UTM:::Real Talk

Real Talk

MUSIC OWNERSHIP AND INCOME: WHERE EVERYTHING BEGINS AND ENDS

By: Christopher J. Cabott, Esq.

I think a good starting point for the first edition of this column, which is devoted to discussing the business and legal issues that independent artists face, is the two most important aspects of every business - ownership and income. If you don't understand what you own and how you can profit from it, your business will most likely fail. The music business is no different. Unfortunately, some artists never master the basics of the music business and are held back from success as a result. Even worse, artists sometime don't receive the dollars that they have earned because of their confusion. This article will help alleviate these problems.

In music, everything begins and ends with copyright law - the law that protects original expressions of ideas that are reduced to a tangible form. What does that mean, you might ask? In plain terms, it means every time you write music and lyrics, you own a copyright to the written song (or underlying musical composition as it's often called). That right isn't fully enforceable, however, unless you file the Form PA for the song - which is available online at www.copyright.gov - with the United States Library of Congress. Artists enjoy a second copyright when they record their lyrics and music. Similar to the copyright in the song, the copyright to the sound recording isn't fully enforceable until the artist registers the applicable Form SR - also available at www.copyright.gov - with the Library of Congress.

Before moving onto an outline of the income streams available to songwriters and artists from each copyright, let me make one thing clear. Putting a CD in an envelope and mailing it to yourself, a/k/a "Poor Man's Copyright," doesn't make your rights fully enforceable. It only establishes a date of creation. You must register the Form PA or Form SR for full protection. Now that we've cleared that up, let's talk about money.

When you own the copyright to the song, there are five (yes, five) primary income streams available to you. They are (1) mechanical royalties, (2) public performance royalties, (3) synchronization license fees, (4) copy license fees, and (5) new media license fees. A brief explanation of each is as follows:

1. Mechanical Royalties - Every time a recording of a song is sold, be it in the form of a CD, download, cassette, etc., the owner or owners of the copyright to that song receive the 9.1 cents (or 1.75 cents per minute if the song is over 5 minutes). This may not seem like much, but take these pennies and multiply them times one million. The product will make you smile. Also, don't forget that copyright ownership lasts for the life of the author of the song or recording plus 70 years. If two or more people co-own a copyright, the co-owners and their heirs enjoy the right for 70 years after the death of the last surviving author.

2. Public Performance Royalties - Anytime the recording of your song is played publicly on any type of radio, in a restaurant, at an arena, on television, etc., you are entitled to receive public performance royalties based on the amount of time your music was played. ASCAP, BMI and SESAC are the companies that collect public performance royalties for the owners of copyrights to songs in the United States.

3. Synchronization License Fees - When someone synchronizes a visual picture to the music you wrote (films and videogames are examples), you are entitled to a licensing fee for the use of your song. Often times, this is a one-time payment. Synchronization license fees can range from very little to five or six figure payments, depending on the popularity of the song.

4. Copy License Fee - If the song you wrote gets manufactured as sheet music, you are entitled to a licensing fee. Most copy license fees range from 7 cents to 15 cents per page, depending on the demand for the song.

5. New Media Licensing - This is the catch-all for new forms of song display such as ring tones, ring backs, online lyric reprints, etc. You, as the owner of the song, will negotiate a licensing fee arrangement directly (or through a publishing company, if you have signed a publishing, co-publishing, or administration deal) with the cell phone company or website provider. The payment method of these fees vary. Sometimes, they are one-time payments. Other times, they are paid as royalties for each use of the song.

There are also multiple streams of income for the owner of the copyright to the sound recording. These streams are generated from (1) recording sales, (2) public performances on digital, satellite and Internet radio, and (3) use of the master recording in television, films, videogames, etc. A brief breakdown of each of these streams is as follows:

1. Recording Sales - This is a simple formula. If you own the sound recording, your income stream from the sale of the recording is the price for which you sell the CD, download, etc. minus any manufacturing costs. If you are signed to a record label, the label usually owns the sound recordings and you receive a royalty on their selling price, usually 10% to 15% depending on the success of your prior albums.

2. Public Performance Royalties for Digital, Satellite and Internet Radio - Please note that terrestrial (AM/FM) radio is excluded from this list. In the U.S., the owner of the sound recording does not receive a performance royalty for terrestrial airplay. The owner of the sound recording does, however, receive a royalty for play of the recording on digital, satellite and Internet radio. SoundExchange is the company that collects these royalties. Similar to the song, the amount of this royalty depends on the length of time the recording is played.

3. Use of the Master Recording in Television, Films, Videogames, Etc. - When someone wants to feature a sound recording in a television program, film, videogame, etc., the person who wishes to use the recording must pay its owner a licensing fee for the use of the master recording. This is called a master use license. Master use license fees are usually one-time payments, but they can vary depending on the popularity of the recording and how many times it will appear as a part of the particular use.

Now that you know the two forms of music income and the primary income streams that flow from each, you are prepared to negotiate better deals and make more money. With that said, go out and turn your night gig into your day gig.

All the best,

Chris

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Christopher J. Cabott, Esq. is an entertainment, sports and media lawyer with the Law Office of Lloyd Z. Remick and Zane Management, Inc.

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Christopher J. Cabott, Esq.
Law Office of Lloyd Z. Remick
One Liberty Place
1650 Market Street, 21st Floor
Philadelphia, PA 19103
Office - (215) 575-3820

MySpace - www.myspace.com/chriscabott
Website - www.zanemanagement.com