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Royalties Are a Good Thing—Part 1: Copyright, Print Rights and Mechanicals

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money Editor's Abstract

In recent comments that have come to Polyphonic, several of you have suggested an article discussing royalties. Our editorial staff aims to please, so here is the first installment.

Ramon Ricker

Royalties are a good thing, and you, as a musician, have a better chance of receiving them than the average professional person. The basic concept is that if you create something, it is yours, and you have the right to be compensated if others use it. This right was provided for by the authors of the United States Constitutioni, and it empowers Congress in Article 1, Section 8, Clause 8, “To promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” This is the so-called Copyright and Patent Clause.

Without royalties a musician is like a barber. A barber cuts someone’s hair and gets paid for it. The more haircuts he gives the more money he makes, but his financial condition is limited by the number of haircuts he can do. On the surface it’s the same for musicians. We play a gig. We get money. The more gigs—the more money. With royalties, however, the balance changes: we can do something once and be repaid for it many times over. It’s like planting a fruit tree. We put it in the ground and each year it pays us again by bearing fruit. For musicians there are several different ways we can receive royalties—print rights, mechanical rights, performance rights and sync rights. We’ll discuss each of these, but first we have to talk about copyright.

Copyright

Everything you need to know about copyright can be found at copyright.gov, the official site of the U.S. Copyright Office.ii The site offers useful circulars, brochures, factsheets, reports and studies. You can also check on the status of proposed rule changes and amendments. If you are real hard-core you can download, at no charge, the official, “Copyright Law of the United States and Related Laws Contained in Title 17 of the United States Code, 2007,” or purchase it for $29.50. It’s 327 pages of tough reading, but you can find more user-friendly circulars on the site that will give you essentially the same information. Obviously, there are lawyers who specialize in copyright law, but I’m not in that group. What I will give you here are some basics that will help you protect what you create—your intellectual property.

Patentsiii protect inventions or things, while trademarks protect names, words, logos, designs, etc. Copyright, on the other hand, is used to protect the following categories:

•literary works;

•musical works, including any accompanying words;

•dramatic works, including any accompanying music;

•pantomimes and choreographic works;

•pictorial, graphic and sculptural works;

•motion pictures and other audiovisual works;

•sound recordings; and

•architectural works

If you compose a piece today it will be protected for the duration of your life plus 70 years. Some things relevant to musicians that are not copyrightable are ideas, procedures, titles of songs, slogans and chord progressions.

As the owner of your creation you receive the following exclusive rights, which you may also authorize others to do:

•To reproduce the work in copies or phonorecords;

•To prepare derivative works based upon the work;

•To distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease or lending;

•To perform the work publicly, in the case of literary, musical,dramatic and choreographic works, pantomimes and motion pictures and other audio­visual works;

•To display the work publicly, 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; and

•In the case of sound recordings, to perform the work publicly by means of a digital audio transmission.

In very simple terms, if you compose original music or arrange works taken from the public domain, or author books, like this one that you are reading right now, you own it, and your creation is protected from the moment it is put in tangible form, i.e., written down. It is protected, but should there be an infringement on your work (read: someone tries to steal it) you may not prevail in court unless the work is registered with the Copyright Office.

Though it is no longer required under copyright law, it is still a good idea to include the notice of copyright’s three elements on your works. It informs the public that the work is protected, and as we just discussed in connection with registration, it adds credence to an infringement case should that ever become an issue. The three elements are the symbol © (the letter c enclosed by a circle, or copr. or copyright spelled out); the year of first creation; and your name or your company’s name. (Example: © 2009 You, Inc.)

This has been a very perfunctory discussion. I didn’t mention fair use, public domain, joint authorship or how to actually file for copyright. There are still about 326 pages in the copyright law remaining to cover! But, now you know where to go. When the time is right you can find out about these and a host of other topics by checking out the U.S. Copyright Office’s website.

Print rights

Over my lifetime in music, I have written many original compositions, created arrangements of public domain and copyrighted pieces, and authored instructional or “method” books for saxophonists and aspiring jazz improvisers. In most cases I entered into royalty agreements with my publishers by assigning or licensing my copyright to them. In turn they have manufactured and marketed my creations—published them. I gave them the exclusive right to distribute my work and, in return, they give me a royalty for each unit sold. The usual rate for royalties from printed music or music books is 10 percent of the retail price, but that is always open to negotiation. These are royalties from print.

The publisher sells my works to retail and online music stores at a discount of 40-60 percent depending on how good a customer they are (read: how much product they buy). For illustration purposes let’s say that the retailer gets a 50 percent discount. After my 10 percent that leaves 40 percent for the publisher, who must pay out of that sum the cost of design, printing, marketing, storage, etc., of the book. As an author you should watch out for offers of 10 percent of wholesale or any royalty based on a percentage of the “net.” The “net” is the amount of money remaining after expenses, as opposed to the “gross,” which is the total amount of money received. Creative accountants (if so inclined) can charge all kinds of expenses against your creation, thereby reducing the “net.”

