2022 Annual Royalty Recap

We completed 12 monthly royalty distributions in 2022 — our second year of operations — and each was completed on time or early. Our initial match rate for the year averaged nearly 85 percent but thanks to reprocessing, our average current match rate for the year rose to more than 89 percent, and our current match rate for the usage reported for January 2022 is already above 90 percent. For the 12 months of usage processed in 2022, The MLC directly distributed more than $532.3 million in royalties to our Members, and another $48 million was distributed by DSPs via voluntary licenses, bringing our total royalties distributed for the year to roughly $580.3 million.

Here are some additional annual metrics for the 12 royalty distributions we completed in 2022 as of this month’s distribution:

2021 Royalty Distributions – Continued Improvement

In addition to completing 12 more monthly royalty distributions in 2022, we continued to reprocess the remaining unpaid data from the nine monthly royalty distributions we completed in 2021, using the millions of new works registrations we received from our Members during the year. As a result of our efforts and the influx of so much additional data, we were able to pay out more than $26 million in additional royalties for those nine royalty periods and correspondingly reduce the amount of unpaid royalties we were holding for those periods. The chart below shows the cumulative metrics for our nine royalty distributions in 2021 that we shared with you last February (in our first Annual Recap) and the updated metrics for those nine royalty distributions as of this month’s distribution.

Cumulative Totals for 2021 and 2022 Royalty Distributions

The chart below shows our current cumulative metrics for the nine months of distributions we completed in 2021 and the 12 months of distributions we completed in 2022, each as of this month’s February 2023 distribution.

Some important things to note:

• Keep in mind that we only completed nine monthly distributions in 2021, while we completed 12 in 2022, so the amounts for 2022 will be higher because they include 3 additional monthly distributions.
• Also keep in mind that we’ve had 12 more months to reprocess the 2021 distributions than we’ve had to reprocess the 2022 distributions, which is why our current average match rate is higher for 2021 than 2022 — though not by much, because we have improved our average initial match rates year-over-year.

Metrics Show The MLC Has Made Things Better

As you can see in the table in the previous section, The MLC has already achieved historically high match rates.  Our current average match rate for the nine distributions we completed in 2021 is more than 90%, and our current average match rate for the twelve distributions we completed in 2022 is more than 89% — not far behind our 2021 average. These match rates continue to improve each month thanks to the additional data Members are submitting and The MLC’s continued reprocessing of any royalties still pending distribution.

Another helpful way to measure how much The MLC has improved the administration of digital audio mechanicals is to compare the percentage of royalties distributed by DSPs before the blanket license became effective with the percentage of royalties distributed by The MLC after the blanket license became effective.

For this comparison, we’ve compared The MLC’s total royalties distributed as a percentage of total royalty pools processed for our first 12 monthly distributions in the column for 2021 (i.e., for our April 2021 to March 2022 distributions) with the comparable percentages for the last three years before The MLC began administering the blanket license. As you can see, The MLC’s performance over its first 12 monthly distributions was better than EACH of the last three years before The MLC began administering the blanket license.

A Breakdown of Royalties Pending Distribution

As you’ve seen in our monthly newsletters, we always break down the remaining royalties that are pending distribution into the following three categories: unmatched, unclaimed and on hold. We do this to provide greater transparency into the reasons these royalties are being held and to help you understand the steps you can take to help us reduce these amounts. We’ve included a refresher for each of these categories here:

UNMATCHED ROYALTIES

These are royalties for usage that The MLC has not yet been able to match to a musical work in our database. As we continue to improve our initial and current match rates, increasingly, the reason we can’t match these royalties is because the corresponding musical work hasn’t been registered yet.

• • First, make sure all of your songs have been properly registered with The MLC. Anyone can use our Public Search tool to search for songs by writer and publisher name and spot missing songs. Members can see all of the songs they’ve registered in The MLC Portal by clicking on the Catalog view, and they can also download any or all of the songs in their catalog using our Catalog Export feature.
  • Second, once you’ve registered your songs properly, Members can use The MLC’s Matching Tool to search the data for unmatched uses and then propose matches of those uses to the works they’ve registered.
    
