Your First Asset: The Right to Reproduce


George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: twitter.com/gah650

My friend and colleague John Snyder, wrote an article entitled "The Magic of Copyright" for this blog a few weeks back. The article brilliantly puts forth the idea that by creating an original work and fixing it in a tangible form (writing it down or recording it), you not only immediately and automatically create a copyright in the work, but you create an asset.

In an era of artists needing to become self-sufficient, and decrease (cease) their reliance on labels for success, it's crucial to begin thinking in terms of assets; they are what you have in order to generate the revenue needed to build a self-sustaining career in the music business….on your own terms!

6 EXCLUSIVE RIGHTS

As John mentioned, when you create a copyright, you are immediately and automatically granted six exclusive rights. As set forth in Title 17, Chapter 1 §106 of the United States Code They are as follows:

  1. to reproduce the copyrighted work in copies or phonorecords [In layman’s terms, a “phonorecord” is a material object that embodies sounds (a CD, a cassette, vinyl, etc.). Importantly, a phonorecord is not the embodiment of sound when it is synchronized with a movie, tv show or ad.]
  2. to prepare derivative works based upon the copyrighted work;
  3. to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
  4. in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
  5. in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
  6. in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

We'll work our way through each of these in the coming weeks.

THE FIRST RIGHT: RIGHT TO REPRODUCE

In this article, we'll look at the first right, and show how it relates to one of the most fundamental assets, but also most misunderstood, elements of the record business: the mechanical license.

As stated in rule number one above, when you create a copyright, you are the only one who is allowed to reproduce the work. This is HUGE. It means that any time a work you hold the copyright to is reproduced physically (i.e. on a CD, vinyl, etc.) or digitally (download), the person who is doing the reproducing must get your permission to do so. If they don't get your approval, they are infringing on right number one of your exclusive copyright, and, so long as you have registered your copyright, you can take action against the infringing party — including suing them for infringement and, potentially, collecting both actual and statutory damages for the infringement.

Because of this exclusive right, and because of the ability to sue and recover damages should this right be infringed upon, this right is a significant asset. It means that if someone – typically a label – wants to reproduce your copyright on, for instance a record or download, you have the opportunity to negotiate a fee in exchange for granting them a right to reproduce.

MECHANICAL ROYALTIES V. ARTIST ROYALTIES

This fee is negotiated via a legal instrument known as a "Mechanical License." You, the copyright holder, grant the label the right to make a "mechanical" reproduction of your copyrighted work(s) in exchange for a payment from the label.

So, imagine you're a songwriter who also performs the material you write. You hold the copyright to the songs you've written, and thus — in addition to the other five exclusive rights — have the exclusive right to reproduce this work. Now imagine that a label approaches you, and wants to put out a record of you performing your songs. The label will make a deal with you as a performer that (typically) grants the label the exclusive right to release the music you perform (whether you write the songs or not) for some period of time. In exchange for this exclusivity, the label will (in theory) pay you what's known as an "artist royalty." This artist royalty is typically a percentage of the list price of the sale of the album. You'll hear, for instance, an artist say, "I have a 15 point deal with my label.” This would mean that the artist receives 15% of the list price from the sales of records (after recoupment of certain expenses and costs associated with the sale of the record), but this is a lesson for another time.

This artist royalty satisfies the label's obligation to compensate the performer for the exclusive right to release the album of the artist’s performances, but does not satisfy the label's obligation with respect to the songs themselves. Remember, as a songwriter with a copyright to your songs, you have the exclusive right to reproduce the songs. The label must therefore negotiate a mechanical license with you for the right to reproduce these songs on the album they release.

This "dual" royalty — an artist royalty, paid to the performer signed to the label, and a mechanical royalty, paid to the writer of the song (whether he or she is signed to the label as a performer or not) — is one of the most misunderstood parts of the music business. It's a dangerous thing to misunderstand.

