MUSIC PUBLISHING- THE ROADMAP TO ROYALTIES
Chapter 4 (Publishing Companies), Chapter 5 (Publishing Deals)
PLAIN & SIMPLE GUIDE TO MUSIC PUBLISHING
Chapter 3 (Types of Publishing Deals)
CLASS 3:
Read the Small Print: What’s in Your Songwriter Contract?
a. Songwriter Agreements are usually between the songwriter and a music publisher
Two basic types: single song agreement Or exclusive term agreement
Single song
can be for more than one song but agreement only applies to specific songs already written and named in the agreement
OR
Exclusive term agreements
exclusive agreements last for a period of time and cover all songs written during that time period. Some Term Agreements can be limited to songs recorded by an artist’s record company during the term of his agreement; other songs she writes which are not recorded by the Artist may, or may not, be subject to the exclusivity agreement
b. Who are the Parties to a Songwriter Contract?
Usually a songwriter and a publisher; Remember, until a songwriter assigns rights to the songs they have written to a publisher, they are self-published and entitled to organize and conduct themselves as a publisher.
c. What are the Inducements for the Songwriter to enter into the songwriter agreement with a music publisher?
Cash advance
This is usually the most popular reason; songwriter gets an advance and transfers 100% of the copyright in exchange for between 50% and 75% of the income from the song. Also, the publisher is going to be responsible for doing the administration of the songs, i.e. negotiating licenses, filing copyrights, and generally trying to the song used commercially
The offer of a recording contract and making a condition of signing a recording agreement that the label also gets to control the artists music publishing rights
d. What Are Administration Rights?
Administration rights are the rights to negotiate licenses and collect monies due from various licenses of the compositions.
e. What are Co-publishing rights?
One publisher can grant a share of publishing rights to another publisher. Typically, under the most popular arrangement, one publisher will end up administering the publishing rights, collecting all of the income and then remitting it to the other publisher in the agreed percentage. These agreements will often call for assignment of half of the copyright to the administrating publisher, along with administration rights.
f. What Territories are covered?
US only?
One Country?
Worldwide?
g. The Term of the Agreement and are there Options to extend?
h. What rights are granted?
Under a single song agreement, the copyright to Songs identified in the agreement.
Under an exclusive term songwriter agreement, existing songs will be assigned, plus all new songs written during an exclusive term
i. Advances to be paid?
j. How is credit for authorship for Songs awarded between songwriters?
Under the Copyright Act, it is presumed that the authors who file the copyright application together are sharing the ownership of the song on a pro-rata basis. i.e., if there are 3 songwriters, each is assumed to own 1/3 each. There is no place on the form to indicate a different apportionment of ownership. In fact, it is rarely the case that all songwriters are in fact sharing the ownership equally. So what are the guidelines for how songwriters arrive at the percentages of ownership for the songs on which they collaborate?
If a song has both lyrics and music, under music industry tradition, the authors of the music and lyrics are each entitled to 50% of the songwriting credit. Since songwriting authorship is the basis for copyright ownership, where there are only two songwriters, and one writes the lyrics and the other writes the music, they will own 50% of the song each. The credits for the song where both songwriters have their own publishing companies would look like this:
Song Title: “Move to the Music”
Songwriters:
Lyrics: Bob Smith 50% (100% of the lyrics)
Music : Dave Jones 50% (100% of the music)
Publishers/Copyright owners:
Bob Smith Music Publishing: 50%
Dave Jones Music Publishing: 50%
If there are four writers, and one of them, Dave Jones, wrote and produced all of the music, but Dave wrote none of the lyrics, the splits would look like this:
Song Title: “I Love My Hound Dog”
Songwriters/Authors:
Lyrics: Bob Smith 16.66% (33 and 1/3% of the lyrics)
Jim Smith 16.67% (33 and 1/3% of the lyrics)
Sam Smith 16.67% (33 and 1/3% of the lyrics)
50.00%
Music: Dave Jones 50.00% (composed 100% of the music)
100%
Publishers/Copyright owners
Bob Smith Music Publishing: 16.66%
Jim Smith Music Publishing: 16.67%
Sam Smith Music Publishing: 16.67%
Dave Jones Music Publishing:50.00%
100%
If Dave Jones and Bob Smith write another song, but this time Dave Jones writes half of the lyrics and all of music, the credits would look like this:
Song Title: “Mortgage Meltdown Blues”
Songwriters:
Lyrics: Bob Smith 25% (50% of the lyrics)
Dave Jones 25% (50% of the lyrics)
Music : Dave Jones 50% (100% of the music)
Publishers/Copyright Owners
Bob Smith Music Publishing: 25%
Dave Jones Music Publishing: 75%
In all cases where songs are created by the contributions of more than one songwriter, it is critical to get all of the songwriters to agree and sign a written document that states what how shares of the songs are agreed to be divided long before the song is released to the public. Many problems are created by songwriters failing to take this step and then having disputes over the ownership shares after the record is released, which can hold up everyone’s royalties.
