate in
[the MLC's] board meetings and be aware of its discussions and
decisions.'' \259\
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\257\ The Office notes, for the MLC's further consideration,
several comments related to specific aspects of these policies.
Gwendolyn Seale Initial Comments at 8-9 (addressing Statutory
Termination Policy); Go to Eleven Entertainment Initial Comments at
4 (addressing Statutory Termination Policy); NSAI Initial Comments
at 3 (addressing Statutory Termination Policy); Spirit Music Group
Initial Comments at 3 (``The MLC's adjustment policy does not allow
for debits and credits of rightsholders in the event of an error.
Additionally, credits to the entitled rightsholder are not delivered
unless the funds are received from the party paid in error. CMOs
around the world have policies in place to handle adjustments and
the MLC should have similar procedures in place.''); Go to Eleven
Entertainment Initial Comments at 5 (characterizing the MLC's
current conflicts procedures as ``not efficient'' due in part to the
lack of deadlines in the ```informal reach out''' stage); SGA, SCL &
MCNA Initial Comments at 11 (urging the MLC to ``revamp[] . . .
rules governing the ability of music creators to demand proper and
accurate changes to the MLC database if the copyright owner of a
work refuses to respond to written correction requests within a
thirty-day period'').
\258\ DLC & DIMA Initial Comments at 14.
\259\ Id. The DLC and DIMA also opined that ``the Copyright
Office should issue a regulation that clearly outlines the instances
(if any) in which a given member of the board, whether voting or
non-voting, may be properly excluded from a board meeting.'' Id. at
29.
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The MLC's Conflict of Interest Policy states that it ``is intended
to supplement but not replace applicable state and federal laws
governing conflicts of interest.'' \260\ The MLC has also explained
that ``the policy is employed to appropriately manage actual,
potential, or perceived conflicts in accordance with applicable legal
requirements'' and ``serves its broader commitment to accountability
and transparency.'' \261\
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\260\ MLC Initial Submission Ex. 5, art. I.
\261\ MLC Ex Parte Letter at 7 (July 21, 2025).
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In response to the DLC and DIMA's comments, the MLC stated that it
``notified the DLC representative when there will be a discussion of .
. . topics [that involve a conflict for the DLC Board Member], and the
DLC representative has been recused from that portion of the meeting,''
but it ``has not insisted on specific disclosure of every actual,
potential or perceived conflict, and has not sought penalties against
the DLC representative for failure to disclose all such conflicts,''
notwithstanding ``the obviousness of the conflicts that exist for the
DLC representative.'' \262\ It provided the following example of where
the DLC Board Member would be excluded from participating in an MLC
Board meeting:
---------------------------------------------------------------------------
\262\ MLC Reply Submission at 33-34.
[T]he DLC representative on the Board is without question a
representative of third parties who have Transactions (as that term
is defined in the Conflict of Interest policy) with The MLC--
including the DLC itself, which has negotiated and entered into
multiple agreements with [t]he MLC concerning the administrative
assessment
[[Page 33224]]
. . . . When a meeting of The MLC Board is to include a discussion
of whether to accept the DLC's proposed terms for the administrative
assessment, the DLC representative is obviously not entitled to sit
in on that discussion.\263\
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\263\ Id. at 33 n.89.
The MLC also emphasized that ``when acting in their capacity on the
Board, all Board members of [t]he MLC have a fiduciary duty of loyalty
to [t]he MLC,'' including the DLC Board Member.\264\ Finally, it added
that the DLC's Board Member ``has not before sought to create a dispute
over this practical way of handling conflicts.'' \265\
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\264\ Id. at 34.
\265\ Id.
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At this time, the Office is not making any recommendations
concerning the MLC's Conflicts of Interest Policy, to permit further
discussion and potential refinement of the issues. We will continue to
consider this issue and any possible recommendations, as appropriate;
we also encourage the MLC and DLC to find a mutually agreeable
resolution.
ii. Anti-Comingling Policy
The MMA also directs the MLC to ``establish an anti-comingling
policy for funds not collected under [17 U.S.C. 115] and royalties
collected under [17 U.S.C. 115],'' \266\ i.e., a policy to avoid
combining royalty funds collected under the statutory blanket license
with any other funds. Those other funds could include its own
operational funds (i.e., funds under the administrative assessment,
voluntary contributions from DMPs and SNBLs, or fees charged for
services) or royalties for voluntary licenses that it administers.
---------------------------------------------------------------------------
\266\ 17 U.S.C. 115(d)(3)(D)(ix)(I)(cc); MLC 2024 Annual Report
app. at 5 (noting that its Investment Policy ``contain[s] an anti-
commingling policy'' as required by the MMA).
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While the MLC does not have a stand-alone anti-comingling policy,
its Investment Policy Statement and its Cash Management Policy
Statement (both discussed in more detail below) each include anti-
commingling policies.\267\ Neither policy, however, accounts for the
commingling of funds collected by the MLC when administering voluntary
licenses.\268\ While the MLC does not currently administer voluntary
licenses, it should adopt a standalone anti-commingling policy to
account for this possibility.
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\267\ MLC Initial Submission Exs. 7, at 3, and 8, at 2.
\268\ Id. at Exs. 7, at 3, and 8, at 2.
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5. Governance--Financial Management
a. Background
The final governance issue involves the MLC's financial management
of royalties for (1) unmatched works and (2) matched works that have
not yet been distributed (what the MLC calls ``royalties pending
distribution''). The MMA provides some direction on how the MLC should
manage royalties in its possession. The statute authorizes it to
``[c]ollect and distribute royalties from digital music providers,''
and ``[e]ngage in such other activities as may be necessary or
appropriate to fulfill [its] responsibilities.'' \269\ This
authorization, however, is subject to ``more particular requirements,''
\270\ including a requirement that the MLC ``deposit into an interest-
bearing account'' any royalties that cannot be distributed due to ``an
inability to identify or locate a copyright owner of a musical work (or
share thereof); or . . . a pending dispute before the [D]ispute
[R]esolution [C]ommittee.'' \271\
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\269\ 17 U.S.C. 115(d)(3)(C)(i)(II), (XIII).
\270\ Id. at 115(d)(3)(C)(i).
\271\ Id. at 115(d)(3)(G)(III)(aa), (bb).
