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How To Legally Record And Sell A Cover Song In 3 Steps

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This post was originally written for and published on Dozmia’s blog.

If the popularity of user generated content (UGC) platforms, such as YouTube and SoundCloud, has taught us anything about the music industry in the Digital Age, it is that aspiring artists from anywhere can amass huge online audiences and earn global reach by putting out cover songs that spark a reaction.

Success stories like those of Justin Bieber, Tori Kelly, 5 Seconds of Summer, Charlie Puth, Shawn Mendes, and Ed Sheeran are no longer rare phenomena. Talented unsigned artists like Jade Novah and Austin Mahone have earned tens of millions of views and plays across their UGC accounts. Previously undiscovered talent have gone on to land brand sponsorships, live performances with major recording artists, appearances on TV, casting in commercials, and more– all without the backing of a major record label.

However, while recording and uploading cover songs to UGC platforms can be a great first step to building a fanbase, monetizing those songs on traditional digital music services can be a legal nightmare if not done correctly. Furthermore, knowing when, where, and how to capture all of the royalty streams that your cover recording earns will put you in a better position to reap all of the rewards from releasing a cover recording that takes off.

Here are three steps that you should take if you plan to legally record and release a cover song:

Step 1: Secure the proper licenses to reproduce and distribute the original composition.

The U.S. Copyright Act grants copyright owners six exclusive rights including the right to reproduce and the right to distribute their compositions in phonorecords. When you record a cover of an existing song, you are effectively using someone else’s copyrighted work and they must be compensated for the use when you distribute the recording in physical and/or digital media.

The law includes a provision that enables anyone to reproduce and distribute a composition by following the specific requirements set out in the compulsory license. These requirements basically state that you must notify the copyright owner of your intent to use their song and you must account to (provide reports and statements on usage) and pay statutory mechanical royalties to the copyright owner for each use.

The term “mechanical” refers to when songs were mechanically reproduced in phonorecords. The statutory mechanical royalty rates are set by the Copyright Royalty Board.

Currently, the statutory mechanical royalty rate for physical formats (CDs, cassettes, LPs) and permanent digital downloads (e.g. iTunes) is 9.1¢ for songs 5 Minutes or less or 1.75¢ per minute or fraction thereof for songs over 5 Minutes.

Harry Fox Agency (HFA), Loudr, and Easy Song Licensing are just three of the resources for securing a mechanical license.

HFA is a membership-based mechanical licensing agency owned by SESAC. HFA represents and issues mechanical licenses in the U.S. on behalf of their U.S. music publisher members. HFA’s website claims that they currently represent over 48,000 music publishers. This makes it easier for you to go to them for most of the top popular songs released in the U.S. HFA’s service for obtaining a mechanical license is called SongFile.

Through SongFile, you pay upfront for the number of physical or digital phonorecords that you project to sell. For example, if you will sell 1,000 CDs, then you’ll pay 9.1¢ x 1,000 = $91 per cover song, which will then be paid to the publisher(s) to compensate the songwriter(s). You can also secure a license for interactive streams. However, in the United States, some interactive streaming services already pays the mechanical interactive streaming rate, so you do not have to when releasing to these platforms in the United States. Spotify, for example, pays HFA for the mechanical license for songs used on their platform in the United States, so you do not have to worry about securing a mechanical license if you’re only releasing to Spotify.

The rates for interactive streams (e.g. Spotify) and limited downloads (e.g. offline mode) are determined by a formula that takes into account the service type, license type, whether or not it’s ad-supported, amounts paid to labels, and other factors. Spotify’s rate comes out to about $0.0007 per stream. Again, they pay this to HFA so you don’t have to!

Loudr and Easy Song Licensing are independent services that charge a small service fee (about $15 per song) to secure a mechanical license for any song that you’d like to cover. This is awesome because if you’re covering some obscure song from an indie band in Wyoming or an international songwriter from France, you wouldn’t be able to license the song through HFA’s SongFile, which only represents and licenses U.S. publishers.

When you’re getting a license through Loudr or Easy Song Licensing, do not select interactive streams. Like I mentioned above, Spotify is already paying this to HFA and other services are paying Music Reports, Inc. (MRI), which is a rights administrator that represents a number of digital music platforms. Outside of the U.S., digital services pay local collection societies, who then pay the publishers.