Despite the traditional approach to dividing the songwriting credit between lyrics and music, there are really no hard and fast legal rules about how songwriters must accord credit to each other for their contributions. Writers that come up with a catch chorus often feel that it is worth a higher percentage of the lyrics. Some bands prefer to share credit equally on all songs rather than get into a divisive discussion over who contributed what to each song to avoid disputes and encourage an open spirit of collaboration.
Co-Administration Agreement’s Between Songwriters
When songwriters end up owning portions of songs, each has the right to administer their own shares. If one of them is the artist, it is common for the artist to ask for the other non-artist songwriters to enter into a Co-Administration agreement that sets out basic terms governing how the issuance of licenses and collection of monies will be handled between them.
k. How are transactions involving assignment of a portion of the so-called “ Publisher’s Share” of a composition calculated?
Much confusion abounds in the music industry about the term “publisher’s share”. I will try to shed some light on this important term.
First, keep in mind that the classic division of income earned by a musical composition between a songwriter and a publisher was 50% to the songwriter, and 50% retained by the publisher. See chart below:
Over time, the music publishing industry referred to these two equal shares of the income from musical compositions as the “the publisher’s share” and the “songwriter’s share”.
When one publisher is negotiating with another publisher to jointly own a song, they will typically negotiate only for the publisher’s share, since it is assumed that the songwriter’s share will be paid out by which ever publisher has the obligation to pay the songwriter.
Lets assume Dave Jones owns 100% of the composition “Big Fat Frank”. If Big Publisher buys “50% of the publisher’s share” of “Big Fat Frank”, here is how the shares of the song will look before and after the transaction.
Before the Co-Publishing Agreement:
Song Title: “Big Fat Frank”
Songwriter/Author: Dave Jones 100%
Dave Jones Music Publishing 100%
After the Co-Publishing Agreement
“Big Fat Frank”
Dave Jones Music Publishing 75%
Big Music Publishing 25%
l. What are the most common income sharing terms found in today’s agreements between songwriters and publishers?
Over the years, the songwriter has succeeded in securing more favorable terms from publishers. Today, it is common to see a songwriter receiving 75% of the income from exploitation of the song instead of the traditional 50%. In today’s publishing agreements, you will still often find references to the “songwriter’s share” and “the publisher’s share” however. In describing the total share paid to the songwriter, agreements will often state something like this:
“ the songwriter is to receive “100% of the songwriters share, pro-rated amongst songwriters, and 50% of the publisher’s share attributable to that portion of the song authored by the songwriter”
The result of this language is that the songwriter assigns his copyright to the publisher, and in return receives 75% of the income paid to the publisher from the total earnings of the song, less any contractual deductions, i.e. 100% of the songwriters share, and 50% of the publisher’s share.
m. Ownership of Copyright Interests in Songwriter Agreements
Most Songwriter- Publisher agreements call for the songwriter to transfer 100% of their copyright interest in the song(s) to the Publisher in exchange for an advance and the agreed share of the royalties earned by the exploitation of the songs(s).
Occasionally, you will see a songwriter agreements where the songwriter assigns 50% of the copyright interest, but the songwriter is still be required to assign 100% of the administration rights over his share of the song. The retention of 50% of the copyright interest by the Author/Songwriter does not change the amount of royalties that the songwriter receives, since the Publisher has the right to collect all of the money earned by the author’s share.
The only difference is that in the event of a SALE of the copyright to the song to another party, the songwriter would be entitled to receive a share of that money whereas they would not receive anything if they had not retained a share of the copyright.
If the Songwriter enters into a pure administration deal with a larger publisher, they will typically keep 100% of the copyright, and only assign 100% of the Administration rights, i.e. the rights to license the song to others and collect income.