What it fundamentally means is that the asset you created as a songwriter, and thus has a copyright to the song released on an album, are going to get paid two times (assuming you recoup costs associated with the artist royalty), while those who are performers, but aren't songwriters will only get paid once (if that – remember, it's hard to recoup).

Equally important, as the owner of the asset (the copyright of the song that is being reproduced) you are to be paid from record one; irrespective of whether the label has recouped their recoupable costs that they must prior to being obligated to pay an artist royalty.

This is why in a band where there is one songwriter, and a handful of other band members who are also signed to the label, but don't write, it will be the songwriter who will be buying the house, while the other members are living in Mom's basement.

TERMS OF MECHANICAL LICENSES

At this point you should be asking, "How much do I get paid by these labels in order for them to have the right to reproduce my copyrighted work?" The answer, as it is with all things vaguely legal is, "it depends." However, mechanical licenses are a lot more calculable than other types of licenses (which we will discuss in future articles).

This is because the mechanical rate is set by "statute." You may have heard of the term "statutory rate." This relates to the maximum amount someone who wishes to mechanically reproduce another's copyrighted work must pay the copyright holder. The current statutory rate is $.091 cents per song i.e. just about a dime). The rate goes up fractionally if the song is over five minutes in length.

This statute was enacted into law by the United States Congress in order to reduce transactions costs associated with innovation. Copyright is always a play between the tensions of protecting and giving incentive to authors to create, and allowing for innovation to occur.

What this statutory rate means is that anyone who wants to record and reproduce another's copyrighted work is able to… so long as they pay the copyright holder $.091 per song reproduced. This is referred to as a compulsory license; compulsory meaning that the copyright holder must (is compelled) to grant the license. The only caveat being that the compulsory license rule doesn't go into effect until the copyright holder has commercially released the copyrighted work. This is called the "first use" exception to the compulsory license. It allows the copyright holder to pick who gets to release their song first, and, importantly, negotiate whatever rate the copyright holder can get for that first use. Once it's been commercially released, however, anyone who wants may cover the song so long as they pay the mechanical royalty to the copyright holder, and abide by the other provisions of the statutory license rules: pay on all copies manufactured, pay monthly, pay the full rate, pay the current rate.

Those of you interested in putting a cover on your record who are self-releasing a record, must abide by these rules. The Harry Fox Agency acts as a clearinghouse for many publishers, and your first stop should be there website in order to secure the license.

As above, the statutory rate sets the maximum amount one who reproduces a copyrighted work must pay to the copyright holder (the rate is adjusted periodically, and has historically gone up). This baits the question, "is there a minimum rate?" The answer is, "sure." If you're the copyright holder, you can elect to waive your mechanicals, and provide a gratis license. This might occur, for instance, if your song was being used on a record where the profits were being given to a charity or if you wanted to give it away as a free download for promotional reasons.

CONTROLLED COMPOSITION CLAUSE

Of course, between the max and the min there is an infinite range. The labels will tend to negotiate the rate down by 25% for songs that they reproduce on their albums that are written by artists who are also signed to the label as a performer. These songs are called "controlled compositions," and this clause in the recording agreement is called the "Controlled Composition Clause." In addition to reducing the rate, it typically provides that the label will: only pay on songs that are reproduced and sold (i.e. not paid on promotional CDs or songs given away for free to promote the release – like a CD mailed to a radio station for airplay); that they will treat songs over five minutes as if they were under five minutes; and that the rate is fixed at the time of delivery or release of the record (remember, from time to time, by law, the statutory rate goes up, but with the “fixed rate” provision you'll still get the same amount as you did when the songs was delivered or released); only pay on a fixed number of songs – typically 10 or 11 – so, if you deliver a record with 20 songs that are all controlled compositions, you're only going to be paid on 10 or eleven.

SUMMARY

These caveats aside, it should now be clear just how important the asset of the exclusive right to reproduce a copyright is. In some respects, it's the songwriter's best friend.