    

UNCLAIMED ROYALTIES

These are royalties for shares of registered works that have not yet been claimed by a Member of The MLC. These unclaimed shares are easy to see when you view works using our Public Search tool. When you select a work to view, we show you the “total shares claimed” at the top of the page of data for that work. If the total shares claimed are less than 100%, that means that some of the shares are unclaimed, and The MLC is holding royalties for those unclaimed shares.

• • Members can use our Claiming Tool to search for registered works in our database for which they have not yet claimed any shares. Once they find registered works that are missing their shares, they can use the tool to claim those shares.
  • Anyone, including songwriters who work with publishers and administrators, can use The MLC’s Public Search tool to see whether the shares for a given work have all been claimed. If you find a work you’ve written that has unclaimed shares, and you believe your shares have not yet been claimed, you can use the “copy link” button at the top of each works page to copy and paste a link to that work in an e-mail or text and then send it to your publisher or administrator. You can also use this button to send links to your co-writers if you notice that their shares have not yet been claimed.
    
    

ROYALTIES ON HOLD

These are royalties that The MLC has placed on hold for various legal or operational reasons. They include royalties for works that are subject to a dispute between Members and royalties for works that are subject to disputes regarding statutory termination claims. They also include royalties for works where The MLC is investigating potential errors in the data submitted by a Member in the corresponding works registration.

• • Whether you are party to a dispute with another Member or The MLC is investigating a work you have registered, please do your best to respond timely and completely to any inquiries you receive from The MLC and to provide any information you might have that may help resolve your dispute. The quicker you respond, the quicker The MLC can try and resolve the underlying issue and remove the hold placed on the royalties in question.
    
    

Why is the total amount of royalties pending distribution increasing instead of decreasing?

You may have noticed the total amount of unpaid blanket royalties we are holding has increased since last year’s Annual Recap, even though our match rates continue to improve and the percentage of royalties we distribute each month keeps improving. In short, that’s because we continue to work on matching and distributing the unpaid royalties we are holding from previous distributions while we continue to receive and process new royalties each month. Here's why:

The MMA requires The MLC to continue to try and match and distribute any unpaid blanket royalties for at least 3 years after we receive them, before we can consider distributing the remaining unpaid amounts to our Members via a pro-rata or “market share” distribution. (A similar provision requires us to continue to try and match and distribute unpaid historical royalties for a minimum period of time too.) This is an incredibly important provision in the MMA, and it reflects the consensus view among all rightsholders that The MLC should devote ample time and effort into matching and distributing the royalties we collect to the proper rightsholders.

To date, The MLC has focused 100% of its efforts on matching and distributing royalties, and it has not made any decisions about when — after those minimum periods end — to distribute any remaining unmatched royalties to Members via a market share distribution.  While our total unpaid royalties will continue to increase as a result, this means we are giving rightsholders more time to get their data in order so that they can receive their proper share of these royalties.

The MLC Is Illuminating the “Black Box” for Digital Audio Mechanicals!

For years, you’ve heard people refer to the “black box” of royalties in a variety of contexts in the music industry. The term was coined to describe an unpaid pool of royalties that rightsholders could not see, search or quantify because the party paying those royalties did not share that data. For digital audio mechanicals in the U.S., the "black box" prior to The MLC’s inception turned out to be $426.9 million in unpaid royalties accrued by 21 DSPs between 2007 and 2020.

The MLC is illuminating this "black box" by reporting the data about unpaid royalties to its Members on a regular basis and by making the data for unpaid royalties available for Members to search and act on using tools within The MLC Portal:

• The MLC’s Matching Tool allows Members to search the data for the unmatched royalties The MLC has received so Members can propose matches of those uses to songs they have registered.
• The MLC’s Claiming Tool allows Members to search the data for unclaimed shares of registered works in The MLC’s database so Members can claim shares of those songs that they control.