CLASS FOUR
PUBLISHING INCOME STREAMS: AN OVERVIEW OF MUSIC PUBLISHING INCOME SOURCES
Text Reading Assignment for Fourth class:
MUSIC PUBLISHING- THE ROADMAP TO ROYALTIES
Chapter 2 (Sources of Income),
PLAIN & SIMPLE GUIDE TO MUSIC PUBLISHING
Chapter 4 (Mechanical Licenses), Chapter 10(Controlled Composition Clauses)
Overview of Variety of Music Publishing Income Sources
Chart of Primary Income Streams Received by Music Publisher from Use of Musical Compositions
Type of License and Use Who Pays License Fees? Rates Paid
Mechanical & Digital Reproduction of Composition in Recording | Record Label or Major Distributor of Label pays Publisher or Harry Fox Agency | 9.1 cents Per Unit Sold or negotiated reduced rate of 75% of statutory rate |
Public Performance of Compositions by Radio and TV over the air, internet, cable, etc | Owners of Radio, TV, and Satellite Broadcasting Stations pay Performing Rights Org. such as BMI, ASCAP or SESAC | Negotiated Rates based on percentage of Station Income |
Public Performance of Compositions in Public Places such as Nightclubs | Owners of Public Venues Where performances occur Pay Performing Rights Orgs | Negotiated Rates based on percentage of Station Income |
Synchronization of Music with tv shows, videogames and film | Producers of Audio Visual works pay Publisher directly | Rates vary from minimal to $100,000 for use of hit song in theatrical motion picture |
Mechanical Reproduction of Recorded Music in Merchandise such as toys, cards, dolls etc | Manufacturer of goods pays publisher directly | Ranges from pennies per unit to higher based on price of device and importance of song |
Sheet Music and Lyric Repro | Manufacturer or Distributor of Sheet Music pays publisher directly | 20% of wholesale selling price |
Ring Tones | Ring Tone Distributor pays Music Publisher | 24 cents per sale is current established rate |
Jukeboxes | Paid by Juke box owners to Publisher’s Performing Rights Organization | Negotiated rate |
Use in Play | Paid by Producer of Play | Negotiated Rate |
Foreign Uses | Paid by Sub-publishers in foreign territories | 75% of income received in territory by subpublisher paid to Original Publisher |
As we look at this chart, note that with the exception of income from Sheet Music , every other form of use requires the licensing and payment of monies to the owners of the Master Recording.
Each separate type commercial use of musical compositions has its own type of license.
For a thorough explanation and sample of all of the various type of licenses, publishers see “The Art of Music Licensing” by Al and Bob Kohn (http://www.kohnmusic.com/).
Factors Increasing Prosperity of Music Publishing Income in today’s Internet Environment (Sobel)
-Increasing number of film and television placement opportunities with growth of cable networks
-Growth of legal music downloads
-Expansion of Ringtones and Ringbacks
-Audio and Video Internet Streaming Increase
-Smart Phone Mobile Platform Increase
-Increased use of existing songs for commercials and advertising campaigns
-Expanding Internet and Satellite radio uses
-Growth of Video Game releases and Licenses
-Small but steady increase in print music business
Mechanical Licenses
Mechanical Licenses – what are they? REVIEW MECHANICAL LICENSE
Example of a Mechanical License Agreement between a Record Label and Publisher:
MECHANICAL LICENSE
This AGREEMENT dated As of September 6, 2005 made by and between Happy Hemp Music, (hereinafter referred to as "Licensor"), c/o Michael Ashburne 539 Summit Drive, Pinole, CA 94564 and George Clinton Enterprises (hereinafter called "Licensee"), 524 San Anselmo Ave Ste. #107 San Anselmo, CA 94960. WHEREAS, Licensor controls the right to reproduce and distribute within phonorecords twenty percent of that certain copyrighted musical work entitled as set forth hereinbelow (hereinafter referred to as the "Composition"); and,
WHEREAS, Licensee desires to embody said Composition in that certain phonorecord as set forth hereinbelow;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and conditions hereinafter set forth, the parties hereto do agree as follows:
1. GRANT OF RIGHTS
Licensor hereby grants to Licensee the non-exclusive license to use the Composition entitled "Viagra", written by T. Jones ("Del") (20%), G. Clinton (40%), L. Curry (40%), in the recording, manufacture and sale of phonorecords throughout the United States. 2. PHONORECORD
Licensee's rights to use the Composition is limited to the use within that particular master recording of George Clinton presents the P-Funk All-Stars ("Artist"), within that certain phonorecord entitled "How Late Do You have 2 B B 4 U R Absent?" [recording duration: 6:12], and for no other use. Artist's record is scheduled for release on September 6, 2005. 3. ROYALTY RATE
For each particular copy of Artist's phonorecord, the royalty rate shall be 100% of the statutory rate in effect at the time such particular phonorecord is manufactured, as such rate is set forth at 17 U.S.C. §315 as amended from time-to-time. 4. ACCOUNTING