---------------------------------------------------------------------------
The statute further details the process: ``Accrued royalties for
unmatched works (and shares thereof) shall be maintained . . . in an
interest-bearing account that earns monthly interest--(I) at the
Federal, short-term rate; and (II) that accrues for the benefit of
copyright owners entitled to payment of such accrued royalties.'' \272\
Once the MLC has located the owner of an unmatched work--and provided
that it has not already distributed the royalties as unclaimed--it must
pay the ``royalties and a proportionate amount of accrued interest
associated with that work (or share thereof) to the copyright owner.''
\273\ The MMA does not contain comparable language addressing whether
or how the MLC should generate or pay interest for royalties pending
distribution.
---------------------------------------------------------------------------
\272\ Id. at 115(d)(3)(H)(ii).
\273\ Id. at 115(d)(3)(I)(ii).
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In the NOI, the Office requested copies of any MLC policies
addressing statutory duties, procedures, practices, and guidelines,
including those governing the ``collection, processing, holding, and
distribution of royalties,'' and ``investments.'' \274\ In response,
the MLC provided its ``Investment Policy Statement'' and ``Cash
Management Policy Statement.'' \275\
---------------------------------------------------------------------------
\274\ NOI at 5944.
\275\ MLC Initial Submission Exs. 7 and 8.
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The Investment Policy Statement covers (1) ``royalties for sound
recording uses that have not yet been matched to an underlying musical
work''; (2) ``royalties for sound recording uses that have been matched
to an underlying musical work, but for shares of that work where the
identity and/or sufficient payment instructions for the copyright owner
are not yet known''; and (3) ``royalties that have been matched, and
where one or more copyright owner claims have been made, but where
royalties are not yet payable, including due to ownership disputes,
reviews over eligibility for payment, regulatory guidance or legal
claims.'' \276\ In other words, it covers royalties the MLC considers
to be subject to the ``Statutory Interest'' requirements described
above.\277\ In contrast, the Cash Management Policy Statement covers
all other royalties, chiefly those pending distribution, which are held
in money market or bank deposit accounts ``for a relatively brief
period of time, until they can be processed as part of regular monthly
royalty distributions.'' \278\
---------------------------------------------------------------------------
\276\ Id. at Ex. 7, at 1.
\277\ Id.
\278\ Id. at Ex. 8, at 1, 3.
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Regarding its Investment Policy, the MLC submitted that ``the MMA
effectively requires . . . an investment program.'' \279\ It claimed
that ``[t]here is no deposit account where [t]he MLC can maintain
royalty funds and earn interest at the [F]ederal short-term rate,
without risk to the principal or interest.'' \280\ It noted that the
Federal short-term rate typically exceeds the return available from
bank and money market accounts; the MMA did not create a deposit
account that offers that rate; and the government has not made such an
account available to the MLC.\281\ Absent the ability to directly
obtain the rate designated by the MMA, the MLC ``developed an
investment program intended to earn the necessary interest rate while
keeping risk at a minimum,'' with guidance from a fixed-fee financial
advisor.\282\
---------------------------------------------------------------------------
\279\ Id. at 66.
\280\ Id.
\281\ Id.; id. at Ex. 7, at 3.
\282\ Id. at 66.
---------------------------------------------------------------------------
The Investment Policy Statement provides the MLC with two options
for holding unmatched royalty funds: ``(1) exceptionally diversified,
high quality, short-term, fixed income and cash equivalent strategies
via short-term fixed income funds and money market funds managed by
reputable and experienced institutional investment firms that have been
diligently vetted and/or (2) [Federal Deposit Insurance Corporation]
insured bank deposit accounts with reasonable levels of
[[Page 33225]]
insurance for the funds placed.'' \283\ For royalties pending
distribution, the Cash Management Policy Statement retains the same
bank deposit option, but modifies the investment option to: ``high-
quality cash equivalent strategies via money market funds managed by
reputable, experienced institutional investment firms that have been
diligently vetted.'' \284\ Both policies require the MLC to
``regularly'' meet with its financial advisors to review its strategy
and monitor the performance of investments to ``ensure they continue to
align with [the relevant] policy.'' \285\
---------------------------------------------------------------------------
\283\ Id. at Ex. 7, at 3.
\284\ Id. at Ex. 8, at 3.
\285\ Id. at Exs. 7, at 4, and 8, at 3.
---------------------------------------------------------------------------
Beyond these policy statements, the MLC provided limited
information about the details of its investments. According to the MLC,
it ``has investments in a handful of mutual funds managed by
significant and experienced institutional investment firms that our
financial advisors have thoroughly vetted,'' and has at times ``held a
small amount of funds in deposit accounts at a handful of commercial
banks willing to offer very competitive interest rates.'' \286\ It
further stated that ``[f]unds are never placed in investments that
would be classified as having heightened or high risk.'' \287\
---------------------------------------------------------------------------
\286\ Id. at 66.
\287\ Id.
---------------------------------------------------------------------------
Although prior versions of the policy statements detailed specific
investments, the MLC withheld those statements from the public,\288\
concluding that it would be ``inappropriate to disclose . . . specific
recommendations in a public document.'' \289\ It had ``security
concerns and concerns that such information could be used alongside
[its] public royalty distribution timelines to engage in market timing
to the detriment of [t]he MLC.'' \290\ Before publicly disclosing its
policy statements, it amended them to remove information about specific
investments.\291\
---------------------------------------------------------------------------
\288\ The Office also has not been provided with copies of those
statements.
\289\ MLC Initial Submission at 67.
\290\ Id. at 67 n.93.
\291\ Id. at 67.
---------------------------------------------------------------------------
b. Commenters' Views and the MLC's Response
Many commenters addressed the MLC's investment policies, and
generally called for greater transparency.\292\ Discussing the
statutory language, the Artist Rights Institute concluded, ``[w]hatever
Congress meant, it did not provide a broad discretionary authority to
invest `hundreds of millions of dollars' of other peoples' money in the
open market and then not disclose their holdings.'' \293\ Go to Eleven
Entertainment said ``[i]t is our money that they are investing, and I'd
like to know the details as would many other publishers''; \294\ while
attorney Gwendolyn Seale commented ``I do not understand why the MLC is
secretive about how it is investing songwriters' and publishers' . . .
royalties.'' \295\ ``[J]oin[ing] other filers,'' A2IM ``call[ed] for
increased transparency around the MLC's investment policies and the
revenue generated from those investments'' and cautioned that ``when
transparency fails, it breeds skepticism.'' \296\
---------------------------------------------------------------------------
\292\ See Artist Rights Institute Initial Comments at 2-8; A2IM
Initial Comments at 3-4; BMAC & MAC Reply Comments at 2; SGA, SCL &
MCNA Initial Comments at 10; DLC and DIMA Initial Comments at 26-28;
DLC & DIMA Reply Comments at 9-10; Christian L. Castle Reply
Comments at 2 n.3; Gwendolyn Seale Initial Comments at 8; Go to
Eleven Initial Comments at 4; George Johnson Initial Comments at 28-
29; George Johnson Reply Comments at 8; Hameys Songs Initial
Comments at 2.