So, definitely secure a license if you’re releasing a cover song on a physical format. Definitely secure a license if you’re releasing a cover song as a digital download. If you’re releasing only to major interactive streaming platforms, then you may not have to secure a license because most of these companies pay HFA or MRI already.

Step 2: Get a unique code to distinguish your recording.

If you’re planning to do a cover of a popular song, chances are that many other artists have or will cover the same song. With multiple releases of the same song to the global music ecosystem, it is important to distinguish your recorded version of the original song from all others. This is done with a unique identifier called the International Standard Recording Code or ISRC for short.

The ISRC code is a unique 12-character alphanumeric code assigned to each version/mix of a recording (ie. QMZTA1700001). For example, if you have a live version and a studio version of your cover song, each will need its own ISRC. If you get a dance remix of your cover or do a stripped down acoustic version of your studio-produced cover, again each of these versions will require a unique ISRC.

When you distribute music digitally, almost all digital platforms require an ISRC for each recording. Your ISRC can and should also be embedded in the metadata of your recording file so that when your recordings are released as a digital download or on physical formats, the ISRC is attached to the recording.

Be very careful to only purchase ISRC codes from official ISRC Managers. ISRC Managers appointed by the US ISRC Agency, the Recording Industry Association of America (RIAA), are the only companies approved to assign ISRCs on behalf of the owner of a recording. These companies have guaranteed that they will abide by the Procedures for Assignment of ISRCs by ISRC Managers.

Other companies claiming to assign ISRCs on behalf of their clients are not authorized to do so and the ISRC’s they generate are invalid and risk collisions with codes issued by authorized registrants and ISRC Managers. This happens when fake ISRCs are issued or legitimate ISRCs are re-used. This results in erroneous metadata being disseminated across the digital music ecosystem, which can result in missing or misallocated royalties and disputes.

TuneRegistry is an all-in-one music rights and metadata management platform that’s also an approved ISRC Manager offering free and discounted ISRC codes included in its subscription plans. You can quickly and easily obtain ISRCs for each of your versions/mixes inside your account and immediately use the ISRC with any digital distributor to get your cover song distributed. You can view a complete list of approved ISRC Managers at http://www.usisrc.org/managers/index.html.

Step 3: Unlocking your royalties and getting paid.

The goal of virtually all aspiring artists is to have their music heard as wide and as far as possible. When songs are hits, earning national and even international reach can happen literally overnight. And even when there is slow momentum as buzz picks up across blogs and social sites, the right mention, the right placement on a playlist can break a song within a matter of weeks.

Whether or not your cover song blows up to international success, you may still earn and be due royalties for the exploitation of your cover song recording. Although you will not earn publishing royalties related to the underlying composition (remember, the original songwriter is the copyright owner and compulsory license enables you to record and distribute a cover), such as performance royalties that are paid out by ASCAP, BMI, and SESAC, you will own the master sound recording and will be able to collect master royalties.

Here are some of the income streams associated with the master sound recording and how you obtain the royalties:

  • Sales Income – This is pretty straightforward. You earn income when your recording is sold in physical format or permanent digital downloads. Sales are generally passed on to you through your distributor.
  • Interactive Streaming Royalties – When your recording is streamed on interactive platforms (e.g. Spotify), the service pays a streaming master use royalty to the distributor, who then pays you for the streams. The royalty rate is based on a formula that takes into account the type of use, the number of total streams, your share of streams, and territory.
  • Non-Interactive Streaming Royalties – Webcasters and digital services that broadcast recordings over the Internet (e.g. Pandora, iHeart Radio), cable (e.g. Music Choice), and satellite (e.g. SiriusXM) in radio-style programming where the end users/listeners have limited to no control over the selection of music pay a royalty for the digital performance of sound recordings to SoundExchange. SoundExchange then pays out 45% of the royalties to the featured performers on the recording, 50% to the copyright owner of the master recording, and 5% to a fund for background vocalists and session musicians maintained by AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund. It is important that you register your track title, the performers, copyright owner (which will be you if you’re independent and not signed to a label), and ISRC to SoundExchange. This helps them to identify you and match incoming usage reports and royalties from digital services to you as the income participant. After joining SoundExchange, you can easily keep on top of registering all of your tracks directly through your TuneRegistry account. This way, you’ll never forget to make sure that you’re raising your hand to capture your non-interactive streaming royalties.
  • Master Use for Sync Fees – If your cover song gets licensed to a TV show, a movie, a commercial, or any other audiovisual media, you would need to obtain a synchronization license from the publisher of the composition. While you own the recording of your cover song, the copyright owner owns the composition and still give permission for the composition to be used in audiovisual media (this is a separate license from the compulsory mechanical license). The producer of the content will need to pay the synch fee for the composition and pay a master use fee for the master use license of the sound recording. These negotiations take place directly between the producer of the content (or their representatives) and the owners of the copyrights (you for the master sound recording and the songwriter or publisher for the composition that you’ve covered).