Licensee shall account to and pay Licensor accumulated royalties no later than sixty (60) days after the end of each calendar quarter. Payment shall be made on the basis of all phonorecord copies sold. If Licensee fails to account and pay to Licensor royalties on such basis in timely manner, Licensor may notify Licensee of Licensee's default, and if such default is not cured within thirty (30) days after receipt of such notice, this license will be deemed terminated. Thereafter, continued manufacture or distribution of phonorecords shall constitute acts of copyright infringement by Licensee. 5. SEVERABILITY
If any provision of this Agreement shall, for any reason be illegal or unenforceable, then and in such event, the same shall not affect the validity of remaining portions and provisions of the Agreement. 6. RELATIONSHIP OF PARTIES
Nothing contained herein shall be construed to constitute a partnership or joint venture between the parties hereto, and neither party shall become bound by any representation, act, or omission of the other. 7. CONSTRUCTION
This Agreement shall be deemed entered into within the State of 8. NOTICES
All notices which either party may desire or be required to give hereunder, shall be in writing and sent by certified mail postage prepaid. Notice shall be deemed effective five (5) days after posting. (A simultaneous transmission of all notices and statements via facsimile is recommended.) The address of the parties for all notices, statements, and payments shall be as first set forth above. 9. ATTORNEY'S FEES
In the event of any controversy, claim, or dispute as to the terms of this Agreement, or the subject matter thereof, or breach, thereof, and/or litigation resulting therefrom, the prevailing party shall be entitled to recover from the other party reasonable attorney's fees and costs resulting therefrom. 10. ENTIRE UNDERSTANDING
This Agreement sets forth the entire understanding between the parties regarding the subject matter hereof, and cannot be modified except by written instrument signed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have accepted this Agreement on the date first set forth above.
LICENSOR:_____________________ LICENSEE: ____________________
Happy Hemp Music [ASCAP] George Clinton Enterprises
First Mechanical Reproduction of compositions occurred with emergence of sale of Piano Player rolls of popular songs
Alternate Terms for Mechanical License in the digital realm at Digital Phonograph License (DPL) or Digital Phonograph Download (DPD) , but increasingly the music publishing industry refers to all licenses in that category (i.e. reproduction of music for recordings, whether digital or physical) as “mechanical licenses”.
Key Terms to Understand about Mechanical Licenses
- Statutory Rate
- Reduced Rates
- Compulsory Licenses vs. Voluntary or Negotiated License
- Controlled Composition Clauses in Artists Recording Contracts
- Rate fixed at date of Manufacture, or Date of License
Mechanical Payments and Controlled Compositions
A “Controlled Composition” is defined in a recording contract (and a Producer Agreement as well) as any song written by the artist or by a producer hired by the artist.
Here is a typical controlled composition clause from a recording contract with an Artist:
(i) "Controlled Composition" - a Composition wholly or partly written, owned or controlled by Artist or any Person to whom Artist is related or who is employed by Artist or in whose business affairs Artist has a direct or indirect interest.
12. LICENSES FOR MUSICAL COMPOSITIONS
(a) (i) Artist hereby grants to 360 an irrevocable license under copyright to reproduce all Controlled Compositions, as defined herein, on Albums, to distribute them worldwide, and to assign such rights to third parties.
(ii) For such license, 360 will pay Mechanical Royalties, on the basis of Net Sales, at a rate equal to seventy-five percent (75%) of the Statutory Rate (the “Controlled Rate”) prevailing at the earlier of (the “Controlled Rate Determination Date”): (A) the date the first Master Recording embodying such Controlled Composition is actually delivered to 360; or (B) the last date upon which delivery of the first such Master Recording would have been timely delivered pursuant to paragraph 3 of this agreement.
(iii) Without limiting the above, it is agreed that the maximum copyright royalty which 360 shall be required to pay in respect of a Album embodying Master Recordings recorded hereunder (inclusive of payments with respect to non-Controlled Composition(s)) shall be equal to the number of Compositions on such Album times the Controlled Rate provided, however, that in no event shall the aforesaid maximum copyright royalty exceed an overall limit of:
(A) eleven (11) times the Controlled Rate for an LP;
(B) two (2) times the Controlled Rate for Singles Record; and
(C) five (5) times the Controlled Rate for an EP.