\293\ Artist Rights Institute Initial Comments at 5.
\294\ Go To Eleven Entertainment Initial Comments at 4.
\295\ Gwendolyn Seale Initial Comments at 8.
\296\ A2IM Initial Comments at 3-4; see also the SGA, SCL & MCNA
Initial Comments at 10 (``[W]e remain highly disappointed by the
apparent lack of authority or ability of such administrators to
provide us with straightforward details concerning issues [such as]
investment of held royalties . . . .''); BMAC & MAC Reply Comments
at 2 (commenting that there ``lacks transparency to songwriters and
artists regarding how this investment fund will impact them'').
---------------------------------------------------------------------------
Several commenters asked for details on specific investments, with
some expressing concerns over potential conflicts of interest or other
possible mismanagement.\297\ Responding to the MLC's claim that it
cannot disclose such information due to security and market timing
risks, multiple commenters noted that at least one major investment is
(or was) already made public, albeit from public financial disclosures
by the investment fund and not the MLC itself.\298\
---------------------------------------------------------------------------
\297\ See, e.g., Artist Rights Institute Initial Comments at 5-8
(``Does [t]he MLC[ ] hold any shares of its board members companies
or any licensees? If so, how many share in which ones?''); A2IM
Initial Comments at 3-4 (``The MLC must disclose how they invest
funds [and] the revenue generated . . . .''); George Johnson Initial
Comments at 28 (``Where is the black-box money invested is another
question and how much have they made off their secret
investments?'').
\298\ See Gwendolyn Seale Initial Comments at 8; Artist Rights
Institute Initial Comments at 6-7; George Johnson Initial Comments
at 28-29; George Johnson Reply Comments at 8 n.16; Christian L.
Castle Reply Comments at 2 n.3.
---------------------------------------------------------------------------
Commenters also sought greater transparency on the MLC's policies
beyond the policy statements. Many asked some variant of: ``what
happens when profits are made or, more importantly, when losses are
incurred,'' \299\ or when and how will investment revenues be
distributed to rightsholders?\300\ Some questioned how investments
would be transferred in the event the MLC were not redesignated, with
the Artist Rights Institute asking ``[i]n whose name are the securities
held?'' \301\
---------------------------------------------------------------------------
\299\ Gwendolyn Seale Initial Comments at 8 (emphasis omitted);
see also Artist Rights Institute Initial Comments at 7 (``If
Congress authorized this investment program, who bears the losses
and who earns the profit on those investments?'').
\300\ See A2IM Initial Comments at 3-4 (``The MLC must disclose
. . . how they will disburse those revenues to rightsholders.'');
BMAC & MAC Reply Comments at 2 (``[T]here exists uncertainty
surrounding . . . investment fund losses or distribution impact on
payments of unmatched royalties . . . .''); Artist Rights Institute
Initial Comments at 7 (``Have there been any distributions of
trading profits from the investment corpus? If so, to whom were
these distributions made?'').
\301\ Artist Rights Institute Initial Comments at 7; see also
BMAC & MAC Reply Comments at 2 (noting uncertainty surrounding
``policies for transfer or ownership of the securities if the MLC in
[sic] not redesignated.'').
---------------------------------------------------------------------------
Separate from these transparency issues, the Artist Rights
Institute also suggested that the MLC may lack the statutory authority
to invest royalty funds at all.\302\ It claimed that had Congress
intended the MLC to invest funds, it ``would have taken more care to
specify which bank, what kind of bank, what happens to shortfalls or
windfalls, and so on.'' \303\ Instead, the Artist Rights Institute
suggested the statutory interest should function as a penalty
``similar[ ] to the royalty late fee,'' which could be paid out of the
administrative assessment.\304\
---------------------------------------------------------------------------
\302\ See Artist Rights Institute Initial Comments at 2-5, 7;
see also Gwendolyn Seale Initial Comments at 8 (``It must be said
that there is no specific language in the MMA which directs the MLC
to invest the historical royalties in its possession.'').
\303\ Artist Rights Institute Initial Comments at 3.
\304\ Id.
---------------------------------------------------------------------------
Conversely, the DLC and DIMA observed that collective management
organizations ``often generate interest or other investment income on
the funds they collect. Typically, interest is used to either offset
administrative costs of the organization or is added to the total pool
of funds to be distributed.'' \305\ While recognizing that the MMA is
explicit about the disposition of interest on royalties for unmatched
and disputed works, they argued that it is ``silent as to all of the
other categories of interest or other investment income,'' including
that ``earned as part of the ordinary churn of royalties.'' \306\ They
suggested that this income could be
[[Page 33226]]
significant and should be used to offset the MLC's administrative
costs.\307\
---------------------------------------------------------------------------
\305\ DLC & DIMA Initial Comments at 26.
\306\ Id. at 27.
\307\ Id.
---------------------------------------------------------------------------
In its reply comments, the MLC acknowledged that commenters had
raised questions about its investment policy, and responded by citing
to its Initial Submission and policies, saying they provided ``an
extensive explanation of why [t]he MLC is effectively required by the
MMA to have an investment program and how it works.'' \308\ It also
reiterated that it ``does not publicize the details of specific
investments, which involve security and market manipulation concerns.''
\309\
---------------------------------------------------------------------------
\308\ MLC Reply Submission at 22.
\309\ Id.
---------------------------------------------------------------------------
The MLC and others further discussed these issues at a series of ex
parte meetings with the Office.\310\ Initially, the MLC emphasized its
commitment to minimizing risks and preserving funds, quoted policy
provisions related to the independence of investment decisions, and
noted that it interprets ``Federal short-term rate'' as the rate
proscribed in 26 U.S.C. 1274(d).\311\ At the final ex parte meeting, it
provided details on several operational issues.\312\
---------------------------------------------------------------------------
\310\ See MLC Ex Parte Letter at 6-7 (July 21, 2025); MLC Ex
Parte Letter at 6-7 (Dec. 10, 2025); Artist Rights Institute Ex
Parte Letter at 6-10 (Aug. 22, 2025); DLC Ex Parte Letter Ex. 1
(Sept. 22, 2025).
