Finding Your Footing in Music Licensing



By Stephen Block

There are many elusive things in the life of a musician - the perfect chord change, a welcoming record label, a sympathetic review - but there may be nothing more difficult to catch than a consistent, music-based cash flow. It’s not just a problem for unknowns - pop music history is riddled with famous performers who ended up penniless because they got dealt out of their licensing rights. Stephen Block of the Harry Fox Agency has kindly agreed to write this primer on the basic ideas and definitions behind music licensing and its ability to use copyright law to help musicians protect and profit from their original material.

If you are a songwriter or a recording artist, understanding the basics of licensing your compositions and sound recordings is a critical part of your career. Licensing can be a significant income source beyond album sales and performances. There are several valuable copyrights you own as a creator of music, and if you record someone else’s songs, you need to be aware of the licenses you are legally required to obtain. This article is a brief overview of mechanical, master use, performance, and synchronization licensing in the U.S.

The Benefits of Copyright Ownership

First, where do licenses come from? U.S. Copyright law gives the copyright owner a number of exclusive rights, including those to reproduce a work, distribute copies, perform it publicly, and prepare derivative works. When the owner of a copyright authorizes someone else to do any of these things, she is granting a license. Monies collected from these licenses are called royalties.

U.S. Copyright law for music is structured so that there are separate rights for the publisher of the composition and for the owner of the sound recording. As your career evolves, you may sign with a publishing company or a record label, but for now, you are your publisher and record company — you own all these rights under law, whether you have officially registered your songs with the Copyright Office or not (though it is recommended that you do), so you should understand what is entailed when opportunities arise.

After all, penalties for violating copyright law are not trivial: willful copyright infringement can carry statutory damages of up to $150,000 for every copy of every work infringed. While copyright law contains the concept of “fair use,” this is much more limited under the law than most people realize. Fair use generally applies to the use of excerpts for criticism, news reporting, teaching and research. There is no exemption for small quantities of copies, charities, or free goods. Proper licenses still need to be obtained.

Mechanical Licenses

A mechanical license grants the rights to reproduce and distribute copyrighted musical compositions (songs) in nondramatic musical recordings, including uses on phonorecords (such as CDs, records, tapes, and certain digital configurations). This right is owned by the publisher of the song. If a composition has already been commercially recorded and released, anyone can obtain a compulsory mechanical license to record and release his own version of the composition. Yes, this means no one can stop you from recording and distributing a cover of their song so long as you obtain the mechanical license and pay the royalties appropriately.

The Harry Fox Agency (HFA) is a common source for mechanical licenses in the U.S. Its license is technically a written variation of the compulsory mechanical license. If you are making less than 2,500 copies of a recording, the licenses can be obtained through the website at www.harryfox.com using the Songfile(r) online licensing service. A publisher can affiliate with HFA if they have songs that have been released on a recording that has been issued by a third party (not a self-produced recording). Mechanical licenses can also be obtained directly from the publisher or by following the compulsory provisions of the U.S. Copyright Act.

The royalty rate (what gets paid to the music publisher) for mechanical licenses is set by law, and is known as the “statutory rate.” As of January 1, 2006, the statutory rate is 9.1¢ for songs five minutes or less, or 1.75¢ per minute (rounded up) for songs more than five minutes long.

However, both recording artists and songwriters should be aware of something called a “controlled composition clause,” which is common in many recording artist contracts. It requires the artist to secure lower rates from publishers on certain songs that are either written or indirectly “controlled” by the artist. The controlled composition clause usually reduces the per-song royalty payable on these compositions as well as the label’s total mechanical royalty obligation for the album as a whole. These provisions can vary in complexity but are usually based on a percentage reduction of the statutory rate. The math can seem a little complicated, but the main lesson is to look closely at any recording contract for how the mechanical will be paid, as it could work out to be quite a bit less than the statutory rate.

Master Use Licenses

Master use rights are controlled by the person or company that owns the copyright in the original recording of a song, which is called a “master,” and cover the reproduction and/or distribution of that recording. Unlike a mechanical license, licenses for master recordings are not compulsory — permission and rates must be negotiated with the owner, and he or she has the right to prohibit you from using that recording. How much an owner can charge for use of their master depends on many factors, including the popularity of the artist and the song and the nature of the use.

So for example, your local radio station wants to give away permanent digital downloads of your songs that are being played on its new talent show. It would need to obtain both a mechanical and a master use license from you. You may decide it’s worth the exposure and do it for free, but you should understand what you are giving away.

Synch Licences

A synchronization (or “synch”) license is the right to use recorded music in timed combination with visual images such as film, television, advertising, video, user-posted content on web sites, video games, and the like. Again, unlike the compulsory mechanical, the user must get your permission to use your music in this way — both the publisher and the record company must consent.

Royalty-wise, the same considerations will come in to play as for a master use license, except that generally publishers and master rights holders receive about the same royalty rate for a synch use. Synch deal can be extremely lucrative, and more and more musicians are pursing this avenue to expose their music.

Public Performance Licenses

Public performance licenses are, you guessed it, for the right to publicly perform music. This includes any concert venue, television, jukebox, club, and radio station. Performance licenses need to be obtained by the venue - you don’t need to worry about getting one for your recording or concert performance. There are three agencies that handle performance rights: ASCAP, BMI, and SESAC. Collectively, they are known as performance rights agencies, or PROs. Performing rights are a growing area for licensing income; BMI and ASCAP have been reporting record collections over the past several years.

A songwriter can register with only one PRO at a time. Most commonly outlets that require performance licenses pay a blanket fee to each PRO, which the PRO distributes according to its specific method for calculating royalty payments. If you are a songwriter, you should investigate these organizations and sign up with the one that looks like the right fit for you (note that membership with SESAC is by invitation only). ASCAP and BMI also offer a number of other resources to developing songwriters, from showcases to health insurance.

While there are other areas for earning licensing revenue in the music business, mechanical, master use, performance, and synchronization are the most common. Even if you are not yet in the big leagues, it pays to educate yourself about the different opportunities for earning a living making music — and it may protect you from making costly mistakes.

Stephen H. Block is Vice President Business Affairs and Senior Counsel for HFA. He works with Business Development on securing new licensing arrangements for HFA publishers, and provides support to the Royalty Compliance and Collections teams.