(B) two (2) times the Controlled Rate for Singles Record; and
(C) five (5) times the Controlled Rate for an EP.
(D) three (3) times the Controlled Rate for so-called “maxi-singles”.
(b) Mechanical Royalties shall not be payable with respect to:
(i) any Controlled Composition(s) of less than two (2) minutes duration; and
(ii) any Controlled Composition(s) which are in the public domain or are arrangements of compositions in the public domain except that if such arrangement is accredited by ASCAP or BMI, then the Mechanical Royalty otherwise payable hereunder will be apportioned in the same ratio used by ASCAP or BMI in determining the credits for public performance of the work, provided that Artist furnish 360 with satisfactory evidence of that ratio. Notwithstanding the foregoing, if on any date any Composition becomes property of the public domain in any territory, no mechanical royalties whatsoever shall become payable in connection with Records hereunder manufactured, distributed, sold or otherwise exploited in such territory on and after said date insofar as such Composition is concerned.
(c) Without limiting 360's rights, if for any reason 360 is required to pay any mechanical royalties in excess of limits specified herein, 360 shall have the right to offset such payments against all Royalties payable to Artist hereunder.
(d) Artist hereby grants 360 the right to reprint the lyrics of Compositions on the jackets, sleeves or other packaging of Records derived from Masters hereunder free of charge.
(e) Any assignment or other disposition of the rights in any Controlled Composition shall be specifically made subject to 360's rights hereunder.
(f) Artist's execution hereof shall include, but not be limited to, execution as an officer(s) and/or authorized signatory(ies) agreeing to the issuance of the licenses in this Agreement on behalf of any music publishing 360 which is the publisher of Controlled Compositions.
(g) Notwithstanding anything to the contrary contained herein, with respect to Records hereunder distributed pursuant to a Distribution Agreement, if the mechanical license provisions for Controlled Compositions contained in such Distribution Agreement differ from the foregoing provisions, the applicable provisions hereof shall be deemed amended to conform to such Distribution Agreement; provided that the foregoing provisions of this subparagraph 12(g) shall not operate to increase the amount of mechanical royalties which would otherwise be payable hereunder.
“Mechanical Royalties or Payments” are the legally required payments to the owners of the compositions that are recorded and sold by the record company. Currently the statutory rate under the US
Lets assume the mechanical “cap” is 10 songs X 3/4 of .091 cents (2009 statutory rate) which equals = 6.82 cents. Multiply the per song rate of 6.82 cents per record time 10 = 68.2 cents is the ‘cap’ on total mechanicals that the record company has to pay on one CD, no matter how many songs are on the album. Any compositions that are NOT controlled compositions, such as covers or samples of other recordings that are owned by other publishers, must be paid at the full mechanical rate. After those songs are deducted from the “cap” the amount payable to the “controlled songs” is calculated, which could be very low depending on how much had to be paid to ‘outside’ publishers.
EXAMPLE:
Total Number of Songs on CD: 20
Total Mechanical Payment under Recording Contract: 68.2 cents
Total number of “uncontrolled” songs with outside “non-controlled” writers/publishers or sample owners: 5
Total mechanical payments to outside publishers; 5 x 9.1 cents = 45.5 cents
Total left for Artist and Artist Producers: 68.2 cents – 45.5 cents =22.7 cents
Total per song mechanical for remaining 15 songs = 22.7 cents divided by 15 equals
1.51 cents per song
Record Companies will often by contract elect not to treat a song less than a minute as a song for mechanical royalty payment purposes to the artist/writer. This clause needs to be reviewed to insure that income derived from songs used in ringtones is not excluded from mechanical or artist royalties, because the use is less than a minute.
Note that with regard to single digital downloads, only one song is sold at a time and not an entire album, so the mechanical rate per single download is either a straight ¾ of the statutory rate under the controlled composition clause if recorded before 1995, or the full statutory rate if recorded after 1995 when the copyright law changed. US Copyright Act. 115 (c) (3)
Also note that most controlled composition clauses will state that the effective date for of the statutory rate for the release is the date of the CONTRACT or DELIVERY of the sound recordings. This treatment is most favorable to the Label, unless the rate goes down in the future, which is an unlikely scenario. A more artist-favorable method of determining the effective date for determining the applicable statutory rate is to use the date of commercial RELEASE of the sound recording. Since historically these type of rates increase over time, if the Label re-releases the material in the future, the rate in effect at that time should be higher than it was at the time of the original contract or the delivery of the material.