\311\ MLC Ex Parte Letter at 6-7 and 6 n.11 (July 21, 2025).
\312\ MLC Ex Parte Letter at 6-7 (Dec. 10, 2025).
---------------------------------------------------------------------------
On the composition of its investment portfolio, the MLC explained
that ``consistent with best practices among nonprofit organizations
managing similar funds . . . , it has retained expert, fee-based
financial advisors to provide specialized guidance.'' \313\ According
to the MLC, it has been advised ``that an investment strategy composed
exclusively of purchasing U.S. Treasury securities would be highly
unlikely to meet the Statutory Interest Rate over time.'' \314\ This is
``due to several factors, including that the target benchmark reflects
current market yields while any portfolio holds securities purchased at
prior yields, causing systematic underperformance during periods of
rising rates; there is no guarantee that offsetting rate movements
would occur during the MLC's investment horizon; . . . ongoing
distribution obligations require liquidations even during unfavorable
conditions; and fund returns are net of fund expenses and so will
systematically lag the yield of any underlying bundle of treasuries.''
\315\ Accordingly, the MLC pursues a strategy designed by their
advisors to generate sufficient returns ``while prudently managing risk
and maintaining adequate liquidity.'' \316\
---------------------------------------------------------------------------
\313\ Id. at 6.
\314\ Id. (footnote omitted).
\315\ Id. at 6 n.13.
\316\ Id. at 6.
---------------------------------------------------------------------------
On investment expenses and costs, the MLC explained that ``fees
paid to its fee-based advisors are covered by assessment funds'' but
that ``mutual fund expense ratios are not investment fees paid by [t]he
MLC'' and ``are part of a fund's net asset value, with no distinct
investment fee payable by fund investors.'' \317\ When asked whether it
could structure its investments such that management fees are paid out
of the administrative assessment, it responded that it was ``not aware
of any such foreclosure by [Generally Accepted Accounting Principles],
but [t]he MLC chose to pursue the strategy that its fee-based advisors
recommended.'' \318\
---------------------------------------------------------------------------
\317\ Id. at 6-7.
\318\ Id. at 7.
---------------------------------------------------------------------------
On potential investment gains and losses, the MLC stated that it
holds investment returns that exceed the Federal short-term rate, and
the cash management interest on royalties pending distribution, to
``ensure that it can meet its statutory obligation to pay interest on
unmatched royalties.'' \319\ The MLC described these funds as
``reserves,'' claiming that it ``has not identified any excess funds
beyond reasonable reserves for its statutorily mandated interest
obligations in the future.'' \320\ As to a potential distribution of
excess reserves, it stated it ``has not created any policies for
distribution or liquidation of royalty funds beyond the distribution
provisions set forth in the MMA.'' \321\
---------------------------------------------------------------------------
\319\ Id. at 6 n.14.
\320\ Id. Although the MLC did not disclose the amount of its
reserves, it stated that it had ``approximately $153.7 million in
interest income'' at the end of October 2025. Id.
\321\ Id.
---------------------------------------------------------------------------
Finally, the MLC discussed whether its royalty investments would be
protected from non-royalty creditors in the event of insolvency.\322\
It ``stressed that it has no basis to expect any such situation to
occur, and reiterated comments shared with Congress.'' \323\ It said it
`` `would have to address the matter based upon the specific details at
hand,' '' and it is its ```intention and expectation that there will
never be a shortfall.' '' \324\ It also stated that ``royalty funds in
its custody are subject to statutory safeguards under the MMA.'' \325\
---------------------------------------------------------------------------
\322\ Id. at 7.
\323\ Id.
\324\ Id.
\325\ Id. (citing 17 U.S.C. 115(d)(3)(D)(ix)(I)(cc),
(d)(3)(G)(ii), (d)(3)(H)(ii), (d)(11)(D)).
---------------------------------------------------------------------------
c. Analysis
As discussed above, the MMA requires the MLC to ``deposit'' certain
royalty funds into ``an interest-bearing account'' that ``earns monthly
interest . . . at the Federal, short-term rate.'' \326\ Interest
``accrues for the benefit of copyright owners entitled to payment of .
. . accrued royalties,'' \327\ and the MLC must pay out a
``proportionate'' amount or share when making a distribution.\328\
Interpreting this language presents several challenges.
---------------------------------------------------------------------------
\326\ 17 U.S.C. 115(d)(3)(G)(i)(III).
\327\ Id. at 115(d)(3)(H)(ii).
\328\ Id. at 115(d)(3)(I)(ii), (J)(i).
---------------------------------------------------------------------------
i. The Federal Short-Term Rate
The phrase ``Federal, short-term rate'' is not defined or cross-
referenced in the Copyright Act or MMA. Beyond title 17, the phrase
does appear in the Internal Revenue Code at sections 1274(d)(1)(C)(i)
and 6621(b)(3); however, these sections supply different definitions
for different purposes. Section 1274 describes the process for
determining an imputed principal amount for certain debt instruments
that lack ``adequate stated interest.'' \329\ It defines ``[f]or
purposes of this section'' a short-term rate that is ``based on the
average market yield . . . on outstanding marketable obligations of the
United States with remaining periods to maturity of 3 years or less.''
\330\ In contrast, section 6621 describes the process for determining
interest rates corresponding to the underpayment and overpayment of
tax.\331\ It defines, ``[f]or purposes of this section,'' a short-term
rate that is calculated ``in accordance with section 1274(d),'' except
it is rounded to the nearest full percentage.\332\
---------------------------------------------------------------------------
\329\ See 26 U.S.C. 1274(a).
\330\ Id. at 1274(d)(1)(C)(i).
\331\ See id. at 6621(a).
\332\ Id. at 6621(b)(3).
---------------------------------------------------------------------------
The MLC takes the position that the section 1274 Federal short-term
rate is the rate contemplated by the MMA.\333\ The following factors
support this position. First, the MMA is explicit that interest is
earned ``monthly,'' and revenue rulings from the Treasury Department
under section 1274 provide the short-term rate calculated for different
compounding periods, including monthly, whereas rulings under section
6621 are based on daily compounding.\334\ Second, the short-term rate
defined in section 6621 is based on
[[Page 33227]]
the rate defined under section 1274. In the absence of an explicit
cross-reference to section 6621--something Congress has done in other
statutes--it is reasonable to infer that the base rate was intended.