Since launching these tools, Members of The MLC have been able to search all of the data for unclaimed shares of songs registered with The MLC, along with all of the unmatched royalties reported to The MLC pursuant to the blanket license. Starting last spring, The MLC began adding data for the remaining unmatched historical royalties to the Matching Tool. In just a few more months, all of the remaining unmatched royalties from historical periods will be available to be searched in the Matching Tool, at which point The MLC will have completely illuminated the black box for digital audio mechanicals.

This greater visibility is one key way The MLC is fulfilling its mission to serve rightsholders and ensure that they receive all of the royalties they are due. Learning how to use our Member tools effectively, so you can claim your share of any unpaid royalties, is one of the best ways you can Play Your Part to ensure The MLC is successful for you. Together, we will not only illuminate the "black box," but also seek to eliminate it entirely!

Refresher on Phonorecord Rate Periods

At the beginning of last year, only months after receiving the final set of data from DSPs for the historical unmatched royalties they had transferred to us, The MLC began processing these historical unmatched royalties. Starting in May of last year, The MLC began matching this historical data, making the remaining unmatched historical data available to be searched by our Members using the Matching Tool in The MLC’s Portal, and paying out the first batches of matched historical royalties for usage that took place between 2007 and 2017.

As a reminder, there were three different sets of rates applicable to the historical royalties we received, covered by three different rate periods. The chart below shows the years covered by each of those rate periods, along with the amount of historical unmatched royalties transferred to The MLC for uses that took place during those rate periods.

As of the end of last year, we completed our first pass at processing the usage from these periods. We processed all of the usage from the Phono II period, the Phono I period, and the pre-Phono I period (I.e., 2007 to 2017) for which DSPs had not previously paid any royalties. As a result, we were able to pay out approximately $11.4 million (or 21.6%) of the roughly $53.4 million in unmatched royalties we received for uses that took place during these periods. Next month, we expect to begin our second pass at processing the usage from these periods, by processing those uses for which DSPs previously paid some, but not all, of the royalties owed for these uses. The first matched royalties from this second pass should begin to appear on statements issued in our March distribution.

Awaiting Phono 3 Final Rate Determination; The MLC Prepares for Next Steps

As a refresher, the Copyright Royalty Board (CRB) sets the rates we administer. When the DSPs appealed the rates for Phono 3 in 2018, and the Federal Court of Appeals then vacated those rates and remanded them back to the CRB for further consideration in 2020, we were effectively left without rates for the Phono 3 period — which is why, as per guidance provided by the U.S. Copyright Office (USCO), The MLC began administering new blanket royalties applying rates from the previous Phono 2 rate period.

While the CRB did issue a new initial ruling on the Phono 3 rates last summer, they have yet to issue a final determination. That final determination, and the publication of the corresponding regulations that accompany the final determination, is what makes the rates final and starts the clock on the 6-month period the DSPs then have to deliver the revised data and incremental royalties that apply to their Phono 3 usage. The MLC is awaiting the final rate determination to initiate the next steps to process the historical royalties for the Phono 3 period — roughly $373.6 million of the $426.9 million in historical unmatched royalties transferred to The MLC.

Here is a hypothetical timeline showing the remaining steps that would still need to take place before The MLC can begin processing the historical royalties from the Phono 3 period. The dates in this hypothetical timeline are calculated as if the CRB issued a final rate determination as of February 21, 2023:

As soon as the Phono 3 rates are finalized and the DSPs deliver their revised data and any incremental payments, The MLC will be ready to begin processing this new data. We will share additional updates on the timeline for processing historical unmatched royalties from the Phono 3 rate period as soon as the CRB issues its final rate determination.

The MLC is completely FREE to Members!

The Music Modernization Act that led to The MLC’s creation requires digital services to separately fund The MLC’s operating costs. That means The MLC will never deduct any administration fees from the royalties we pay you. Our Members are now receiving more royalties from The MLC than they’ve ever received before - completely free of charge.