Now that you’re an expert on legally recording and selling cover songs, share the knowledge with your musician friends! No artist should be afraid to record and release cover songs — unless you’re releasing to YouTube, because that’s a different beast! The good news is, many publishers have opted-in to an agreement between YouTube and the National Music Publisher’s Association to earn a revenue share from advertisements placed on videos that feature recordings that embody their compositions. However, getting a license for YouTube could be down through We Are The Hits.

5 Royalty Streams Every Indie Artist Should Know

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This post was originally written for and published on Repost Network’s blog.

With the rise of music distributors and digital music aggregators, it has never been easier for an indie artist to release and monetize their music across the global digital music ecosystem. The Digital Music Era has significantly lowered the barriers to entry to the top outlets for music search and discovery; and startup entrepreneurs continue to develop and launch new platforms to innovate search, discovery, sharing, and access.

Today, music fans can easily access music from their favorite artists or discover new artists to fall in love with, pitting major established artists against their up-and-coming indie artist counterparts. And the music industry is changing for the better as a result (the Recording Academy now recognizes music released on free services for GRAMMY Award consideration and Billboard has accepted YouTube and SoundCloud streams for the purpose of charting).

Innovation in technology has made it possible for any indie artist with decent enough production tools and access to the Internet to record and release new music at any time. And with thousands of artists pumping out new music, it is no wonder that the industry has grown to over one million new tracks entering the global music market every month.

Each of these tracks begin earning royalties from its first play on any of the 400+ digital music services and 3,000+ webcasters operating around the world. And all of these royalties, billions of dollars of royalties, flow through a complex network of pipelines into various buckets of royalty collection with the ultimate goal of trickling down to the appropriate music creators and rightsholders. While this sounds straight-forward for a number of reasons this is far from a smooth process; and millions of dollars in royalties are in fact not making its way to the music creators and rightsholders to which they are due.

Part of the reason starts with you, the music creator. It is especially important for independent artists to understand the various income streams that your releases generate and the ways in which you must be setup to collect your royalties.

Here is an awesome infographic created by Future Music Coalition that visually breaks down how creators are compensated. Below it, I highlight five royalty streams that every indie artist should be setup to collect.

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If you plan to release music digitally, you should be aware of and setup to collect all of the royalty streams that your music earns. Your music earns royalties for the use of two different copyrights. The first is the copyright for the composition (song). The second is the copyright for the sound recording (master). These two copyrights earn royalty streams that are collected and paid out by different sources to different income participants, as explained below.

Royalty Stream 1: Performance Royalties for Compositions

With few exceptions, virtually all uses of your composition earns performance royalties. Performance royalties are earned when your composition is played on digital radio-like services (e.g. Pandora), when your composition is accessed and played through on-demand streaming services (e.g. Spotify), and when your composition is performed in venues, bars, and restaurants. All of these companies have performance licenses from one or more performing rights organization (PRO). In the United States, ASCAP, BMI, SESAC, and Global Music Rights are the PROs who issue blanket licenses for the performance rights in compositions to digital music services. In return, these services pay royalties to these PROs. The PROs then pay 50% to the songwriter(s) of the composition and 50% to the publisher(s), in accordance with the publishing splits reported to the PRO by the copyright owners. In order to collect performance royalties, you must join a PRO and register your composition (your songs) and the associated ownership splits (for example, 4 Writers might have equal ownership (25% each) or varied ownership (Writer 1 – 25%, Writer 2 – 50%, Writers 3 – 12.5%, Writer 4 – 12.5%)) to the PRO in a timely manner. One of the reasons music creators and rightholders do not receive the performance royalties that their compositions earn is because they have not joined a PRO or have not registered their songs with their PRO.