Third, the short-term rate in section 6621 is rarely cross-referenced
directly. Instead, the Internal Revenue Code uses it to define separate
overpayment and underpayment rates, and it is those rates that are most
frequently cited by other statutes.\335\
---------------------------------------------------------------------------
\333\ MLC Ex Parte Letter at 6 n.11 (July 21, 2025).
\334\ Compare Rev. Rul. 2025-14, <a href="https://www.irs.gov/pub/irs-drop/rr-25-14.pdf">https://www.irs.gov/pub/irs-drop/rr-25-14.pdf</a> (last visited May 26, 2026), with Rev. Rul. 2024-
25, <a href="https://www.irs.gov/pub/irs-drop/rr-24-25.pdf">https://www.irs.gov/pub/irs-drop/rr-24-25.pdf</a> (last visited May
26, 2026).
\335\ See, e.g., 30 U.S.C. 1721. But see Public Law 113-291,
3021(c)(2) (Dec. 19, 2014) (amending prior version of section 1721
to refer to the ``Federal short-term rate determined under section
6621(b)'').
---------------------------------------------------------------------------
ii. Achieving the Statutory Rate
Assuming section 1274 applies, the statute is not clear as to how
the MLC should achieve that rate. The MLC takes the position that the
MMA directs it to maintain an internal account or ledger for unmatched
and disputed royalties, and to calculate interest owed pursuant to the
Federal short-term rate, but that the statute does not govern how it
must fund the interest obligations.\336\ It claims that in the absence
of deposit accounts that offer the Federal short-term rate, the statute
``effectively'' requires an investment program that obtains a return
that ``matches or exceeds [the] required amount.'' \337\ The problem
with this ``ledger'' approach is the plain language of the statute,
which directs the MLC to ``deposit'' funds ``into'' an ``interest-
bearing account'' that ``earns monthly interest.'' The ledger
interpretation would seem to render several of these statutory terms
meaningless.\338\
---------------------------------------------------------------------------
\336\ See MLC Initial Comments at 66 and Ex. 7, at 3; MLC Reply
Comments at 22; MLC Ex Parte Letter at 6 (July 21, 2025); MLC Ex
Parte Letter at 6 (Nov. 20, 2025).
\337\ MLC Initial Comments at 69, 191.
\338\ The Office also rejects the Artist Rights Institute's
claim that the MLC should do nothing with royalty funds at all and
pay the interest out of the administrative assessment as some form
of penalty. There is no indication that Congress intended this
approach.
---------------------------------------------------------------------------
The Office has no reason to doubt the MLC's assertion that there is
no standard financial product that would allow it to consistently earn
monthly interest at exactly the Federal short-term rate. The section
1274 rate is based on the average market yield on government debt
instruments, mainly U.S. Treasuries, with remaining maturity periods up
to three years, and is calculated based on the preceding month.\339\
This rate will often exceed rates available from traditional bank
accounts and money market funds because the underlying securities are
subject to greater duration risk.\340\
---------------------------------------------------------------------------
\339\ The rate is calculated each calendar month, for the
``following calendar month,'' based on ``the average market yield
(during any 1-month period selected by the Secretary and ending in
the calendar month in which the determination is made) on
outstanding marketable obligations of the United States with
remaining periods to maturity of 3 years or less.'' 26 U.S.C.
1274(d)(1)(C)(i); see also About Treasury Marketable Securities,
TreasuryDirect, <a href="https://www.treasurydirect.gov/marketable-securities/">https://www.treasurydirect.gov/marketable-securities/</a> (last visited May 26, 2026).
\340\ Cf. 17 CFR 270.2a-7(d)(1) (limiting the average maturity
of investments held by money market funds). At times, including in
recent years, some deposit accounts have offered rates that exceeded
the Federal short-term rate. This can happen when the treasury yield
curve is inverted, i.e., when one-month treasuries offer a higher
yield than three-year treasuries. Cf. 10-Year Treasury Constant
Maturity Minus 3-Month Treasury Constant Maturity, Federal Reserve
Bank of St. Louis, <a href="https://fred.stlouisfed.org/series/T10Y3M">https://fred.stlouisfed.org/series/T10Y3M</a> (last
visited May 26, 2026) (charting the historical spread between 10-
year and 3-month Treasury yields). But when the yield curve has a
positive slope--as is often the case, including when the MLC began
administering the blanket license--the Federal short-term rate will
likely exceed rates available from deposit accounts. This means the
MLC cannot reliably achieve the short-term rate from a traditional
deposit account.
---------------------------------------------------------------------------
The MLC must place royalty funds somewhere. Even if it used
traditional deposit accounts, such accounts are not entirely risk-free,
especially as they are not insured at the scale of the MLC's
holdings.\341\ And Congress directed the MLC to earn interest ``at''
the Federal short-term rate--not above or below it. While exceeding the
short-term rate could lead to greater interest payments or an
accumulated ``reserve,'' it also means greater risk exposure. If the
MLC cannot obtain the short-term rate in a deposit account directly,
one reasonable response would be to invest in assets that mirror the
risk and return of the short-term rate, i.e., a blend of U.S.
Treasuries with remaining maturities up to three years.\342\ Whether it
has done so, and how, presents a different set of questions.
---------------------------------------------------------------------------
\341\ Subject to more specific provisions and adjustments, the
Federal Deposit Insurance Corporation's ``standard maximum deposit
insurance amount'' is $250,000. See 12 U.S.C. 1821(a)(1)(E).
Depositors may be able to obtain greater coverage in certain
circumstances, but those methods do not appear to be a practical
solution for the MLC.
\342\ This would be somewhat analogous to the Copyright Office's
investment of cable, satellite, and digital audio recording devices
or media royalty fees in ``interest-bearing United States
securities''. See, e.g., 17 U.S.C. 111(d)(2) (``The Register of
Copyrights shall . . . deposit the balance in the Treasury of the
United States, in such manner as the Secretary of the Treasury
directs. All funds held by the Secretary of the Treasury shall be
invested in interest-bearing United States securities for later
distribution with interest . .''); id. at 119(b)(3) (same); id. at
1005 (same).