Music Licensing Income: What Every Composer Should Know
By Steven WinogradskyAnyone who has had their music used in television or motion pictures or has had a hit record that received substantial airplay is well aware of the income that is generated through ASCAP, BMI and SESAC for public performances. But whether the music you write is (a) a "work-for-hire" and owned by the production company, (b) controlled by a publishing company under a songwriter contract, or (c) self-published where you own the copyright, there are other uses of this music that are capable of earning substantial amounts of income for the composer.
The ability to license music for use by third parties is one of the exclusive rights given to copyright owners under the Copyright Act of 1976. If you own the publishing to your music, this gives you full control over the use of it and the fees charged for its use. If the music is owned by a publishing company or the publishing affiliate of a production company, they have the right to license this music to others under any terms negotiated and agreed upon by both parties. This right is subject, however, to an obligation to share the revenue earned by these licenses with the composer, who usually receives 50% of the net income.
It is important to remember that what is being discussed here is the licensing of music to third parties. Under most production company composer agreements, the production company has the right to include the music created not only in the production covered by the agreement, but in any other film or television program produced by that company without any further compensation to the composer. In addition, the music may be used in all types of promotion for the production, including other uses such as games, toys, etc. without additional compensation.
An example of third party licensing would be where an independent party wishes to use this music (either the underlying composition only or the actual soundtrack) in another context. This other context may be a phonograph record, television program, motion picture or other visual media or to print sheet music (as that term is broadly defined below). This would include the licensing of a film clip containing your music from the production into a program produced by this third party.
Unless self-published or negotiated as part of the production or publishing contract, the composer has no voice in how or under what terms this music may be licensed. Composers should, however, try to be aware of the uses of their music in order to determine whether they are receiving their share of royalties. For example, if your composer statement from your performing rights society lists the use of music in a motion picture or television program that would require a synchronization license (to be discussed in next month's column), your royalty statement from the publisher should have a corresponding entry.
The language relating to composer royalties are usually buried somewhere in the middle of a 10 to 25 page contract. As such, many composers are not fully aware of the types of uses and division of income that these agreements cover. In this month's and next month's columns, an attempt will be made to explain the various types of licensing and some of the key terms of potential agreements for the use of this music.
Mechanical Licenses
A mechanical license is the type of license used in order to manufacture and distribute audio-only product, such as compact discs and audio cassettes. Of the types of licenses discussed in this article, the mechanical license is the only one where the Copyright Act specifically sets out a method whereby a party may obtain a valid license without the consent of the copyright owner. This is subject to certain procedures being followed, and a statutory rate of payment. As with all other types of licensing, however, it is possible to negotiate the terms of a mechanical license on a basis more favorable to the publisher or the record company.Section 115 of the Copyright Act provides for a compulsory license to make and distribute phonorecords (audio-only devices, such as vinyl records, audio tapes and compact discs), when:
1. Recordings of the music have previously been sold to the public in the
2. The party wishing to license the music notifies the copyright owner;
3. The statutory royalty is be paid for each copy manufactured and distributed, with royalties paid monthly.
As of January 1, 2006, the statutory rate for mechanical royalties increased to 9.10 cents for a recording up to 5 minutes in length. For recordings over 5 minutes in length, the rate increased to 1.75 cents per minute, or portion thereof.
Not all uses are licensed at the statutory rate, however. The term "controlled composition" refers to any composition written, published or owned by a recording artist. For instrumental tracks on soundtrack albums, the composer is usually the artist. A controlled composition is generally paid only 75% of the statutory rate. However, the royalty paid may be even less if the total royalties on a soundtrack album are higher than what the record company releasing it wants to pay. The record companies have placed a ceiling on the amount of the mechanical royalties they will pay on an album to 10 times 75% of the statutory rate. If some non-controlled compositions are included on a soundtrack album and paid the full rate, the difference will be deducted from the controlled compositions.
Of course, when not dealing with a controlled composition situation, the publisher is free to negotiate any terms it can agree upon with the record company. This may involve a reduced royalty, but it would based upon the mutual agreement of the parties, not an arbitrary decision by the record company. Negotiated royalties are usually paid quarterly, not monthly, and paid on units sold and not returned instead of manufactured and distributed.
Other negotiable terms include the amount of money held back as a reserve by the record company, reduced royalties on record club sales, "free goods" or promotional copies and limitations on the license to the recording actually licensed, not some other recording or compilation.