Thanks for bearing with me through this. As above, the amount of misunderstanding about the mechanical royalty, and what exclusive right it relates to is second only to the misunderstanding around public performance royalties. We'll get to those soon.

Please leave questions in the comments.

For more information on subjects covered in this article, check out these videos from Artists House Music or download the free TuneCore Music Industry Survival Manual: The Basics You Should Know About Music Publishing and Copyright: Cover Songs:

Donald Passman — one of America’s foremost entertainment lawyers and author of All You Need to Know About the Music Business, widely considered to be the single most essential and influential book ever written about how the music industry works — on the difference between artist royalties and mechanical royalties:

The Difference between artist royalties and mechanical royalties

Michelle Singer, Director of Business and Legal Affairs for Jazz and Classics at Blue Note Records.

Controlled composition clause and excess mechanical royalties

TuneCore Music Industry Survival Manual 
The Basics You Should Know About Music Publishing and Copyright: Cover Songs

  • PB

    Hello,
    I am a songwriter and performer and I receive royalties from my various labels that I’ve been signed too. I think I have only gotten royalties on copies sold though (artist royalties) but not as a songwriter (mechanicals).
    I do receive publishing form ASCAP but that has nothing to do with a label.
    Have I been screwed?

  • MSL

    question: if the writer of a song issues an “exclusive” license to someone for that song – is there still such a thing as a “Compulsory License” available to another person…? Thinking of a case where someone does a ‘cover’ of a tune, but wants to have an exclusive use of that song, so others don’t put out another ‘cover’ at the same time…? Would they want to negotiate an exclusive song license use for that song before doing the cover, if that’s possible?
    thanks

  • DL

    Hello PB,
    It sounds like you need an agency called The Royalty Society Of America. These guys get it done. Artist royalties, mechanical, publishing etc. For ASCAP, that’s free. All you have to do is join, give some info and you’ll receive royalties directly from them. If you have music being sold by companies you should be receiving song writers royalties but that comes from publishing companies. Write to royaltysociety@gmail.com
    maybe they can help. Good Luck.

  • http://Facebook.com Michael R. Porter

    Hello George ! Thank You For The Informational Lesson On The 6 Rights Copyrighting. I was Unaware Of Some Of My Legal Recourses. After I Got The Majority Of My Songs Cpoyrighted [35 To Be Exact], The Library Of Congress Didn’t Send Me A List Of Rules Or Legal Rights , Which I Find Disappointing,That They Don’t List Your Rights And Responibilities. I’m , Like Alot Of Other Musicians Who Have Chosen To Go a More Independant Route, So We Have To Learn Alot Of The Buisiness End Of Music The Hard Way. So Professionals Like Yourself, I’m all Ears. Thank You , Michael R. Porter [The Celestial Realm].

  • Dejuan Lattimore

    Im a song writer who has music in another state thats under or was under a contract to reproduce or record my song.The company cut an album my song wasnt on it, but they were performing it.how do i go about retrieving my music or monies owed? and thanks for the information and how could i somehow get panthlets or more information on drawing up musician directing and producing agreements

  • Dejuan Lattimore

    Im a song writer who has music in another state thats under or was under a contract to reproduce or record my song.The company cut an album my song wasnt on it, but they were performing it.how do i go about retrieving my music or monies owed? and thanks for the information and how could i somehow get panthlets or more information on drawing up musician directing and producing agreements

  • http://LindaRobertsMusic.com Linda Roberts

    Does USA copyright cover the song globally? This would be great to know! And thanks much for the great article!!

  • http://profile.typepad.com/kategracebauer Kategracebauer

    What’s the benefit in copyrighting both the song (lyrics) AND the performance?? IS there a benefit? Are you better covered or do you pigeonhole yourself more? Are people more averse to covering a copyrighted piece of work if the performance is also copyrighted? What are the basic terms of the mechanical license as it relates to the P-in-the-circle and the C-in-the-circle?