---------------------------------------------------------------------------
Initially, it is difficult to fully assess the MLC's investment
practices because its policies were adopted without public debate and
with limited public disclosure. The MLC has not publicly disclosed its
financial advisor, the fund(s) it invests in, the portfolio(s) held by
the fund(s), the amount(s) invested, or its policy for gains or losses.
Likewise, it has not identified the amount of interest earned on
royalties pending distribution under its cash management practices, or
a written policy on the distribution or use of this interest. However,
based on the information that is available, the Office has several
concerns.
The MLC claims that disclosing specific investments would pose
security and market timing risks.\343\ Yet, it appears that the
identity of a major investment has already been publicly disclosed via
routine Securities and Exchange Commission filings, and the MLC has not
responded or updated its practices. If there are substantial security
and market timing risks from that disclosure, it should take steps to
address them. If there are not, it should not cite them as a reason for
withholding information.
---------------------------------------------------------------------------
\343\ See, e.g., MLC Initial Submission at 67 n.93; MLC Reply
Submission at 22.
---------------------------------------------------------------------------
To the extent there are market timing risks, they would also seem
to arise from the MLC's decision to invest beyond U.S. Treasuries. The
treasury market is a multi-trillion-dollar market with high liquidity
and massive trading volumes. It is unlikely that the MLC could
influence such a market. Further, investing solely in U.S. Treasuries
would have a separate advantage--they are government-backed assets that
are relatively uncontroversial. While the Office has no reason to
question the propriety of the MLC's investments, and it certainly
appears that the underlying fund(s) hold relatively standard and
diversified fixed income securities, the decision to go beyond U.S.
Treasuries and the accompanying lack of transparency has fostered
suspicion among some stakeholders \344\ and may be inconsistent with
Congressional intent in choosing an interest rate explicitly tied to
marketable U.S. government debt.
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\344\ For example, some commenters questioned whether the MLC
invests within the music industry or in some other improper manner.
See, e.g., Artist Rights Institute Initial Comments at 5, 7-8;
George Johnson Initial Comments at 28.
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The MLC asserts that it cannot limit investments to U.S. Treasuries
or funds that mirror the treasuries used to calculate the short-term
rate.\345\ It points to guidance from financial advisors that such a
strategy would be ``highly unlikely'' to meet the short-term rate over
time.\346\ Specifically, it claims that the short-term rate reflects
``current market yields,'' and therefore a portfolio of treasuries
purchased at prior yields
[[Page 33228]]
would underperform ``during periods of rising rates.'' \347\ This
underperformance might not be corrected during the ``MLC's investment
horizon'' and its distribution obligations could require liquidation
during unfavorable conditions.\348\ Finally, since investment funds
provide returns net of expenses, they would systematically lag the
yield of underlying treasuries.\349\
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\345\ MLC Ex Parte Letter at 6 (Nov. 20, 2025).
\346\ Id. at 6 n.13.
\347\ Id.
\348\ Id.
\349\ Id.
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The MLC is correct on the first two points: U.S. Treasuries have
interest rate risk, lose value when rates rise, and might not generate
sufficient funds to cover the short-term rate during a period of rising
interest rates.\350\ The problem is that this is also true of fixed
income funds with broader portfolios, which are subject to interest
rate and greater credit risks.\351\ Conversely, both generally perform
well during periods of falling rates. In either instance, the MLC could
be forced to liquidate funds at a loss or gain; and this does not
explain why a rolling treasury portfolio would not more closely mirror
the risk and return of the treasuries underlying the short-term rate.
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\350\ However, contrary to the MLC's claim, the Federal short-
term rate does not reflect ``current market yields''; it is
calculated based on a preceding month. Cf. 26 U.S.C. 1274(b) and
(c)(1).
\351\ For example, following a year of rising interest rates,
the MLC had over $6 million in net unrealized losses on investments
at the end of 2022. See The MLC's Form 990 for 2022, MLC (2022),
<a href="https://www.themlc.com/hubfs/990-2022-Combined.pdf">https://www.themlc.com/hubfs/990-2022-Combined.pdf</a>; Federal Funds
Effective Rate, Federal Reserve Bank of St. Louis, <a href="https://fred.stlouisfed.org/series/fedfunds">https://fred.stlouisfed.org/series/fedfunds</a> (showing an increase in the
federal funds effective rate from 0.08% in January 2022 to 4.10% in
December 2022).
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The MLC's third point, however, does explain why treasuries might
be infeasible. Investment funds generally charge a fraction of a
percent of the investment in annual management fees and other expenses,
and as the MLC notes, their returns are ``net'' these expenses.\352\
Accordingly, the return on a treasury-based fund similar in composition
to the treasuries used to calculate the short-term rate would
inevitably lag the rate due to expenses--unless those expenses were
paid separately.
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\352\ MLC Ex Parte Letter at 6 n.13 (Nov. 20, 2025).
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iii. Investments and Administrative Costs
The Office questioned the MLC on how its investment expenses relate
to the MMA's provisions on administrative costs. The MMA provides that
``collective total costs'' shall be funded by the administrative
assessment and voluntary contributions from DMPs and significant
nonblanket licensees,\353\ and defines those costs as ``the total costs
of establishing, maintaining, and operating the mechanical licensing
collective to fulfill its statutory functions,'' including ``costs of .
. . royalty administration.'' \354\ The MLC responded that its
financial advisor fees are paid out of the assessment funds
``consistent with the treatment of other administrative costs,'' but
``that mutual fund expense ratios are not investment fees paid by [t]he
MLC,'' and there is ``no distinct investment fee payable by fund
investors.'' \355\ When asked whether it could structure its
investments so that expenses were paid out of the administrative
assessment, the MLC did not identify any specific barriers but said
that it pursued a strategy recommended by its financial advisors.\356\
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\353\ See 17 U.S.C. 115(d)(7)(A).
\354\ Id. at 115(e)(6)(A)(v).
\355\ MLC Ex Parte Letter at 6-7 (Nov. 20, 2025).
\356\ Id. at 7.
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iv. Gains, Losses, and Reserves
An important consequence of the MLC's current practice of investing
in relatively higher-risk, higher-return investments, is the potential
for gains that exceed statutory interest obligations. Further, under
its cash management practices, the MLC earns interest on royalties
pending distribution with no corresponding statutory obligation. The
MLC indicated that it holds excess investment returns and the cash
management interest as ``reserves'' against future interest
obligations, i.e., to make up for potential future investment losses.