Print License
The licensing of printed copies of music is the derivation of the term "music publishing". Until the early 1900's, this was the only method by which music could be reproduced and distributed to the public.A print license allows for the reproduction of printed copies of music such as sheet music, folios, concert arrangements and the printing of lyrics in magazines, advertising and books.
Although not the income producer it once was, print licenses, especially for well known songs or well known songwriters, can still generate substantial income. The print music publishers have become very creative in marketing their material, such as a folio containing all the songs from a hit movie or album, or notation on guitar solos from heavy metal songs.
There is still a large market in instructional music books for people taking music lessons and for educational uses, such as choral, marching band or orchestral scores. For educational uses, it is not uncommon to grant a royalty-free mechanical license for recordings of the arrangement to be made as a promotional tool by the print publisher.
Royalties have become fairly standardized and are usually granted on a Most Favored Nations basis, which means that all parties are paid at the same rate.
A music publisher entering into a print licensing agreement should make sure that the agreement states that the copyright in any new arrangement is owned by the music publisher and that it should be considered a work-for-hire, with the music publisher considered the author of the copyright.
Summary
As noted above, music created for one particular use can be licensed for many other uses, all of which may earn royalties for years to come. Whether composers publish their own music or have their music controlled by other parties, the opportunities for licensing this music to third parties are unlimited. A party who actively seeks out these opportunities can generate a substantial income for both publisher and composer with minimum of effort once the use is secured.Music Licensing Income: What Every Composer Should Know
By Steven WinogradskyIn last month's column, composer royalties from mechanical licenses and sheet music were discussed. Both of these types of income are paid by the user to the music publisher who, in turn, pays the writers their share, according to the contract.
This month, the focus will be on synchronization licensing, the act of marrying, or "synchronizing", audio to video. A sync license is necessary whenever a visual image is accompanied by sound. This most often involves television programs, videos or motion pictures, but can also involve computer games, internet sites and other media not yet developed.
Synchronization Licenses
Synchronization licensing is part of the right of reproduction granted exclusively to copyright owners in the Copyright Act. Although the word "synchronization" is not mentioned specifically, publishers are given the exclusive right to authorize the reproduction of their music in copies, such as television programs, motion pictures and home videos. In other words, publishers can grant the right to producers to "synchronize" their music with a visual image, either on video or film. This grant is usually non-exclusive and is totally discretionary with the publisher. Permission may be denied for any reason whatsoever.Generally a synchronization license does not include the right to utilize the title of the song as the title of the production or to incorporate the story of the song into the production, although those rights can be negotiated.
Because many of the types of programs into which music can be licensed also generate public performance revenue, it is essential that the publisher of the licensed music obtain a copy of the music cue sheet for the production. Failure to get a copy of the cue sheet, or not filing that cue sheet with the performing rights societies, can cost both the composer and publisher a substantial amount of money that cannot be recovered in later years.
Television
As a right of reproduction, it is important to understand what type of television program requires a synchronization (sync) license. All programs shot on film, a reproductive medium by definition, require a sync license. However, because there is no reproduction, live programs do not require a sync license (although they are still covered under the performing rights licenses). Examples of these programs are news programs, sporting events and special events like "The Jerry Lewis Telethon" or "The Academy Awards".In addition, certain programs recorded on video tape do not require a license. The Copyright Act allows a transmitting organization (such as a local station or television network) to make an "ephemeral recording" of no more than one copy of a particular program if the recording is made solely for the purposes of broadcast. This is the so-called "live on videotape" exception.
In this case, programs like "The Tonight Show", which are recorded on videotape earlier in the day for broadcast at a later time, do not require a sync license for their original broadcast. Extending this provision by custom and practice, neither do the first run episodes of any other program on videotape, such as "Home Improvement". Reruns of videotaped programs, however, do require a sync license. The very fact that they are broadcast again means that they were recorded so that they could be reproduced. As such, reruns are outside the scope of this exception. As a practical matter, since virtually all prime time programs are repeated, television producers of videotaped programs negotiate for sync licenses prior to taping their programs. This gives them some negotiating leverage and the ability to prevent the use of a song that may not, for whatever reason, be licensable.
Other than the specific contract language, negotiating for a sync license involves two main elements: permission and a determination of the license fee. As an exclusive right of the copyright owner, permission must be obtained for the use of the work in the program. Granting of permission and the setting of a license fee is totally within the discretion of the copyright owner, as there is no compulsory license provision as there is in mechanical licensing.