Mechanical rights

A mechanical license grants the rights to reproduce and distribute copyrighted musical compositions (songs), including uses on phonorecords (i.e., CDs, records, tapes, and certain digital configurations). When you think mechanical rights, think Harry Fox Agency (HFA). “HFA is the foremost mechanical licensing, collections, and distribution agency for U.S. music publishers. Established in 1927, it acts as an information source, clearinghouse and monitoring service for licensing musical copyrights. It continues today to license, collect, and distribute royalties on behalf of U.S. publishers that own and/or control the rights to musical compositions.”iv Simply stated, if you want to record and distribute a song that was written by someone else, or if your business requires the distribution of music that was written by others, you must obtain a mechanical license.

Mechanical rights apply to audio compositions that are delivered without live performers i.e., mechanically. The term originates from early piano roll music. Picture a turn of the century (1900) player piano with the roll played mechanically by a person pumping away on foot pedals instead of actually touching the keys. From that early beginning mechanicals have evolved to cover a wide-range of copyrighted material including CDs, tape recordings, music videos, ringtones, MIDI files, downloaded tracks and DVDs.

Though U.S. copyright law gives the copyright holder the exclusive right to use his or her music on any of the formats cited above, it also provides that once a composition has been recorded, any other party can record the piece without obtaining permission from the copyright holder. Here is the important part. The entity using previously copyrighted material must pay the statutory compulsory rate. So—if it has been recorded, you don’t have to ask permission. You just pay the statutory rate to the Harry Fox Agency and everything is legal and on the up and up.

As of this writing the present statutory rate is:

9.10 cents for songs 5 minutes or less, or 1.75 cents per minute or fraction thereof over 5 minutes. For example:

Songs 5:01 to 6:00 = 6 x $.0175 = $.105

Songs 6:01 to 7:00 = 7 x $.0175 = $.1225 (and so on)

Let’s say that you have a tune that someone else wants to record. If it has previously been recorded they simply go ahead and make their version of it, and send a check to Harry Fox for the statutory rate of 9.10 cents per song, times the number of units they sell or distribute. Harry Fox then sends the royalties to the publisher, and the publisher then divides the money 50/50 between the publisher and the composer. It is possible for the composer to also be the publisher, which is typical with self-published or small independent labels, but the bigger labels will require the composer to enter into a co-publishing agreement with them. They often ask for 50 percent of the publishing. They simply won’t take on your recording unless they get a piece of the mechanicals. Now the royalty to the composer is down to 6.825¢ per song. For a new artist the record company might even try to drive a harder bargain by asking for 100 percent of the publishing.

You can see that there is some serious money involved with mechanical rights. If an album has 10 songs on it at 9.10 cents per song, the amount generated per album is $.91. I’ll let you multiply that out by a million or two to see what a best selling CD would produce! But that’s not all! Down the road there is even greater potential for royalties. If the song turns out to be a hit and others want to record it, those mechanicals will go to the composer and the publisher. Thirty years ago I did some work with Jerome Kern songs. The publisher gave me a printout of all the artists who had recorded the pieces in which I was interested. One of those tunes was “All the Things You Are.” I did the math. It had been recorded over 600 times, and that was thirty years ago! Let’s be conservative and say that only 1,000 units were sold with each of those 600 versions. That equals 600,000 units. Multiply that by 9.1¢ and you have $5,460,000. That’s a lot of money even with this conservative example. Songs (including classical compositions) can generate substantial amounts of money over time, and publishers’ catalogues can have tremendous monetary value. In a much-publicized event in 1984 the entire 4,000-song catalogue of Associated Television Corporation (ATV) was offered for sale. It included most of The Beatles songs, and Michael Jackson bought it (read: acquired the publishing rights) for $47.5 million beating out his then friend Paul McCartney. The two reportedly never spoke to each other again. But with the recent death of Jackson, it has been rumored that earlier this year he changed his will, leaving The Beatles rights to McCartney. The accuracy of that story will unfold very soon now. But regardless of this latest twist, and before you start feeling sorry for McCartney or the John Lennon estate, remember Jackson only acquired the publishing rights. The composing royalties still go to McCartney and the Lennon estate. In the second part of this discussion we’ll cover : Performance Rights, Sync Rights, Patents and Trademarks.


i United States Constitution website. http://www.usconstitution.net

ii Official site of the U.S. Copyright Office. http://copyright.gov

iii United States Patents and Trademark Office. http://www.uspto.gov

iv Harry Fox website. http://www.harryfox.com

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