While it did not directly quantify the size of these reserves, it
reported over $153 million in ``interest income'' as of the end of
October 2025.\357\
---------------------------------------------------------------------------
\357\ Id. at 6 n.14. According to the MLC's annual report from
2024, by March 2025 it had accrued approximately $41 million in
interest on royalties held but not distributed related to usage from
2021-2024, $25 million in interest on historical unmatched
royalties, and $11 million in Phono III adjustment royalties. See
MLC 2024 Annual Report app. at 48-52.
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The MLC's interest reserve practices are not addressed in its
policy statements and raise important legal and policy questions. It is
unclear whether the MLC's ledger interpretation and reserve practices
align with the MMA's direction that royalty payments include a
``proportionate'' amount or share of the accrued interest, at least for
interest from invested unmatched royalty funds.\358\ Further, as the
MMA does not require royalties pending distribution to accrue interest,
it is unclear why interest earned by those matched royalties should be
used as a reserve for underperforming unmatched royalty funds. It has
also not explained whether its current reserves, supplemented by the
ongoing cash management interest from royalties pending distribution,
are consistent with its claims regarding the infeasibility of investing
in U.S. Treasuries. The MLC has not articulated any policies for
managing the size of the reserves or distributing excess reserves. Nor
has it articulated any policies that address the converse possibility
that these investments could result in sustained extended losses and
exhaust its reserves.\359\
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\358\ 17 U.S.C. 115(d)(3)(I)(ii), (d)(3)(J)(i).
\359\ When asked about these scenarios, the MLC responded, ``it
is our intention and expectation that there will never be a
shortfall,'' and that in the event a hypothetical shortfall came to
pass, they ``would have to address the matter based upon the
specific details at hand.'' MLC Ex Parte Letter at 7 (Nov. 20, 2025)
(quoting Resps. to Questions for the Record, Five Years Later--The
Music Modernization Act: Hearing Before the Subcomm. on Courts,
Intellectual Prop., and the internet, of the H. Comm. on the
Judiciary, 118th Cong. (2023) (Kris Ahrend, CEO, the Mechanical
Licensing Collective)).
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The potential for investment shortfalls raises important questions,
including whether a shortfall for one period would be shared across
usage periods or between the historic and blanket royalties, and
whether investments would be protected from non-royalty creditors in
the event of insolvency. While the MLC points to ``statutory safeguards
under the MMA,'' \360\ the Office believes the MLC and stakeholders
would benefit from further articulation of how these safeguards
function, the degree of protection afforded, how the MLC intends to
respond to potential overages or shortfalls, and any additional legal
mechanisms available or used to protect royalty funds.
---------------------------------------------------------------------------
\360\ Id. at 7 and n.16.
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v. Conclusion Regarding Financial Management
The purpose of this proceeding is to address whether the MLC
continues to meet the statute's designation criteria, and not to
address issues with the MMA itself. Unfortunately, the MMA was not
clear as to how the MLC should earn interest on royalties for unmatched
works at the Federal short-term rate. This omission, in combination
with the requirements the Act imposes, places the MLC in a difficult
position regarding the management of an important administrative
function. The Office believes the MLC and the greater music community
would benefit from additional Congressional direction in this
area.\361\
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\361\ The Office notes that under the MMA, the MLC is prohibited
from engaging in government lobbying activities and therefore could
not raise this issue with Congress directly. See 17 U.S.C.
115(d)(3)(C)(iv).
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[[Page 33229]]
Absent that direction, the MLC has articulated one potential
interpretation of the statute, and the available information suggests
it has adopted a relatively routine and low-risk investment strategy to
implement that interpretation. This was a rational response to a
difficult situation and is not a reason to withhold the designation.
Nonetheless, it is not clear that the MLC's ledger-based approach is
consistent with Congressional intent and, even assuming it is, there
appears to be room for improvement in its execution. While the Office
appreciates the MLC's deference to financial advisors, we encourage it
to work with those advisors to reevaluate (1) the viability of a
treasury-based portfolio, taking into consideration the size of its
current reserves and the ongoing interest earned on royalties pending
distribution; (2) the potential for reallocating investment management
fees to the administrative assessment; and (3) any market timing risks
associated with its current investments.
The Office also notes that the MMA directs the MLC to ``ensure that
the policies and practices of the collective are transparent and
accountable.'' \362\ This creates heightened expectations for
transparency and oversight regarding its handling of large sums of
money on behalf of others, even where the MLC may be following common
industry practices. Unfortunately, the MLC has not provided
stakeholders with a meaningful opportunity to review and comment on
these issues. For example, it has repeatedly deferred to the advice of
financial advisors, but it has not conveyed that advice at a sufficient
level of detail for interested parties to assess its quality or the
MLC's actions thereon. Further, regardless of whether the MLC changes
its investment strategy based on the reevaluation discussed above, it
should at least revise its public policy statements to fully articulate
its reserve practices, including the extent to which they comingle
royalties across usage periods (and any statutory authority for doing
so), and formulate meaningful contingency plans for sustained
investment losses or gains.
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\362\ Id. at 115(d)(3)(D)(ix)(I)(aa).
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6. Education and Outreach
Under the MMA, the MLC must ``engage in diligent, good-faith
efforts to publicize, throughout the music industry . . . the existence
of the collective and the ability to claim unclaimed accrued royalties
for unmatched musical works (and shares of such works) held by the
collective'' and ``the procedures by which copyright owners may
identify themselves and provide contact, ownership, and other relevant
information to the collective in order to receive payments of accrued
royalties.'' \363\ The MLC is further required to ``participate in
music industry conferences and events for the purpose of publicizing
the [aforementioned] matters,'' as appropriate.\364\ In the Register's
initial designation, we stated that its education and outreach efforts
``should include clear benchmarks that measure [the MLC's] outreach
effectiveness so that it can modify and adapt its strategies and
tactics to best serve the entire songwriter community.'' \365\
---------------------------------------------------------------------------
\363\ Id. at 115(d)(3)(J)(iii)(II)(aa)-(bb).
\364\ Id. at 115(d)(3)(J)(iii)(III).
\365\ Initial Designation at 32292 (internal quotations
omitted).
