How Your Songwriting Generates Income

by Joy R. Butler, Esq.
Please read the disclaimer.

As a songwriter, you earn money by licensing your songs for various uses, and collecting the corresponding license royalties. Generating income from your songwriting is music publishing. While some songwriters handle their own music publishing, many songwriters work with a music publishing company to market and promote their songs. In return for its services, the music publishing company generally receives 50% of all songwriting royalties.

The most significant royalty revenue for the typical songwriter comes from issuing the following licenses:

• Mechanical Licenses
  
• Performing Rights Licenses
  
• Synchronization Licenses
  
• Print Licenses
  
• Foreign Licenses
  

Let's briefly go through each one. The chart at the end of this article summarizes the sources of your songwriting royalty income.

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Mechancial Licenses

A mechanical license gives a record company or other party the right to reproduce your song on to a record. You might negotiate this license directly with the person who wants to record your song. Alternatively, the person who wants to record your song may obtain a compulsory mechanical license.

The compulsory mechanical license is a creation of the United States Copyright Act. Here's how it works. Once a song has been commercially released, anyone may make another recording of that song and sell copies of his recorded version as long as he pays the song's copyright owner certain license fees in accordance with the compulsory mechanical license rules. In order for a compulsory mechanical license to be valid, the copyright owner must have authorized the commercial release of the song, and the song must be non-dramatic. While the Copyright Act doesn't provide a specific definition for the term "non-dramatic song", most people think of it as a song that's not from a musical or an opera.

The compulsory mechanical license rate - also referred to as the statutory rate - is periodically modified. The current statutory rate is 7.55¢ per song per record distributed for recordings of up to five minutes. If the recording is more than five minutes, the rate is 1.45¢ per minute per record. The next change is scheduled to become effective on January 1, 2002. As of that date, the statutory rate will increase to 8¢ for recordings up to five minutes, and 1.55¢ per minute for recordingsover five minutes.

Despite the existence of the compulsory mechanical license, most mechanical licenses are in fact negotiated. That's because the notice and accounting requirements of the compulsory mechanical license are quite cumbersome. Also, many artists record songs that have not been previously commercially released and, as a result, are not available for compulsory licensing. Nevertheless, the statutory rate still has substantial importance because it provides a guideline for setting the negotiated license fee.

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Performing Rights Licenses

Each time your song is performed in public, you are entitled to receive royalty income for that public performance. It doesn't matter whether your song is performed by a live band, or if a recorded version of your song is played. Both can qualify as a public performance. That means your song is performed publicly when a recording of it is broadcast on a radio station, when it is played as part of a television program or when it is played in a nightclub. To comply with copyright law, the radio station, television network, or club must have a performing rights license authorizing the public performance.

With some limited exceptions, performing rights apply only to the song and not to the sound recording. Each time a song is performed publicly, the songwriter - but not the recording artist singing the song or the record company that released the record - is entitled to receive compensation.

To eliminate the need to negotiate a separate license with each radio station, night club, and restaurant that wants to perform their song, songwriters or their music publishers affiliate with performing rights societies. ASCAP, BMI and SESAC are the performing rights societies in the United States. These associations specialize in negotiating performing rights licenses and collecting performing rights royalties. The societies often negotiate blanket licenses with radio stations, television networks, and restaurants that allow those organizations to perform any song in the catalog of the performing rights society issuing the blanket license.

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Synchronization Licenses

Through a synchronization license, you authorize someone to use your song with visual images. Your song is synchronized with the visual images. That's why the license is called a synchronization license or synch license for short. The visual images might be from a commercial, film, video, television show or other audiovisual production.

Synchronization fees are subject to negotiation and vary according to the popularity of the song and the importance of the song in the visual piece. For example, the synchronization fee to use an entire song in a major motion picture might be in the $50,000 to $75,000 range while the synchronization fee for use of a song as background music in a television show might range from $1,000 to $2,000.

Print Licenses

A print license authorizes the sale of your song in printed form. Printed music is sold as single song sheet music or as part of a folio, which is a book containing a collection of songs by one or more songwriters.

Print licenses are generally issued to a company that manufactures and distributes printed music. The manufacturer then pays a royalty to the songwriter or his music publisher for each unit of sheet music and each folio that is sold.

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Foreign Licenses

The same licenses that we just discussed - mechanical, performance, synchronization and print - are also issued in foreign countries. Songwriters or their music publisher typically retain an agent located in each of the foreign countries where the song is exploited. These sub-publishers - as they are frequently called -collect royalties generated in their country, retain about 15-25% as their fee, and pass the remainder along to the songwriter or U.S. music publisher.

This chart summarizes the major sources of your songwriting royalty income:

1. The music publisher first deducts all costs associated with collecting the song royalties. The amount remaining is then split between the music publisher and the songwriter.
2. This is the historical share given to songwriters for single-song sheet music royalties. Some music publishing companies now share these royalties 50-50 with songwriters.
3. The sub-publisher retains 15-25% as a fee before passing earnings to the domestic music publishing company.

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A FEW WORDS ABOUT SASHAY COMMUNICATIONS
from Joy R. Butler, Principal and General Counsel

Sashay Communications is a publishing and media production company located in Arlington, Virginia. We recently launched our Guide Through the Legal Jungle (TM) Audiobook Series. Our goal for the audiobook series is to target subject areas where there's often an urgent need to understand complex laws quickly and inexpensively. Music law was a natural choice for our first release.

The Musician's Guide Through theLegal Jungle cuts through the complexity of music law by presenting it as an informal conversation between a legal expert and a musician. Narration by our professional voice-over artists keeps the audiobook's question and answer format light. While the audiobook can not replace an attorney, any musician can obtain a basic understanding of music law after spending 3 hours with the tapes and accompanying 62-page booklet. And at $29.95, the audiobook is well within most musician's budgets.

We're eager to expand the series into additional areas of entertainment and media law. The next audiobook, scheduled for release later this year, is already in development. Visitors to http://www.legaljungleguide.com/musician.htm can preview The Musician's Guide,and find free legal and business resources on the music industry.

ABOUT JOY R. BUTLER

Joy R. Butler, Esq., is a principal and the general counsel of Sashay Communications. Joy also wrote the script for the company's first audiobook production, The Musician's Guide Through theLegal Jungle. Prior to joining Sashay, Joy was in private practice where she provided legal counsel to a variety of entertainment and media clients including record labels, performing artists, songwriters, personal managers and internet companies. She holds a B.A. from Harvard College and a law degree from Harvard Law School.

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DISCLAIMER
This article is offered as an educational and informational tool only, and should not be relied on as legal advice. Applicability of the legal principles discussed may differ substantially in individual situations. If you have a specific legal problem or concern, you should consult an attorney.