Payments are made generally by production companies and/or record companies to the music publisher for the right to reproduce and sell recordings which embody musical compositions (songs) that are controlled by the publisher. Those payments are known as mechanical royalties. These tunes are known as “controlled compositions.”
Most production and recording company agreements have language very similar to the following:
Now that we have seen the definition, what does it mean and how may it affect you? Minimally, a controlled composition is a song (musical composition) which has been written and or composed, generally by the artist signed to the recording agreement. It can be more. If the recording artist wrote part of the song with another songwriter, the contract language considers that song to be “controlled” as well. In other words, any collaboration by the recording artist will render the resultant musical creation to be subject to the “controlled” composition provisions.
Additionally, if the song was neither written nor composed by the artist, but is owned by the artist, directly or indirectly, then the production company considers the song to be controlled by the artist. Quite often an artist forms his own publishing company. It is not uncommon for the artist to assign his own songs to his or her solely owned (or co-owned) publishing company. In this respect it is also common for artists to acquire an ownership interest in other songwriters’ musical compositions. The contract language also encompasses those compositions which the artist may have a financial interest in, whether or not the artist actually owns or wrote the composition.
Most of the language regarding controlled compositions is found in the mechanical licenses section of the production contract. Included in that section are the representations and warranties that the songwriter/artist must provide to the production company, who in turn, provides these same representations and warranties to the recording company and/or distribution company, if any.
The controlled composition must be available to be used by the company. In other words, the company must be able to obtain a mechanical license in order to be the first to include a `cover’ of the underlying musical composition on a commercially released record, compact disc, pre recorded tape, etc. The rights so licensed must be free and clear of any encumbrances, and generally must not infringe upon nor violate any other entities’ rights. The mechanical license agreement would probably include indemnification warranties and representations in order to effectuate this.
What if a composition has already been “covered” by a previous release? Although a production company can pay the statutory rate for a “compulsory” license, it will seek to pay a more favorable or discounted rate. Controlled compositions are generally licensed to the company at what the industry calls “three quarter” rate. “Three quarter” rate means that the record company pays the publisher seventy five (75%) percent of the minimum statutory rate. (For the current minimum statutory rate, see the update to our article on Mechanical Royalties, which appeared in December ’91 issue of IMPS). This rate, for better or worse, is somewhat the standard in the industry, although there are some companies which do pay full rate for the use of the songs. Although many contend that payment of the full rate would be appropriate (especially publishing companies), the record manufacturers and distributors strenuously argue that they need the 25% discount on the statutorily established mechanical royalty rate in order to minimize their costs and their ultimate risk in releasing and financing pre recorded musical product.
Recording companies, which must pay the publisher for the use of the controlled compositions, generally seek to further limit the amounts that must be paid in the event the controlled composition is used on mini albums, extended play records, budget records or other reduced price records. In addition, if the composition is used more than once on a particular album, mini-album, or cassette, using different mixes for example, then some recording companies seek to pay for only one use. Many companies will only pay for two uses. In addition, cassingles or “12 inches” with four to six mixes of the same song may result in a single or (if you’re lucky and well represented) double mechanical royalty.
Most production companies also seek to limit the amount of songs for which they are obligated to pay licenses on album length recordings to ten, although most album length recordings regularly include more than ten songs. In the event a composition is an arrangement of a public domain song, meaning creative material which is no longer protected by copyright law; general contract provisions may provide for no royalties to be paid for these copyrighted arrangements. That means no mechanical royalties paid for a cover, even though it is an original copyrighted arrangement of an previously created, but no longer protected musical work. Please note, we feel quite obligated to point out that the length of copyright protection varies from country to country (as does the amount of and method of calculating mechanical royalties). Consequently, a song will not enter the public domain at the same time in every nation.
In addition, as we pointed out, in a previous issue, the statutory mechanical royalty is a certain amount of cents per song or a certain amount of cents per minute, whichever is higher. If a composition is controlled, regardless of the length of the song, the company will seek to make payments based on the lower of the two. In the event the production company or its distributor produces music videos (video grams), their contract will also seek a grant to the company of a license to use the compositions for little or no additional fee.
Finally, the statutory mechanical royalty rate changes periodically, based on hearings before the Copyright Royalty Tribune and the consumer price index. Although, a long term record deal may cover periods when several different escalating royalty rates are in effect, the production company will seek to lock in the amount payable based upon the lowest and earliest statutory rate. The artist, on the other hand, will seek, in negotiations, to use the rate which is in effect at a later time, such as, when the records are released or manufactured.