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In the NOI, the Office asked about the MLC's education and outreach
efforts, ``including how the MLC reaches a variety of audiences to
engage in diligent, good-faith efforts to publicize the collective and
ability to claim unclaimed accrued royalties for unmatched musical
works (and shares of such works).'' \366\ Referencing the Unclaimed
Royalties Report recommendations, we also asked how the MLC ``tailor[s]
its education and outreach activities in recognition of the industry's
broad and diverse spectrum of songwriters and copyright owners,
including by stakeholders' varying levels of sophistication, geographic
location, age, and music genre,'' and how it ``employ[s] dedicated,
persistent outreach to historically underserved groups.'' \367\
Finally, we asked how it is using ``member demographic statistics and
DMP usage analytics . . . to better target its education and outreach
efforts towards under-participating groups.'' \368\
---------------------------------------------------------------------------
\366\ S. Rep. No. 115-339, at 14 (2018).
\367\ Unclaimed Royalties Report at 29.
\368\ Id.
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In response, the MLC first highlighted its implementation of the
outreach-specific recommendations from the Unclaimed Royalties Report.
As of the date of its initial submission, the MLC reported that it has
conducted or participated in over 5,000 different outreach activities.
Of those activities, (1) 1.6% addressed the recommendation to target
historically underserved groups, (2) 8% addressed the recommendation to
``focus efforts on educating the community about what it does, its
processes, the complex nature of the statutory license, and the
significance of registering with the MLC,'' \369\ (3) 3% addressed the
recommendation to ``advertise to the broadest extent reasonably
practicable, including through official journals and other broad-
reaching publications (i.e., not just music industry publications),
social media campaigns, national newspapers, television, multi-state
unclaimed property sites, direct mailings, and public events,'' \370\
(4) 20% addressed the recommendation to ``publicize throughout the
music industry the existence of the MMA, the MLC, the Blanket License,
and the public musical works database, the ability to claim ownership
of unmatched works (and shares), and the procedures by which copyright
owners may identify themselves and provide relevant information to the
MLC,'' \371\ and (5) 6.4% addressed the recommendation to conduct
outreach efforts in partnership with ``individual creators, foreign
CMOs, [performing rights organizations], the DLC, DMPs, distributors
and aggregators, music education programs, and local government arts or
cultural organizations.'' \372\
---------------------------------------------------------------------------
\369\ Id.
\370\ Id. at 37.
\371\ Id.
\372\ Id.
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Next, the MLC described its communications strategy, which involves
``in-person events, webinars and virtual events, print and digital
advertisements, video content, newsletters, interviews for articles and
podcasts, social media, and strategic partnerships'' with educational
institutions, international organizations, distributors, aggregators,
and third-party companies operating in the music and technology
sectors.\373\ The MLC stated that it employs this strategy to reach a
variety of audiences, differentiated by level of sophistication,
geographic location, age, music genre, and community.
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\373\ MLC Initial Submission at 79.
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Finally, the MLC addressed its use of data ``to assess the impact
of various marketing activities, including in-person events, webinars
and advertising campaigns'' and decide where to allocate time and
funding.\374\ It stated that it ``tracks various digital performance
metrics, including potential reach (i.e., the estimated number of
potential Members that will see the advertisement), impressions (i.e.,
the number of potential Members that actually see the advertisement),
and clicks (i.e., the number of potential
[[Page 33230]]
members that click on the advertisement).'' \375\
---------------------------------------------------------------------------
\374\ Id. at 103.
\375\ Id.
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In addition to tracking engagement, the MLC uses member demographic
and DMP usage analytics to target education efforts. As an example of
how it uses member demographics, it noted it ``analyzes [m]ember zip
codes to gain valuable insight into the regional concentrations of
rightsholders and to help target event outreach accordingly.'' \376\
Likewise, it ``analyzes statistics pertaining to its [m]embers' varying
levels of activity and engagement,'' and ``segments its [m]embers
according to these engagement patterns . . . [to] tailor[ ] its email
marketing campaigns to each segment so that the messaging is relevant
and targeted, fostering continuous interaction and involvement.'' \377\
---------------------------------------------------------------------------
\376\ Id. at 105.
\377\ Id. at 103.
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The MLC also reported that it ``analyzes [DMP] usage reporting to
help target outreach to members in multiple ways.'' \378\ It
highlighted two initiatives that demonstrate this effort: the DURP
program, offering metadata in DMP usage reporting ``to provide enrolled
independent sound recording distributors with a targeted view of the
public works database that can be used by them to direct outreach and
education to rightsholders who potentially have unregistered works,''
\379\ and the Missing Member initiative, which ``analyzes sound
recording artist metadata in [DMP] usage reporting to try to identify
rightsholders who have not yet registered with [t]he MLC in connection
with their works.'' \380\
---------------------------------------------------------------------------
\378\ Id. at 106.
\379\ Id.
\380\ Id.
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Generally, commenters praised the MLC's efforts, noting that its
staff provides a ``high level of service and support to assist and
educate its members.'' \381\ They were particularly impressed with its
work to educate self-published or ``DIY'' songwriters,\382\ and to
curate webinars and workshops covering relevant topics for this
audience.\383\ Peermusic also expressed appreciation for the MLC's
``proactive[ ]'' outreach to ``elicit feedback, hear . . . concerns,
and address specific issues.'' \384\
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\381\ Big Machine Music Initial Comments at 2; BMAC & MAC Reply
Comments at 3 (``The MLC has been proactive in educating
songwriters, particularly those who are self-published.''); NSAI
Initial Comments at 2 (noting that the MLC's customer service is
staffed with ``many human . . . representatives specifically trained
and assigned to assist self-published songwriters and even published
songwriters who have questions and concerns related to their digital
mechanical royalties''); Peermusic Initial Comments at 2 (``No
department is without a reliable contact at the MLC for any issue
that may arise, from our colleagues in IT to Royalties to Copyright
to Legal and Business Affairs'').
\382\ Go to Eleven Entertainment Initial Comments at 2; NSAI
Initial Comments at 2 (``The MLC took their mission to outreach and
educate very seriously and have strategically positioned themselves
in any and all places where a self-published songwriter might take
notice'').
\383\ Dennis Llewellyn Day Reply Comment (``To its credit MLC
offers numerous webinars and workshops available to its members,
most cover relevant topics around program operations''); Go to
Eleven Entertainment Initial Comments at 2 (``They have lots of
webinars and are really trying to reach DIY songwriters in multiple
ways and locations''); see also Big Machine Music Initial Comment
(``From monthly memos updating information regarding tools and
services to webin
[…truncated; see source link]Indexed from Federal Register on June 3, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.