  • http://www.ghostandthebigsky.com patrick

    Thanks for great article! But why does the Library of Congress take UP TO A YEAR to process the Form PA? that’s only if it’s done over the web. If it’s done via the actual paperwork, it takes up to a year and a half!
    That’s way too long.

  • http://profile.typepad.com/gah6501 Gah650

    @Patrick
    Thanks for your kind words. you’re right, the process of receiving your actual (c) certificate, etc. seems oddly long (particularly for something that should/can be done online).
    remember, however, that submitting these reg forms does grant you additional rights and remedies. so, it’s still good practice to do so.
    best,
    George

    Thanks for great article! But why does the Library of Congress take UP TO A YEAR to process the Form PA? that’s only if it’s done over the web. If it’s done via the actual paperwork, it takes up to a year and a half!
    That’s way too long.

  • http://profile.typepad.com/gah6501 Gah650

    @Kategracebauer
    I’m a bit confused by the question. Remember, you are granted (c) when you author and fix (write down/record) an original work. that would give you the copyright to that work, and if anyone wants to reproduce it, they must pay you a mechanical royalty. this includes if they reproduce your version (i.e. recording of the song), or if they create their own version (i.e. a cover of the song). maybe that’s what you mean by performance? (it’s confusing, because – as we’ll see soon – “performance” also relates to “public performance,” which is a whole other can of worms).
    So…this distinction between the copyright to the underlying work (the melody and lyric you created) and the sound recording or the version of this underlying work is crucial, and relates to your questions about the distinction between the (c) and the (p) marks.
    The (c) mark relates to the underlying work (the musical work – lyric and melody – expressed in music notes, etc.).
    The (p) mark relates to the “sound recording” (it actually stands for “phonogram,” a sort of now-archaic term). It relates to this specific “sound”; i.e. the specific version of the underlying work as manifest on the specific album, etc.
    So…typically, a writer (or publisher) will hold the copyright to the underlying work (the song itself), and note this with (c). The label typically owns (or licenses) the specific version of that song that they (label) release on their record (the sound recording), and notes this with the (p).
    If you are a writer of a song, and you release that song on your own label, you would have both the (c) and the (p).
    best,
    George
    What’s the benefit in copyrighting both the song (lyrics) AND the performance?? IS there a benefit? Are you better covered or do you pigeonhole yourself more? Are people more averse to covering a copyrighted piece of work if the performance is also copyrighted? What are the basic terms of the mechanical license as it relates to the P-in-the-circle and the C-in-the-circle?

  • http://profile.typepad.com/gah6501 Gah650

    @Linda
    It’s a great question. US (c) does not apply specifically to other countries. However, there are a number of unifying agreements between countries that represent a good degree of protection for us copyrights internationally. Specifically, the Berne Convention for the Protection of Literary and Artistic Work, which was first put in place in 1886, and has been regularly updated mandates that the signatories to this document give the the copyrighted works of authors from other signatory countries the same protection as they give copyrighted works of authors from their country. It’s a sort of reciprocity. In other words, France – a Berne signatory – will respect your American (c) to the same degree they respect the (c) of a French national.
    Many, but not all, of the us (c) rights and protections are the same across all Berne-signatory countries.
    There are other unifying bodies – most significantly – World Intellectual Property Organization Copyright Treaty (WIPO). This is more recent than Berne (1996), and strives to deal with more recent tech advances (it is implemented in US law via the digital millennium copyright act (dmca)). it relates to, but is distinct from Berne.
    All of this is a long way of saying that there are mechanisms to afford a degree of security for international copyright.
    best,
    George
    Does USA copyright cover the song globally? This would be great to know! And thanks much for the great article!!