Royalty Stream 2: Mechanical Royalties for Compositions

Mechanical royalties are earned when your composition is reproduced and distributed in phonorecords (a medium in which a sound recording is stored). This includes compositions embodied in sound recordings stored in physical formats (CDs, vinyl, cassette), MP3 permanent downloads (e.g. iTunes), and interactive streams (e.g. Spotify). In the digital music sector, streaming services secure mechanical licenses either directly from copyright owners or by utilizing the compulsory license as provided by copyright laws. Regardless of how they secure their mechanical license, the major services pay mechanical royalties to Harry Fox Agency (HFA) and Music Reports Inc. (MRI), who then pay the publishers of the composition. One of the reasons music creators and rightsholders do not receive the mechanical royalties that their compositions earn is because they have not registered their songs with HFA or MRI, who help digital music services secure the mechanical licenses. For unsigned indie artists, this can be much more difficult if you do not have a publisher because HFA only represents eligible publishers who’ve affiliated with them. MRI is a rights administrator and will issue notices to copyright owners if their digital music service clients intend to utilize the copyright owner’s composition in a manner that requires a mechanical license. Spotify pays HFA mechanical royalties for the compositions used in their platform. Amazon Music pays MRI mechanical royalties for the compositions used in their platform. (Note that in the United States, iTunes passes the mechanical royalty to the distributor, who then pays the label. If you’re an unsigned artist, then you receive the income since you are your own label. Outside of the United States, iTunes and on-demand services such as Spotify pay mechanical royalties to a mechanical licensing society in the territory represented by the society. In order to capture these foreign mechanical royalties, a publisher or administrator must affiliate with and register the compositions with the foreign mechanical collection society.)

Royalty Stream 3: Permanent Download Royalties for Masters

A permanent download is generally a sales transaction through a digital retail store (e.g. iTunes). This income is passed along to the distributor, who then pays the label (less any applicable commissions). If you’re unsigned artist, then you receive the income since you are your own label.

Royalty Stream 4: Interactive/On-demand Streaming Royalties for Masters

Just like a permanent download, interactive/on-demand streams (e.g. Spotify) of sound recordings generates master use royalties that is passed along to the distributor, who then pays the label (less any applicable commissions). If you’re unsigned artist, then you receive the royalties since you are your own label.

Royalty Stream 5: Non-Interactive Streaming Royalties for Masters

Unlike a permanent download or interactive/on-demand streams of sound recordings, non-interactive streams are not paid to your distributor. Webcasters and digital services that broadcast recordings over the Internet (e.g. Pandora, iHeart Radio), cable (e.g. Music Choice), and satellite (e.g. SiriusXM) in radio-style programming where the end users/listeners have limited to no control over the selection of music (non-interactive) pay a royalty for the digital performance of sound recordings to SoundExchange. SoundExchange then pays out 45% of the royalties to the featured performers on the recording, 50% to the copyright owner of the master recording, and 5% to a fund for background vocalists and session musicians maintained by AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund. One of the reasons music creators and rightholders do not receive the non-interactive royalties that their masters earn is because they have not joined SoundExchange or have not registered their tracks with their SoundExchange.

When you release music digitally, you should be aware of the various royalty streams that your music earns, where those royalties are collected, and how to claim your earnings. Your distributor is one source of income for two of the royalty streams mentioned. To unlock the rest of your royalties, you’d need a capable publisher and a record company or you’d need to stay on top of the administration yourself.

A great way to keep track of all of these royalties is a service we recommend called TuneRegistry.

TuneRegistry is an all-in-one music rights and metadata management platform for the independent music community. Easily organize and store your song details, recording metadata, credits and ownership splits, and release information in your TuneRegistry account. It’s your robust music catalog manager that’s accessible online, so you don’t have to worry about tracking down emails, storing through documents in various desktop and cloud folders, losing collaborator contact information, or any of the other messy issues that most indie artists face.

