By Chris Castle

[This post first appeared on MusicTechPolicy]

We’ve all heard rumors about how much is in the “inception to date” black box at the digital music services. The main reason that nobody knows is another example of the dismal drafting of the Music Modernization Act.

Wouldn’t you think that if the class actions against Spotify gave the insiders the leverage to negotiate the MMA giveaway that they could at least have gotten an immediate accounting from the services for how much of the songwriters’ money they’ve been holding all these years? But no, it’s sleepy time in Washington yet again. From the Land of Frozen Mechanicals they bring you more Brinksmanship 101. The retroactive black box payment is due to be made by the services to the MLC and its data vendor, HFA–remembering that HFA was also the data vendor for at least some of the services that created the black box in the first place.

However, there is some activity at the Copyright Office now about how to get this money paid. It’s at the Copyright Office because while drafting the aircraft carrier revision to the Copyright Act (aka Title I of the Music Modernization Act), the hard parts were never drafted and were left to the Copyright Office to handle through regulations. Musicians–you’ve seen this before. This is the Washington version of “we’ll fix it in the mix.” So you do have feel sympathy for the Copyright Office in the situation when all the smart people leave them twisting in the breeze.

Not that I necessarily believe this number, but for the first time the services have given a bigger than a breadbox idea of how much is in the black box. The DLC’s lawyers filed an “ex parte” letter in which they made that revelation (along with the known universe: Artist Rights Alliance Ex Parte Letter (Nov. 17, 2020), Digital Licensee Coordinator Ex Parte Letter (Nov. 17, 2020), Mechanical Licensing Collective Ex Parte Letter (Nov. 17, 2020), Music Artists Coalition Ex Parte Letter (Nov. 17, 2020), Nashville Songwriters Association International Ex Parte Letter (Nov. 17, 2020), National Music Publishers’ Association Ex Parte Letter (Nov. 17, 2020), Recording Academy & Songwriters of North America Ex Parte Letter (Nov. 17, 2020), Songwriters Guild of America et al. Ex Parte Letter (Nov. 18, 2020).)

The DLC itself is at the mercy of its members in terms of revealing this number but they claim the following in the Digital Licensee Coordinator Ex Parte Letter (Nov. 17, 2020):

DLC also provided a rough estimate of accrued royalties that are available to be transferred to the MLC, based on a limited survey of a subset of DLC members at a particular point in time, and with the crucial caveat that the precise amounts are in flux as digital music providers continue to engage in robust matching efforts. Specifically, DLC estimated that several hundred million dollars were available to be transferred to the MLC as accrued royalties, even after accounting for the derecognition of accruals based on preexisting agreements containing releases to claims for accrued royalties.

DLC also explained that the accruals that were derecognized because copyright owners were paid and provided releases were a fraction of that amount—on the order of tens of millions of dollars.

So now we know at least that much. We know there are “several hundred million” dollars at issue in the black box and we generally know where the money is. We may know that DLC members hold the money. We also know that this money has not been identified, but we at least know enough to get the nose of the camel in the tent.