  • http://profile.typepad.com/gah6501 Gah650

    @Dejuan
    it sounds to me like someone did a cover of your song? in this case you would likely be owed a mechanical license fee based on the number of times your song was reproduced.
    however, you state that you were under a contract, and that could mean that what you wrote during that contractual period was deemed a “work made for hire.” if so, you may have assigned your rights to the (c) of the song over to the party who contracted with you. in this case, your compensation would have been limited to what you were paid when you entered the agreement (or any other arrangements set forth in the work made for hire agreement). typically, the work made for hire agreements essentially trade the (c) that you create for a one-time payment, and you cease to be the owner of the (c), and therefore have no future benefit (mechanicals, etc.) from it.
    we’ll be going into contracts, etc. soon.
    best,
    George
    Im a song writer who has music in another state thats under or was under a contract to reproduce or record my song.The company cut an album my song wasnt on it, but they were performing it.how do i go about retrieving my music or monies owed? and thanks for the information and how could i somehow get panthlets or more information on drawing up musician directing and producing agreements

  • http://profile.typepad.com/gah6501 Gah650

    @MSL
    Once a song you have the (c) to has been released, it is fair game for anyone who wants to make a recording of it (cover it) to do so. you can not stop someone from doing this – this is why it’s called a compulsory license (you are “compelled” to grant it to anyone who wants it). however, those who cover the song must honor the rules as iterated above with respect to mechanical terms (i.e. pay the royalty, account, etc.). If they do not, you can attempt to stop them from reproducing any further copies of your work, and collect damages, etc.
    best,
    George
    question: if the writer of a song issues an “exclusive” license to someone for that song – is there still such a thing as a “Compulsory License” available to another person…? Thinking of a case where someone does a ‘cover’ of a tune, but wants to have an exclusive use of that song, so others don’t put out another ‘cover’ at the same time…? Would they want to negotiate an exclusive song license use for that song before doing the cover, if that’s possible?
    thanks

  • http://profile.typepad.com/gah6501 Gah650

    @PB
    you identify yourself as a songwriter, so I assume the labels released your performances of songs you wrote (i.e. not covers). if this is the case, you are owed a mechanical payment, unless you waived your mechanicals on these compositions (see above on “controlled composition clause,” etc.).
    You mention you’ve received payment in the form of an artist royalty from the label. what I see a lot – particularly with new labels – is that they don’t know that what a mechanical is, and they therefore don’t pay it. they often make a payment to the artist – usually some kind of profit sharing payment (i.e. the label recovers its costs and then splits the money with the artist), but – as much as this might be a good faith gesture on the part of the label – it’s not legal. they MUST pay the mechanicals, and if they try to lump those payments in with an artist royalty, problems will arise (what do you do if an artist does some covers and not others; what about cross-collateralization, etc.). it’s a mess.
    you need to go back to the labels, and ask them to render accounting for your mechanical royalties. if they’ve lumped all the payment (i.e. artist royalty and mech royalty) together, you need to tell them that’s not acceptable, and they need to separate it out, and they need to do so retroactively.
    best,
    George
    I am a songwriter and performer and I receive royalties from my various labels that I’ve been signed too. I think I have only gotten royalties on copies sold though (artist royalties) but not as a songwriter (mechanicals).
    I do receive publishing form ASCAP but that has nothing to do with a label.
    Have I been screwed?

  • Janette

    Terrific Article… thanks! Being from Australia, we are of the understanding that anyone wanting to ‘record’ a work MUST get permission, and that the copyright holder has the right to decline this permission… ie: if the version of your song is really bad, and could harm your ‘brand’ you can actually stop them from releasing it. So, unless this has recently changed, perhaps the Compulsory Licence doesn’t extend to this part of the universe…?

  • CAMALION MUSIC

    About the troubles arising in recent times due to privatization of public places end institutions (were the available public to the artist lies) and pertaining to the right to distribute… how do we, the emerging artist proletarian, are to deal with this?? (example: security guard or police chasing and harrasing, intimidating and even trying to criminalize an artist who tries to make a living of selling his music directly to the public)