Everyone is familiar with music. Everyone knows that successful recording artists make large amounts of money throughout their career. Most people probably do not understand, however, the nature of the copyrights involved for songwriters, or the sources of income derived from those rights. Indeed, many people familiar with copyright law may not really understand that there are different copyrights involved when it comes to the copyrights held by the owner of a "song" versus the copyrights held by the owner of a "sound recording." Many do not understand that a performing artist may not actually own any copyrights in the songs or sound recordings that have made the artist famous. A sound recording consists of the recording itself (i.e. the sounds fixed onto the tape from which CDs are manufactured) that was made of a musician’s or artist’s performance of a song. A song, in short, consists of the words, musical notes, and melody that make up the original elements of the composition.
The purpose of this article simply is to briefly outline some of the copyright issues and sources of income for songwriters and musical artists. The article will not present all there is to know about the music industry, or copyrights for that matter. Nevertheless, it is important to have an understanding of the different copyrights involved in the music business, as well as an understanding of the different sources of income for an artist or songwriter, when negotiating any contracts in the music industry. There are different sources of income available to a musical artist and a songwriter, and there are different ways that people in the music business will try to take a piece of that income away from the artist or songwriter. To protect your music industry client, it is important to understand the different copyrights involved.
Copyrights In "Songs" Versus "Sound Recordings."
As stated in the Introduction above, there is a difference between the copyright ownership of a "song" and the copyright ownership of a "sound recording." For example, a record label may own the rights to the sound recording that you hear on your favorite rock group’s CD, while someone else owns the rights to the songs that were recorded. The following will serve as an illustration using an actual song 1. Bob Dylan wrote the song "All Along The Watchtower" and released it on an album around 1967. Jimi Hendrix (and many other artists as well) covered the song and released it on an album also. The copyrights in the sound recording you hear on Dylan’s album would originally have been owned by the label that released his album, Columbia. Likewise, the copyrights in the sound recording you hear on Hendrix’s album would have originally been owned by MCA, the label that released his album. In either case, however, Dylan held the copyrights to the musical composition (i.e., the song) itself. By virtue of his ownership, Dylan had a right to receive royalties from all albums sold containing the song.
The reason for the dichotomy in ownership is because the law recognizes that there are different creations or "works" with respect to a sound recording versus a song. As stated above, the sound recording consists of the recording that was made of an artist’s performance of a song. A recording of a pianist playing Für Elise will sound different from a guitarist’s recording of the same composition. There are original elements found in Hendrix’s recording of "All Along The Watchtower" that you will not find in Dylan’s recording. Yet, the song (including the lyrics and overall melody) remains the same. There are many other instances where a CD will contain songs that may not necessarily be written by the artist or group appearing on the CD, and even when the songs were written by the artist or group appearing on the CD, the copyrights in the sound recording will likely be held by a person different from the owner of the copyrights in the song.
As a result, a songwriter’s source of income comes from the exploitation of his ownership rights in the song. The label receives income by exploiting its ownership rights in the sound recordings, and the performing artist receives income through the record label. Because this article focuses on the singer/songwriter, the following will outline the different income sources for the songwriter and for the performing artist, who may or may not be the same person.
The songwriter is paid for the use and exploitation of his or her song (which consists of both words and music). The main sources of income from song copyrights are as follows:
1. Mechanical royalties;
2. Public performance royalties;
3. Synchronization royalties; and
4. Print royalties.
The income for mechanical royalties is the main source of revenue for the songwriter and music publishers. Mechanical royalties are typically paid by record companies for the use of songs that are embodied on recordings that the label releases for distribution and sale. There is a statutory rate with respect to the payment of mechanical royalties. The statutory rate increases every two years. Until January 1, 2006 the rate was approximately 8.5 cents for each song, with a small amount greater for each minute that the song exceeds five minutes. The statutory rate increased on January 1, 2006 to approximately 9.1 cents. The statutory rate can be (and often is) negotiated to a lower rate. The royalty is calculated based on the sales of the records that contain a songwriter’s song and are paid to the owner of the copyright to the song. The collection and payment of mechanical royalties is overseen by a company called the Harry Fox Agency, Inc.
Public performance income for a song is most often derived from radio broadcast. It could also include live theatre or dramatic production, income from concerts, bars, jukeboxes, and things of that nature. Writers and publishers receive their respective shares of the royalties directly from performing rights societies. In the United States, the performing rights societies are ASCAP, BMI, and SESAC. The rights societies collect revenue into a single fund and then split the royalties between all of their collective members.
Synchronization is the right to control the use of a song in film, commercials, television, video, internet websites, multimedia CD/ROM, and other media. Synchronization fees often come in the form of a single lump sum buyout payment for the use of the song.
Print income includes income from folios, books, sheet music, chord charts, and other printed representations of the song.
The Performing Artist:
The performing artist (i.e., musician or vocalist) is paid for his or her performances, whether recorded or live, and from exploitation of his or her name, likeness, and image. The performing artist receives income from:
1. Artist royalties on record sales;
2. Public performances such as concerts and other live shows (not to be confused with the performance income from radio broadcast discussed above); and
3. Merchandising and publicity (such as tee-shirt sales, posters, etc.).
The record label pays an artist a percentage of sales of CDs, records, and tapes. The artist’s recording contract will set forth the base royalty rate and typically contains detailed formulas for defining how the artist royalties will be calculated. The formulae will take into account things like records that are returned, manufacturing costs, "free goods," and the different configurations that are being sold (i.e., there may be different rates for CDs, vinyl records, or tapes).
The artist also receives income from tickets sales at concerts and merchandising sold at concerts. This income is not based upon any royalties on record sales.
There are many other issues involved in music that are beyond the scope of this article, such as publishing rights, the differences between the so-called publisher’s share and the writer’s share of publishing income, and the roles of the different performance rights societies, such as ASCAP, BMI, and SESAC. It is important for artists to find competent legal representation when dealing with contracts in the entertainment industry so they know exactly what they are giving up when they sign a "deal." The concepts involved in copyright ownership are intricate and complicated to a lawyer, let alone an artist who has not had any legal education (or in many instances any post-high school education). The discussion above should provide a good starting point for learning and remembering the different income streams that a songwriter and artist enjoy, and that the attorney should protect.
1 The illustration used here is not really true to life, because sound recordings were not given federal copyright protection until 1972, and the sound recordings in the illustration were recorded prior to 1972. Sound recordings made before 1972 were protected under common law or state statute, if at all. Therefore, the copyright ownership of the sound recordings used in this illustration may not be 100% accurate. Nevertheless, the illustration is still a good example for purposes of illustrating the current state of affairs.
David M. Jenkins is a partner at Barone & Jenkins, P.C. He has extensive experience in civil litigation and appeals in both federal and state courts. His practice areas include appellate practice, commercial and tort litigation, construction law, professional liability (attorneys, architects, engineers), entertainment law, and intellectual property law. Mr. Jenkins graduated magna cum laude from The John Marshall Law School and was admitted to the Illinois bar in 1992. Mr. Jenkins can be contacted at Barone & Jenkins, P.C., 721 Enterprise Drive, Suite 200, Oak Brook, Illinois 60523, (630) 472-0037, firstname.lastname@example.org.