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How Songwriters Can Make Performance Royalties in a Buyout This little-known rule helps reinforce songwriters’ rights in secondary usage scenarios.

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admin 2018-02-26 Collect

 

This little-known rule helps reinforce songwriters’ rights in secondary usage scenarios.

Transfer of copyrights is a very common practice in the music industry. However, for songwriters and composers, because of the musicians’ lack of leverage in these negotiations, combined with their often eagerness of trying to push out music as soon as possible, they often make huge compromises in front of publishers’ demands of a total buyout of publishing rights. This, in effect, gives away the musicians’ rights of making any money in the future from their songwriting efforts, as well as from any derivative work from the composition.

To combat this imbalance of power in the music industry, the Copyright Collective Management laws have provided a practical solution: If the songwriter and the publisher are both members of the Copyright Collective Management Association, even if the songwriter transfers all of the publishing rights to the publisher, when collecting moneys derived from the performances of said compositions, the Association will reserve 50% of the income for the songwriter.

Here, the definition of “performance” is rather broad, similar to that under the Berne Convention, not only including live performances, background music in a public establishment, but also covering broadcasting and digital streaming.

The Commercial Exploitation of Music

To accurately interpret how this law is valuable when it comes to protecting musicians’ rights, it is important to learn about the various ways of commercial exploitation of music.

The basic, traditional industrial chain goes something like this: Songwriters submit their compositions to publishers for commercial exploitation, then publishers usually partner with labels to record masters of these compositions, and the labels contract manufacturers to press physical records, at which point the labels disseminate the music to the public through retail partners. This is also called “primary use.” After the public release of these recordings, some may want to use it for other commercial uses, such as making a “greatest hits” compilation, or using it as background music, playing it on a radio station, performing a cover, etc., which are all under the umbrella of “secondary use,” which mainly involves public performance rights. In both use cases, the licensee will need to seek permission from the copyright holder. In primary use cases, the songwriters usually directly work with the publishers and labels, so the writers have full control over their compositions in this case. In secondary usages, however, it usually involves many end licensees with various specific use cases, so it is much more difficult for both the songwriters and the publishers to oversee the licensing process, which is why it has become increasingly necessary for a rights management association to step in.

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Two Ways of Buying

Back to talking about protecting songwriters’ rights. What we want to know is, how do labels pay writers for licensing compositions? Are the splits fair?

In normal scenarios, there are two main ways to license compositions to a publisher. The first is a total buyout, or a complete transfer of rights, meaning that the publisher pays the writer a one time fee to obtain the copyrights to a composition, and any future income generated using this composition will no longer pertain the songwriter. The other way is through a songwriting advance + songwriting royalties. To maximize profits and minimize cost, publishers will always try to use the lowest possible price to buy out the composition or pay a low advance.

Direct buyouts have been around since the 16th century when it first emerged in the publishing industry in Europe. This is inevitably due to the fact that songwriters are at a significant disadvantage when dealing with publishers and labels–without their mature infrastructure for commercial exploitation, it is very hard for the regular artist to gain any popularity with his/her music. Even in the highly digital world that is today, low-priced buyouts are still very common in the music industry. This is because music is vastly different from text-based work, which can be directly digitized to become a final product. Musical compositions, on the other hand, need the help of performers, arrangers, engineers, and producers to be finalized before they can be served to the general public, an extremely difficult process without the help of publishers and labels.

It is safe to say that in the music industry, songwriters’ incomes are usually nowhere proportional to what they contribute to the final product. Composing and writing are the fundamentals of almost everything in the music business, but unfortunately, the money that composers and songwriters earn are very much “fundamental” as well. Young songwriters often have no choice but to sell all the rights to their compositions to publishers and labels, and while more established writers can often negotiate for an “advance+royalties” model, the lack of regulations and ignorance on the publishers’ side usually makes for a very mediocre result.

Secondary Use Calls for Rights Management Organizations

In the heyday of the record industry, musicians often had a plethora of opportunities to choose from, which somewhat masked their unfair pay. Today, as the record business takes a deep dive with no signs of revival, publishers and labels have shifted from profiting from primary usages to taking a share from secondary usages. As a result, songwriters make even less money than they used to, making it very difficult for them to sustain a living from the income provided by publishers and labels.

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Because secondary usage scenarios usually involve a multitude of industries and businesses, combined with the large amount of work that often needs to be licensed, both the songwriters and the publishers will need to rely on rights management organizations to distribute the income from publishing royalties. In China, the Copyright Collective Management Association follows a single payment distribution model: when both parties are members of the Association, even if the writer transfers 100% of the composition rights to the publisher, when it comes to distributing moneys from public performance royalties, the Association will reserve 50% of the total income for the writer. This means that if the Association can collect royalties from uses such as background music, karaoke, concerts, and public broadcasts, the respective songwriter can at least receive 50% of the total collection.

Evidently, this is in conflict with the basic nature of a rights buyout. But when a songwriter or a publisher joins the Association, their participation also signifies their agreement to the new distribution of royalties, so in a way, the rule really acts as an addendum or a revision to the pre-existing buyout agreement. When a composition is exploited in primary use, the writer usually has little leverage power against the publisher; in secondary use, thanks to the presence of a rights organization, the writer can get compensated much more fairly. In the digital world that we live in today, secondary usage of musical works far exceeds primary usage, so this rule provides protection for songwriters that otherwise have little power. The existence of these organizations and associates helps calibrate the long-standing imbalance of power in the music industry, something that wouldn’t be possibly accomplished otherwise.

Translated by Kane Ge

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