"Indie" artist (me) what is a reasonable percentage of mechanical and/or performance royalties to offer one who gave songs?

Asked 11 months ago - Overland Park, KS

I am an independent music artist who has recently completed an album. There are two songs on this album that were given to me to travel and sing; however, the individual has retained ALL copyrights to the songs (Sound recording and Performance arts). I'm assuming he should still receive some sort of mechanical and/or (which?) performance royalty each time a record sales, or the song is sung anywhere. If so, I need to draft up a simple contract that includes an offering to this individual regarding a mechanical and/ or performance royalty rate. My question is what would be a reasonable starting rate to offer them, record one sales?

Attorney answers (5)

  1. Maurice N Ross

    Pro

    Contributor Level 20

    5

    Lawyers agree

    Answered . You are wise to seek advice on this web-site. I an intellectual property lawyer, music licensing lawyer, and working musician (in fact I have a show tonight). With respect, you desperately need to educate yourself about the basics of music publishing. And there is no possible way you can draft this agreement on your own, nor can you use this web-site as a substitute for legal counsel.

    Your album is composed of several elements, each of which enjoys separate copyright protection. First, there are the musical compositions (music and lyrics). A musical composition is protected by copyright law. Second, there is the performance of the artist and the sound recording on which the performance appears. The sound recording is protected by copyright law, as is the performance which as a technical matter is separately protected. In addition, any photographs or album art that you use on the album are protected by copyright..

    Here is how the business normally works. Songwriters enter into contracts with music publishers to market and license their musical compositions for various purposes. One such purpose is to make a sound recording. When a license of a composition is provided so that a record company can make a sound recording, this is called a mechanical license (I won't bore you with the details as to why, but it has to do with how people used to make recordings). If a song has not previously been recorded and released to the public, the royalty rate for use of the song on the album is subject to negotiation and can be any amount agreed to by the composer and the record company. However, once a song is recorded for the first time and released to the public, we have a compulsory licensing system, whereby any artist can cover someone else's song on a sound recording in change for a compulsory license royalty. The current compulsory licensing royalty is 9.1 cents per song (about 10% of the costs of a digital download). Most people believe that this 9.1 cents is a reasonable standard for a mechanical license.

    Who gets the mechanical license and who pays the royalties? The mechanical license is obtained by whoever records the album--usually a record label. If the artist, himself, makes the recording, the artist is acting as a record label (a small indie)). The record label must pay the 9.1 cents to the composers or their music publishers based on the number of sales. For each sale, the composers and their music publishers get 9.1 cents (unless a different amount is negotiated, which almost never happens these days). The record label also enters into a contract with the artist, pursuant to which the artist assigns to the record label his copyright in his performance in the song, in exchange for which the artist receives a percentage of royalties from record sales (often between 8 and 12 percent, but subject to wide variation based on the fame of the artist).

    The composers get nothing from the record label and artist for public performances of the song by the artist. However, the composers get paid performing rights fees through the performing rights organizations (ASCAP, BMI, SESAC) based on the number of public performances of their songs in concerts, clubs, and on radio, television, internet streaming etc.. Concerts and nightclubs usually pay negotiated flat license fees to the performing rights organizations, which divide these fees among composers (together with fees from broadcasts). Artists and record labels do not share in these fees.

    Artists and record labels now get fees through Sound Exchange for digital streaming and internet radio etc. Composer's get standard shares of fees from streaming through their performing rights organizations based on rates set adminstratively.

    And then there is synchronization---songs that appear on You Tube need synchronization licenses from both composers and record labels. As you see this is way too complicated for you to draft a simple agreement without a lawyer

  2. Russell William Kinsey

    Contributor Level 9

    3

    Lawyers agree

    1

    Answered . This is a complicated issue of rights that should be handled by an entertainment attorney. You will need to draft a contract that will cover the agreement between you two to avoid future disputes.

    First off you need to understand that the musical composition copyright is separate from the sound recording copyright. In this instance, the other person composed the songs and thus has ownership of the composition but you as the recording artist, assuming you recorded on your own as opposed to in a recording studio under contract, would have the sound recording copyright.

    Secondly, as copyright owners, each one of you has the ability to register your copyrights with the perfuming rights organizations that collect and divvy out royalties paid by venues, businesses, and digital distributors.

    Thus, the agreement you need with the composer should be for money earned outside of performance royalties such as on cd and merchandise sales.

    The above response is general information ONLY and is not legal advice, does not form an attorney-client... more
  3. Ivan Jose Parron

    Pro

    Contributor Level 15

    1

    Lawyer agrees

    Answered . It sounds like you may be a little confused. If the person retained 100% of the rights in the sound recording and the publishing then you don't own anything and the other party determines what is fair. You should consult an entertainment attorney.

  4. Bartley F Day

    Contributor Level 11

    1

    Lawyer agrees

    Answered . Although the concepts underlying these rights are somewhat complicated, as alluded to in the other attorneys' answers, the nuts and bolts of what you need to do here are relatively simple. That being said, you need to make sure it's done absolutely correctly.

    In short, you need to obtain a mechanical license from him, or create one to send to him to sign. The document will need to specify whether the mechanical royalty rate will be the so-called statutory rate, or instead, at some percentage of that rate (often 75%).

    The document should also, among other things, state how the writer/publisher will be listed in the credits on the album.

    Most entertainment attorneys have some stock mechanical license agreements on hand, which would need, however, to be tweaked to fit your song title, and the other particulars of your situation.

    If you anticipate signing a recording contract at some point that would involve use of these songs, it would be best if the mechanical license is drafted in such as way as to anticipate that possibility.

    As far as performance rights: Assuming that the writer has an ASCAP, BMI, or SESAC publishing company, you don't need to do anything other than making sure that the credits correctly list the publishing company and affiliated performance rights organization (PRO). In this kind of situation, I always take a couple of minutes to verify the publisher information by going to the applicable organization's database and cross-checking the publisher and song information, due to problems I've seen in the past.

    P.S. "Record one" is not really applicable to this particular issue. "Record one" is a term used in connection with producer agreements, having to do with how producer royalties are calculated in relation to the recoupment of recording costs.

    The above is not intended as legal advice and does not constitute the creation of an attorney-client relationship,... more
  5. Bruce E. Burdick

    Pro

    Contributor Level 20

    Answered . Nice discussions of general principles of royalty distribution on albums by my colleagues.

    I understand you to be saying you use at live concerts two songs given to you for that purpose by a songwriter. Apparently for that the songwriter is paid by the venue through his P.R.O. Now you have gone beyond that permission and put the two songs on your album and wonder what you should offer the composer for the mechanical license for those two tracks. You say the composer has retained SR rights, so I take it the songs are already recorded and published elsewhere so you can get the compulsory rates, otherwise you have to beg the publisher for a license and the publisher can just say "buzz off." I also take it you are talking about audio-only, as otherwise you need a synch license. So, it seems you are going to take the statutory 9.1 rate and likely offer a 75% rate or 6.82cents/track or total of $0.1364/album, assuming this is for 2 of 10 tracks on the album. This can get very tricky, so you really need to see a music industry attorney to sort out any nuances for your situation.

    I am not your lawyer and you are not my client. Free advice here is without recourse and any reliance thereupon is... more

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