Articles

Articles > Royalty Free Music - Licensing and Copyright

ROYALTY FREE MUSIC - LICENSING & COPYRIGHT

MUSIC PUBLISHERS AND RECORD LABELS

The business of a record label is basically to generate money with the Recordings. The basic business model historically has been to manufacture products (vinyl records, CDs) and sell them in stores. It's a manufacturing business, essentially the same as selling widgets.

Music publishers generate money with songs. For the most part, this is a rights administration business. The music publisher controls the copyright in a song, and that entitles it to revenue when the song is used. Here are the main sources of revenue for music publishing:

1. Public Performance Royalties. These royalties are paid by anyone who 'publicly broadcasts' music, for instance on radio and television stations, live performance venues, retail outlets and yes, even elevators. In Canada, this is administered by SOCAN. In the US, there are ASCAP, BMI and SESAC. Most other territories have a similar organization - referred to as a PRO or Performing Rights Organization. Keep in mind that the royalties are paid by the broadcasters, not by the producers of a program such as a TV show. The broadcasters have to pay a certain percentage of their annual ad revenue to the PRO for a license to use all music. The PROs then pay the composers and publishers for the songs that were broadcast.

2. Mechanical Royalties (also called mass duplication royalties). These royalties are basically the publisher's cut for CD or DVD sales. Since a Master Recording is a reproduction of a Composition (the Composition is embedded within it), the record company has to pay for the right to do this. The rate for CD duplication is set by negotiations between associations representing the labels and publishers (in Canada), and by the copyright board in the US.  This is why the mechanical rate is often referred to as the “Statutory Rate”. The same principle applies to DVDs, except that the price is negotiated on a case-by-case basis.

3. Synchronization. This is where a publisher allows someone to 'synchronize' music with images. This can be for many different purposes: film, TV, advertising, video games, multimedia, websites, or corporate uses (we'll refer to all these as "Productions"). The idea is that the producer of a TV show, for example, pays to synchronize a song with some sort of a scene. Fees are negotiated on a case-by-case basis. From the publisher’s point of view, it's an attractive proposition because you get a fee up front ( the “Sync Fee"), and you also get public performance royalties when the show plays on TV (see # 1 above).

Part 1 - A Tale of Two Copyrights: Composition and Master
Part 2 - Music Publishers and Record Labels
Part 3 - Synchronization and Master Use Licenses
Part 4 - Music Licensing Definitions