This article is the last in a three-part series related to music publishing. We first examined copyrights as the fundamental building blocks of the music business. Last month, we defined how music publishing uses copyrights to benefit the writer and publisher by exploiting copyrighted songs. This month's article will identify the four (4) most significant areas music publishers and songwriters can make their income: licensing their songs to the businesses that use their songs. Licensing is the paid usage of a work (in our case, a song) for a limited purpose, time and territory.
1. Mechanical Licenses:
A mechanical license is the type of license used to manufacture and distribute audio-only products, such as albums, compact discs and audiocassettes. Think of it as making a mechanical copy or recording of the song. Mechanical licenses come in two varieties: negotiated and compulsory. A business interested in using a song usually tries to negotiate a mechanical license, and if unsuccessful, they seek a compulsory license. The compulsory license is the only one in which the Copyright Act sets out a specific method to obtain a valid license without the consent of the copyright owner. This compulsory license is subject to legal constraints, such as "first use" authorization, mandated accounting procedures, and a statutory rate of royalty payment. As a result, it is more desirable for the potential user to negotiate a mechanical license more favorable than a compulsory license.
The Copyright Act provides for a compulsory license to make and distribute phonorecords (albums, compact discs and cassettes), when:
- Recordings of the music have previously been sold to the public in the United States under a valid license from the copyright owner;
- The party wishing to license the music notifies the copyright owner; and
- The statutory royalty is paid for each copy manufactured and distributed, with royalties paid monthly.
The statutory rate for mechanical royalties is currently 7.5 cents for a recording up to 5 minutes in length. For recordings over 5 minutes in length, the rate is 1.35 cents per minute, or portion thereof.
Not all uses are licensed at the statutory rate, however. Some record companies will try to pay less to license a "controlled composition". The term "controlled composition" refers to any composition written, published or owned by a recording artist. A controlled composition is generally paid only 75% of the statutory mechanical rate. Of course, when not dealing with a controlled composition situation, the publisher or songwriter is free to negotiate any terms it can agree upon with the record company. This may involve a reduced royalty, but it would be based upon the mutual agreement of the parties, not an arbitrary decision by the record company. Negotiated licenses also have other benefits, such as royalties are usually paid quarterly, rather than monthly, and paid on units sold and not returned instead of copies 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 recordings actually licensed.
2. Performance Licenses:
Another of the exclusive rights a copyright holder enjoys is the right to perform the copyrighted songs publicly. The copyright holder may also authorize others to perform the musical composition publicly. Such authorizations are accomplished through the use of performance licenses. This type of license is important for music copyright holders, because it can generate substantial income through radio play, television broadcasts, movie soundtrack exhibitions both in the US and abroad, as well as live public performances.
Performing rights societies, such as ASCAP, BMI and SESAC assist music publishers and composers by issuing licenses to companies and establishments which publicly perform, or allow others to publicly perform, music as part of their business operation. These performing rights societies also monitor and audit their licensees to make sure their music usage correctly reflects the performance royalties paid to the composers and publishers. Blanket licenses are usually issued to music users and the income derived from those and other licenses are then divided up through complicated formulas and paid to the copyright owners.
3. Synchronization Licenses:
Synchronization licensing addresses the act of combining, or synchronizing, audio works to video works. A "sync" license is necessary whenever a visual image is accompanied by sound. This most often involves television programs, commercials, videos or motion pictures, but can also involve computer games, Internet sites and other media not yet developed.
Synchronization licensing is another part of the right of reproduction granted exclusively to copyright owners under the Copyright Act. Although "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 for producers to synchronize their music with a visual image, either on video or film. This grant is usually non-exclusive and is entirely at the songwriter's or publisher's discretion.
Generally "sync" licenses do not include the right to use 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 also be negotiated, for an additional fee, of course.
Sync licenses should not be confused with performance licenses in movies or television broadcasts as indicated above. A producer will need both a sync license and a performance license of some type to use a song in a broadcast or publicly performed movie. Because many programs into which music can be licensed also generate performance revenue, the publisher of the licensed music must take actions to obtain a music "cue sheet" for the production. Failure to review or file the cue sheet with the performing rights societies can cost both the composer and publisher a substantial amount of money, which cannot be recovered later.
4. Print Licenses:
Licensing printed copies of music (sheet music) is how the derivation of the term "music publishing" originated. Until the early 1900's, this was the only method 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, sometimes printing folios containing all the songs from a hit movie or album.
