Transition to The MLC: Timing & Cadence of Royalty Payments
One of the many things that will change as a result of the transition to The MLC is the timing of royalty distributions to rightsholders, and the U.S. Copyright Office has promulgated regulations that prescribe the frequency with which DSPs will be required to account to The MLC, the time DSPs will have to send their monthly usage reports and mechanical royalty payments to The MLC, and the frequency with which The MLC must account to its Members. See C.F.R. §§ 207.27 and 209.29(b).
Prior to January 1, 2021, DSPs operating under a compulsory license were required by law to account to rightsholders on a monthly basis, within 20 days after the end of each month. Starting on January 1, 2021, DSPs operating under the new blanket license will have 45 days after the end of each month to send their usage reports and royalty payments to The MLC. The MLC will then take 30 days to perform its matching functions and calculate the royalties due to each of its Members. That means that The MLC will send out royalty payments and statements to Members roughly 75 days after the end of each monthly period. Because the total duration of the new distribution process will be longer than the old process, there will be a two month gap at the beginning of 2021 between the time rightsholders receive their last monthly statements and payments from DSPs under the old process and the time when they receive their first monthly statements and payments from The MLC under the new process.
Prior to January 1, 2021, many DSPs operated under voluntary licenses that they negotiated directly with rightsholders. The terms of these voluntary licenses inevitably varied from DSP to DSP and from rightsholder to rightsholder. While DSPs have the right to maintain those voluntary licenses after the blanket license becomes available, some have announced their intent to terminate those voluntary licenses and instead operate under the new blanket license.
If those voluntary licenses provided for monthly accounting, there could be a payment gap under those voluntary licenses at the beginning of 2021 similar to the one described above for compulsory licenses. If, however, those voluntary licenses provided for quarterly accounting, it is likely that no such gap will occur, and because The MLC will be accounting to its Members on a monthly basis, Members will now receive statements and royalty payments more frequently than they did under those terminated voluntary licenses that provided for quarterly accounting.