This is a complex area. We invite our reader’s questions. The variations in this field are only limited by the participant’s imagination”Controlled Composition” shall mean a musical composition written and/or composed, in whole or in part, by you and/or owned or controlled, in whole or in part, directly or indirectly, by you, or by any person, firm or company in which you may have any interest and/or in which composition you have any direct interest (whether financial or otherwise).
Most production and recording company agreements have language very similar to the following:
Now that we have seen the definition, what does it mean and how may it affect you? Minimally, a controlled composition is a song (musical composition) which has been written and or composed, generally by the artist signed to the recording agreement. It can be more. If the recording artist wrote part of the song with another songwriter, the contract language considers that song to be “controlled” as well. In other words, any collaboration by the recording artist will render the resultant musical creation to be subject to the “controlled” composition provisions.
Additionally, if the song was neither written nor composed by the artist, but is owned by the artist, directly or indirectly, then the production company considers the song to be controlled by the artist. Quite often an artist forms his own publishing company. It is not uncommon for the artist to assign his own songs to his or her solely owned (or co-owned) publishing company. In this respect it is also common for artists to acquire an ownership interest in other songwriters’ musical compositions. The contract language also encompasses those compositions which the artist may have a financial interest in, whether or not the artist actually owns or wrote the composition.
Most of the language regarding controlled compositions is found in the mechanical licenses section of the production contract. Included in that section are the representations and warranties that the songwriter/artist must provide to the production company, who in turn, provides these same representations and warranties to the recording company and/or distribution company, if any.
The controlled composition must be available to be used by the company. In other words, the company must be able to obtain a mechanical license in order to be the first to include a `cover’ of the underlying musical composition on a commercially released record, compact disc, pre recorded tape, etc. The rights so licensed must be free and clear of any encumbrances, and generally must not infringe upon nor violate any other entities’ rights. The mechanical license agreement would probably include indemnification warranties and representations in order to effectuate this.
What if a composition has already been “covered” by a previous release? Although a production company can pay the statutory rate for a “compulsory” license, it will seek to pay a more favorable or discounted rate. Controlled compositions are generally licensed to the company at what the industry calls “three quarter” rate. “Three quarter” rate means that the record company pays the publisher seventy five (75%) percent of the minimum statutory rate. (For the current minimum statutory rate, see the update to our article on Mechanical Royalties, which appeared in December ’91 issue of IMPS). This rate, for better or worse, is somewhat the standard in the industry, although there are some companies which do pay full rate for the use of the songs. Although many contend that payment of the full rate would be appropriate (especially publishing companies), the record manufacturers and distributors strenuously argue that they need the 25% discount on the statutorily established mechanical royalty rate in order to minimize their costs and their ultimate risk in releasing and financing pre recorded musical product.
Recording companies, which must pay the publisher for the use of the controlled compositions, generally seek to further limit the amounts that must be paid in the event the controlled composition is used on mini albums, extended play records, budget records or other reduced price records. In addition, if the composition is used more than once on a particular album, mini-album, or cassette, using different mixes for example, then some recording companies seek to pay for only one use. Many companies will only pay for two uses. In addition, cassingles or “12 inches” with four to six mixes of the same song may result in a single or (if you’re lucky and well represented) double mechanical royalty.
Most production companies also seek to limit the amount of songs for which they are obligated to pay licenses on album length recordings to ten, although most album length recordings regularly include more than ten songs. In the event a composition is an arrangement of a public domain song, meaning creative material which is no longer protected by copyright law; general contract provisions may provide for no royalties to be paid for these copyrighted arrangements. That means no mechanical royalties paid for a cover, even though it is an original copyrighted arrangement of an previously created, but no longer protected musical work. Please note, we feel quite obligated to point out that the length of copyright protection varies from country to country (as does the amount of and method of calculating mechanical royalties). Consequently, a song will not enter the public domain at the same time in every nation.
In addition, as we pointed out, in a previous issue, the statutory mechanical royalty is a certain amount of cents per song or a certain amount of cents per minute, whichever is higher. If a composition is controlled, regardless of the length of the song, the company will seek to make payments based on the lower of the two. In the event the production company or its distributor produces music videos (video grams), their contract will also seek a grant to the company of a license to use the compositions for little or no additional fee.
Finally, the statutory mechanical royalty rate changes periodically, based on hearings before the Copyright Royalty Tribune and the consumer price index. Although, a long term record deal may cover periods when several different escalating royalty rates are in effect, the production company will seek to lock in the amount payable based upon the lowest and earliest statutory rate. The artist, on the other hand, will seek, in negotiations, to use the rate which is in effect at a later time, such as, when the records are released or manufactured.
This is a complex area. We invite our reader’s questions. The variations in this field are only limited by the participant’s imagination
By: Bruce E. Colfin & Jeffrey E. Jacobson
© 2008 Jacobson & Colfin, P.C.,