TuneRegistry is your one-stop source for keeping your music catalog in check.

The advantage of TuneRegistry over other catalog management systems is that we’ve integrated the registrations process directly to ASCAP, BMI, SESAC, Music Reports, SoundExchange, and many more. Save time, reduce errors, and unlock royalties with our integrated registrations module. We make it super easy to get your music registrations to the organizations and data services who need it.

YouTube Announces Major Change To How It Will Handle Music Publishing

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In an email sent to YouTube Music partners this week, YouTube announced that it will change the way it handles publishing.

Currently, YouTube allows rights holders to submit metadata and ownership information to a single global composition record. If there are multiple rights holders, their information is aggregated and rolled up into the “global” composition asset. Then various owners of sound recordings can create relationships (matches) between the “global” composition and their sound recordings. For example, 3 cover song recordings matched to a single “global” composition. However, YouTube is changing this process.

YouTube is doing away with a “global” composition and Composition Asset ID, which all rights holders on the composition would share, and now requiring that rights holders submit a “Composition Share” asset (think of it in relationship to a Split Sheet, the writer/publisher share) and provide their own unique Custom ID to YouTube, which associates back to the composition in the rights holder’s own database (e.g. a catalog number).

Notably, YouTube will no longer create composition to sound recording relationships on behalf of rights holders. It will become more important than ever for right holders to stay on top of their ownership splits and submissions. Furthermore, because YouTube will now rely on rights holders own Custom IDs, it will be important to implement and maintain a clean unique ID database. This could be the catalog number or the same unique ID the publishers use when registering works to PROs via CWR.

Read the full email below…

Dear YouTube Music Publishing Partner,

We are launching a new publishing data model to give you more transparency into and control over how your rights are associated with sound recording assets. In this new model, we will no longer have one “global” composition asset with metadata, ownership, and embedded relationships provided by various owners. Instead, each owner will have their own “Composition Share” assets. These “Composition Share” assets represent only the metadata and ownership information provided by a single owner. Your provided embedded relationships between “Composition Share” assets and sound recording assets will always be applied.

Our current planned launch date for this change is four weeks from now, on Monday, April 3.

This new model will require one major change on your side. Because we will be deprecating our historical Composition Assets and replacing them with a new asset type, today’s Composition Asset IDs will no longer be used. In most cases where you now use Composition Asset ID (including delivery and reporting), you should transition to using the Custom ID field. We recommend that the data you provide in this field always mirror the proprietary work codes that you use in your own database. In order for your Custom IDs to behave in a sensical and deterministic manner, it is critically important that your Custom IDs function as a primary key. That is, every Composition Share must have a Custom ID, and each Custom ID must refer to one and only one Composition Share. We strongly urge you to examine your Custom ID data now and confirm that your Custom IDs refer to only a single work each. If you suspect that this is not the case, please reach out to [omitted] for assistance. We would be happy to send you reports of how you are currently using Custom ID and where any gaps in your data may exist. If your Custom IDs do not function as a primary key in our new model, you may experience errors and ingestion failures.

Because this is a major change, this may require some workflow adjustments on your side. A few important things you should be aware of:

You will have greater control of embedded relationships between Sound Recordings and “Composition Shares.” Any embedded relationships delivered by any publishing partner will always be applied. If partners deliver conflicting data, these conflicts will immediately manifest in the YouTube Content Manager. By the same token, if you do not deliver us a Composition-Share-to-Sound-Recording relationship, we will not create one for you based on other partners’ data. You can continue to create these relationships through CSV ingestions, and we will be adding the ability to delete these relationships in bulk via CSV ingestions. We are also adding functionality to the Content Manager to allow you to edit these relationships directly in the user interface.
Conflicts now exist at the Sound Recording level, rather than at the Composition level. This means that you will see a larger number of conflicts in your conflicts queue. This increase in the number of assets in conflict does not necessarily represent a larger number of views in conflict; conflicts are merely being reported to you on a more granular level. Given that you will now have greater control over embedded relationships, conflicts caused by bad data should be much easier to resolve. When communicating about conflicts with other partners, you should now use Sound Recording Asset IDs instead of Composition Asset IDs.