Because of the changing patterns and uncertainty of television distribution, it is common for producers to negotiate for a number of different licensed rights and options for future exploitation in order to fix their costs at the outset of production. For the use of a composition in a single episode of a television program, the license terms consist of 1) media (ex: free television, basic cable television, pay television, home video); 2) territory (ex: World, United States, World excluding United States); and 3) length of license term (ex: one year, five years, perpetuity). Remember that for each term licensed, a sync license earns a flat fee, no matter how many times a program is broadcast within that term. All of these, including the type of use and duration of the music in the program, go into determining whether permission will be granted and the amount of the license fee.
Motion Pictures
In licensing for motion pictures, many of the same concepts apply. The one key difference is that for motion pictures, producers will want to acquire all rights in all media in perpetuity for a fixed price ("buyout"). This includes media not currently known or developed. This is a major negotiating point.In the days before home video, sync licenses either had language allowing the studios to distribute the films "in any and all media" or the license was silent on this point. When these films began to be released on video, the music publishers were unable to combat the studios with regard to additional payment for video.
Now, with the advent of all types of new media platforms, such as CD-ROM and CD-I, movies can be shown on a personal computer or television and manipulated in ways never dreamed of even 10 years ago. The major studios are requesting language for rights "in any and all media, whether now known or hereafter developed", without paying any additional fees to music publishers and suggesting that any publisher who does not grant these rights will not have their music used in these films.
One difference in motion picture licenses is that there is a grant of public performance rights for theatrical exhibition in the
Home Video
Licensing music for home video (traditionally including video cassette and video disc) is similar to the types of licensing described above. One key element is that, depending on the resources of the producer, the methods of payment may differ.For home video releases, there are three main types of payment structures. The first, as described in the section on motion picture licensing, is the buyout. This is a flat fee payment for all rights to include the composition in the video, regardless of the number of units sold. This is a calculated gamble by the producer as to the success of his project and the music publisher as to the limited appeal of the project. The advantage to the publishers is that they get a larger amount of money up front and do not have to worry about tracking future accountings by the producer. The advantage to the producer is the elimination of the cost of accounting to the publisher on a quarterly or semi-annual basis for the duration of the license term.
The second type of payment is on a royalty basis. A fixed rate, usually a number of cents per copy, is paid by the producer to the publisher for each unit sold during the license term, with regular accountings. It is common for the publishers to request an advance payment covering anywhere from 10,000 to 50,000 units, with the producer paying the royalty on each unit sold thereafter. Standard auditing provisions accompany this type of agreement.
The third type of payment, a combination of the two listed above, is called a "roll-over" or "limited buyout". Here, the producer pays an advance on a certain number of units. When sales equal the agreed upon figure, another advance is paid for an equal number of additional units. For example, if a roll-over is paid on 10,000 units, when unit number 10,001 is sold, an advance is paid on the second 10,000 units, and so on. While a buyout is usually granted for duration of copyright, the royalty and roll-over are granted on a more limited period of time. Also, since this media is produced for home use, there is no public performance language necessary in the agreement.
Multi-Media
Licensing for multi-media product is the newest type of sync licensing and, therefore, the area in which the fewest industry standards and practices have been established. Examples of multi-media licensing are karaoke, Compact Disc Interactive (CD-I), CD-ROM (read only memory), computer games and other platforms still being developed.As with any new media, the publishing industry is taking a cautious approach to the licensing of music, granting limited rights. In the case of some publishers who do yet not understand the media involved, they are refusing to grant rights at all until a clearer picture of the marketplace evolves. With consumer capabilities to play back this type of media still in it infancy, a grant of limited rights is usually accepted by the multi-media producers.
It should be noted that, with many types of interactive multi-media product, the use of music is not linear in the same sense as it is with compact discs or television programs. The media allows for manipulation of the music in many different ways, such as extracting the string section of an orchestral work or the bass line of a pop song, for closer examination by the user. Some programs also will allow for the user to produce their own version of the composition, much as the record producer can manipulate the various tracks in a recording studio. All these things should be considered when licensing for multi-media use.
Summary
By keeping a close watch on how their music is used, even though they might not control the ownership and licensing, composers (and publishers) can generate substantial income from the exploitation of their music far beyond what may be earned through the performing rights societies. Composer agreement should clearly spell out what shares of these types of license fees should be paid to the writers. The failure to have that in writing may prove to be very expensive or fatal when trying to collect your fair share.Harry Fox Agency
What is it and how does it work?
Importance of the Role of Harry Fox Agency in the licensing and collection of mechanicals to small labels.