Asset revenue will be reported at the Sound Recording level, rather than at the Composition level. This means that your asset revenue reports will grow (they will have more lines). To see revenue reported to you at the Composition level, simply pivot the asset revenue report on Custom ID. If you need assistance processing these larger reports, please reach out to your technical account manager or send an email to [omitted].

We recognize that this is a major change that may result in substantial changes to your current workflows. We want to make this change as easy as possible for you and we are here to help and to listen to your feedback. If you have any questions not addressed in this email or on the Help Center, please contact your regular YouTube representatives. To submit feedback directly to our product specialists, please hit the “Help & Feedback” button in CMS. For operational or technical support, please reach out to [omitted]. We will also be hosting office hours and workshops at our New York City office, at our Los Angeles office, and in Nashville in the weeks after the new model is launched. If you are interested in attending, please reach out to your regular YouTube contacts.

Best,

Taylor Fife
YouTube Music Publishing Team

ETLA, The Research Institute Of The Finnish Economy, Publishes Report On State Of Digital Music Infrastructure – Calls For Transparency And Addresses “Black Box” Issues

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I had the honor of being interviewed by researcher and author, Derek Sellin, for his industry report “Digital Music Industry – Background Synthesis” for ETLA Working Papers No. 48, published by Elinkeinoelaman Tutkimuslaitos – The Research Institute of the Finnish Economy.

Black boxes materialize for many reasons, including but not limited to: the inability to identify rights holders despite payments made for the use of their compositions; the lengthy time required for filing domestic and ultimately international copyrights, often begun only when a recording is actually released; multiple claims for the same rights exceeding 100% of ownership, resulting in indefinite disputes; international collaborations with less than all creators asserting their rights; international legal inconsistencies regarding what type of performances result in payments (most visible in the fact that radio play does not generate royalties for recording artists in the United States); and the slow and often manual processes to report usage and clear payments under international reciprocal agreements. – Dae Bogan

You can download the report at https://www.etla.fi/en/publications/digital-music-industry-background-synthesis/.

About ETLA
The Research Institute of the Finnish Economy (Etla) is engaged in applied economic research with emphasis on topics that are important from the Finnish point of view. The main focus is on issues that relate to productivity and drivers of its growth, to the functioning of the labour market, as well as to challenges in maintaining a balanced macro economy including sound public finances. Etla monitors economic development, compiles forecasts as well as assesses economic policy and comments on it.

Etla is a private non-profit organisation. Its operations are backed by the supporting association, the members of which comprise the Confederation of Finnish Industries and the Confederation of Finnish Industry and Employers (TT) Fund. The funding from the background organisations covers more than a third of the institute’s budget and forms a solid base for its operations. Read more.

The Uniquely US Challenge That Indie Artists Face When Asked To License Music To Indie Filmmakers, For Free

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Over the last few years I’ve been approached by several indie filmmaker friends seeking my help on getting music licensed for their indie film projects. While some have had budgets, most have asked for recommendations on getting music for free. Now, as an advocate for indie music creators and rights owners, I tend to disregard “no compensation” opportunities as taking advantage of artists and/or devaluing the work of music creators (although the folks behind the opportunities are wicked good people).

Several times I’ve had to respectfully tell my indie filmmaker friends that I could not share their “music placement” opportunity, but instead I could direct them to resources to license music for cheap.

I’ve since realized that what I have not done was explain why, specifically in the United States, giving filmmakers music for free is frowned upon. So, in this post I aim to do that.

But first, I will say that I understand and agree that many opportunities for music placed in film — as well as TV shows and commercials — can be a huge break for up-and-coming artists. Productions that are widely released and viewed can result in significant exposure for the music, which can translate into increased radio airplay, digital downloads, and audio and video streams, which dramatically increases the artist’s income potential and exposure. There’s a long history of songs from movie and TV soundtracks going Gold & Platinum and topping the charts.

That being said, small indie film projects are typically not the productions that create these kind of success stories. In fact, I’d argue that over 90% of independently produced projects do little by way of “exposure” for artists (if you’re an independent artist reading this who’ve had your music placed in film, please comment and share your experience).

The reality is many indie film  projects do not have the distribution or exposure to generate the volume of public consumption to translate into significant benefit for the artists who contributed music to the film. This is because only a small percentage (maybe less than 1%) of the people who’ve watched the movie would actually make any effort to track down a song placed in the movie.

Now, let’s talk about how artists get paid for music licensed to films. I am focusing solely on commercially released songs being licensed to a film. I am not going into the details of original songs composed for a film, film scores, or any “commissioned” work for a film. I am strictly talking about a filmmaker asking an artist to use an already recorded and released track.

Ok, so typically, a production company should obtain what’s called a synchronization license from the artist (or label) to use the track in the film.

The term “synchronization” refers to the act of synchronizing a sound recording to a motion visual embedded in a video. A production company should pay two (2) fees for licensing music to film: master use fee and synchronization fee.

The master use fee is a fee paid to the artist (or his/her label if they are signed to a record label) for the use of the sound recording, also known as a “master.” The synchronization fee is a fee paid to the songwriter (or his/her publisher if they are signed to a publishing company) for the use of the song, also referred to as the composition.

The artist/label owns the sound recording/master. The songwriter/publisher owns the song/composition (for example the song “Diamonds” by Rihanna was actually co-written and is co-owned by Sia and her publisher; but the sound recording of “Diamonds” that you hear on the radio is owned by Rihanna’s record label. Both the writer/publisher and the artist/label must get paid for the use of “Diamonds” in a movie; those are two separate copyrights).

Alright that was a crash course on publishing.

In order for a filmmaker to license a piece of commercially released music to your film, you need a synchronization license from the independent artist (I’m going back to talking about independent artists, although I used Rihanna (a “major” artist) in my example above). An independent artist may not have a publisher nor a label, so he/she is the sole owner and should still get paid the synch fee (for the song/composition) AND the master use fee (for the sound recording/master).

Now, so far I’ve talked about what’s known as the up front fees. These are the fees you, filmmaker, would pay to an independent artist to put their music in your movie. But like I said in the beginning, many filmmakers have asked me to help them get music for free. 😦

I wouldn’t mind this too much if we weren’t talking about small projects that will be released (and generate most of its viewership) in the United States.

Why?

Outside of the United States, artists earn public performance income from the movie theaters. That’s right, movie theaters must pay public performance fees to public performance organizations for exhibiting movies. These backend royalties can add up if the movie becomes popular and has many showings across many territories.

However, in the United States movie theaters are exempt from having to pay public performance fees. This means, independent artists (specifically, singer-songwriters) do not earn income from movie theaters when they exhibit movies containing their music.

So, when you do not earn up front fees from synch and master use fees, because the filmmaker “doesn’t have a budget for music” AND you do not earn backend royalties from U.S. movie theaters, because they are exempt from paying what theaters in other countries pay, it is frowned upon to give music for free to U.S. filmmakers making low budget movies. Because these low budget projects may not have the distribution and marketing backing of it’s major and big-independent counterparts, the potential for the movie to generate “non-compensation benefits” for the artist (e.g. radio airplay, downloads, streams, awards, etc.) is significantly low.

Basically, if your indie film is being released in a few United States independent theaters and then on DVD and you want music for free, it will be a challenge. There is no substantial benefit for the artist.

All that being said, there are several examples of small budget projects generating grassroots marketing buzz and cult popularity that does impact the distribution and exposure of the movie, which in turn could generate benefits for artists who’ve given gratis (free) licenses to filmmakers. But this is not the norm. Furthermore, there are scenarios where you can license must free in the interim, but commit to payments based on hitting milestones such as getting distribution, hitting box office sales milestones, hitting DVD rental or sales goals, etc. This is a good way for a filmmaker who doesn’t have a big music budget to potentially negotiate with artists to defer compensation based on the performance of the project.

Thoughts? Questions? Stories to share? Post in the comments.

Major Labels Sue Music Tech Startup Aurous In First Week Of Launch

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Here we go again. Music Business Worldwide reports that “The RIAA — on behalf of UMG, Sony Music Entertainment, Warner Bros. Records, Atlantic and Capitol Records — has today filed a lawsuit against Aurous and its founder Andrew Sampson for what it calls ‘willful and egregious copyright infringement’.”

The music app, being called the “the new Grooveshark” (Grooveshark shut down earlier this year after similar lawsuits was filed against the company), just launched in public Alpha this week.

Aurous’ founder, Andrew Sampson, maintains that the website is a search engine that enables Internet users to search BitTorrent networks to find and stream content. However, the RIAA argues that the website directly targets recorded music from overseas pirate sites, effectively enabling consumers to infringe on the copyrights of record labels.

Whether Sampson intended on his platform to illegally access and stream recorded music or if he truly believed he built a legitimate consumer app detached from piracy, like many other uninformed tech developers out there, he has been caught in what could be a very expensive and crushing legal battle informed by copyright law.

I spend a great deal of time consulting with entrepreneurs who have cool ideas to develop new music apps, services, and platforms. However, the challenge that many of them face is having a limited understanding of the music publishing and recording landscape, from the perspective of a music tech startup. With the help of a music industry professional, founders gain insight on where products and services may infringe on the intellectual property rights of others. I’ve helped numerous startup entrepreneurs create products, formulate business models, and deliver value, all while respecting and complying with the intellectual property rights of third-party rights owners.

Read more about this story at Music Business Worldwide.

Infograph: Understanding U.S. Music Royalties

The Music Business Association (Music Biz) published an infographic, “Music Royalties USA Quick Start Guide,” which gives songwriters and performing musicians a simple way to understand the complex framework they must navigate to receive proper payment for their work.

Click to enlarge and download.

Click to enlarge and download.

The document illustrates how royalties are handled for songwriters, publishers, and performers in various media, such as Physical Products and Download Sales, Radio & TV, Satellite & Cable Radio, Non-Interactive Streaming Radio, On-Demand Streaming Music Services, and Synchronization – Movies, TV, Games, Etc. The infographic also explains some of the more misunderstood jargon related to royalties and tells songwriters, publishers, and performers exactly which entities they need to register with.
“Because the rules governing music royalties are so complex and differ so greatly from one medium to another, many artists are leaving a significant amount of money on the table without even knowing it,” said Bill Wilson, Vice President of Digital Strategy and Business Development at Music Biz. “This infographic arms songwriters, publishers, and performers with the knowledge they need to ensure they get everything they are owed, allowing them to get back to what they do best: making music. We’d also like to thank our Affiliate Partners ASCAP, BMI, The Harry Fox Agency (HFA), The Recording Academy, SESAC, and SoundExchange, who all helped review the infographic to ensure it fully captured the process.”

The “Music Royalties USA Quick Start Guide” is the latest in a series of informational infographics that affirm Music Biz’s commitment to the artist community by providing vital information needed to understand how the music industry works and tips to get the most out of the services available to them. Previous entries include the “Global Music Licensing Quick Start Guide,” “SEO for Music Websites,” the “Artist Website Toolkit,” and more.

The infographic is available for free and can be viewed as a JPG or PDF.

Source: http://musicbiz.org/press-releases/music-biz-decodes-u-s-music-royalties-new-infographic/

Music Tech Startups Must Deal With United State’s Broken Music Licensing System

copyright

On behalf of my client, I spent the week conducting conference calls and long email exchanges with ASCAP, BMI, SESAC, The Harry Fox Agency, National Music Publishers Association, Association of Independent Music Publishers, Crunch Digital, We Are The Hits, Tresona Music, and Audible Magic securing public performance licenses, obtaining synchronization licensing information, obtaining copyright identification service & royalty administration information for their UGC video hosting platform.

  I Saw Great Startups @SFMusicTech, But They Have A Lot To Learn About The Music Business

What I learned (or confirmed, rather) is that there is a HUGE need to streamline and make efficient the process of securing synch licenses, a HUGE need to standardized/equalize deal structures between labels and digital service providers vs. publishers and digital service providers, and a HUGE opportunity for a collective-bargaining startup to secure pass-through licenses on behalf of many music tech startups, and we should consider making some forms of synch licensing compulsory.

Nevertheless, as long as the music industry is slow to innovate in how it deals with digital startups, there will continue to be confusion and frustration among all stakeholders and work for me to do as a consultant.

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