Historically, Labels only sought to have an artist sign one agreement, i.e., an exclusive recording agreement, pursuant to which the Label obtained the right to the artist’s exclusive recording services during the term of the recording agreement. However, the trend is now for the Labels to seek all other rights related to the artist, in addition to the exclusive recording rights. These additional rights may include (a) exclusive name and likeness rights for merchandising and commercial endorsements, (b) exclusive touring rights, and (c) exclusive music publishing rights in songs written by the artist. Each of these groups of exclusive rights is typically set forth in a separate agreement between the artist and the Label (or a company affiliated to the Label).
(a/k/a a collection deal). Under this type of Publishing Agreement, the songwriter or other owner of the musical copyrights retains the copyrights in his songs, but grants a Publisher exclusive Administration Rights for the world or for one or more enumerated territories for a specific period of time. Under this type of agreement, the Publisher will take a relatively low fee (5% to 20%) of the income it collects and will account to the songwriter/owner for the balance. Advances paid by a Publisher under this type of agreement or non-existent or relatively low, but that is not always the case for high-income generating Catalog.
Means (a) the right to determine how and when a song will be exploited or otherwise used, and who is authorized to exploit or otherwise use the song (subject to compulsory licenses, for example, those referred to in §115 of the Copyright Act), (b) the right to determine the consideration, if any, for the exploitation of the song (again, subject to compulsory licenses), and (c) the right to collect income generated by the exploitation of the song.
Monies that are recoupable from royalties. Most often, advances are non-returnable and are not a loan owed by the recipient of the advance. In other words, if the advance is not recouped from royalties, the artist or other recipient of the advance is not liable for the unrecouped balance. However, in Merchandising Agreements, the merchandiser often requires the artist to repay the unrecouped balance.
Refers to the period of the time between an artist’s albums, generally measured by the period of time between the commencement of the recording an album and the end of the artist’s touring and promotional activities for that album or the commencement of the recording the artist’s next album, whichever occurs later. The term of a personal management agreement is often measured by one or more album cycles.
A royalty payable by a Label that includes the royalty rates payable to the Producers and Mixers as well as what is left over for the artist (i.e., the Artist Royalties).
Department within a Label whose function it is to find and sign artists to the Label (i.e., in other words, persons whose job it is to find artists to enter into exclusive recording agreements with the Label).
Artist Agency Rider
When an artist signs with a Talent Agent, the artist is typically asked to sign a number of different form agency agreements. The artist agency rider is an agreement that is intended to override and supersede the terms of all of the form agency agreements. In this manner, the negotiation of the individual form agency agreements came be avoided or, at least, minimized.
Record royalties payable to the artist from the sale of records featuring the artist (but does not to Mechanical Royalties).
A term typically used in Publishing Agreements. What it means is that the percentage of income retained by the Publisher controlling the Administration Rights includes the percentage of income retained by the Publisher’s Subpublishers. This is the opposite of an At Receipts Publishing Agreement. For example, assume (a) the Publisher is entitled to retain 20% of the income from the exploitation of song, and (b) the Publisher’s Subpublisher is entitled to retain 10% of the income from the exploitation of song in the Subpublisher’s local territory. Under an At Receipts Publishing Agreement, the Publisher would be entitled to 20% of 90% of the income, which means that the songwriter/co-publisher would net 72% of the income (i.e., 80% of 90%). If the Publishing Agreement states that the songwriter/co-publisher’s royalty or share of income will be computed “at source,” then the songwriter/co-publisher will be entitled to a royalty equal to 80% of the income collected by the Subpublisher.
At Receipts Publishing Agreement
See At Source.
In the music industry, this term refers to a party’s right to review the books and records of the other party in order to verify that the party entitled to receive royalties (i.e., the party granted the audit rights) is being properly accounted to by the party obligated to pay royalties. Although this examination is widely referred to an “audit,” it is not an “audit” as technically used in the general accounting industry.
Big Box Stores
Large retail stores that sell a variety of products as well as Physical Records (for example, Wal-Mart, Best Buy, Costco, Sam’s Club, and Target).
Each Society outside of the United States establishes a pool of licensing income for which the appropriate Licensors are not “affiliated” to the Society through a Subpublisher, or are otherwise unidentified or whose current address is not in the Society’s records. A portion of this pool of income (the pool is called “black box”) is periodically distributed by the Societies to the Publishers in the applicable territory.
Refer to licenses issued by Performing Rights Societies pursuant to which the Licensee is entitled to publicly perform the Performing Rights Society’s entire Catalog, rather than specific songs.
16.Brick and Mortar Stores refer to retail stores that the customers physically need to enter in order to purchase Physical Records, for example, Big Box Stores (as opposed to online stores and mail order sales).
17.Budget Record refers to a Record that is sold by a Distributor at a price that is below the Distributor’s then-prevailing price for Mid-Price Record in the same configuration. This lower price is typically equal to or less than 66-2/3rds of the price for Top-Line Records, but more than 50% of the price for Top-Line Records.
18.Bundles is an online purchase opportunity where the consumer is offered more than one product (for example, a permanent download, a ringtone, and digital wallpaper) for a single price.
19.Business Manager refers to a person, who is typically an accountant, who handles the artist’s finances, for example, paying the artist’s business and personal bills, preparing the artist’s and the artist’s Loan-Out Companies’ tax returns, and making or overseeing the artist’s investments.
20.Catalog: For a Publisher or Performing Rights Society, this means the entire group of songs controlled by the Publisher. For a record company, this means the entire group of Masters and audiovisual programs owned by the record company.
21.Certificate of Authorship: (a/k/a Declaration of Authorship). This is a short-form agreement usually attached to a long-form agreement that states that a Copyright is a Work Made For Hire. The utility of a Certificate of Authorship is that it can be filed with the United States Copyright Office, in lieu of the owner of the Copyright having to file the long-form agreement and, thereby, disclose to the public the terms of the long-form agreement. In many cases, the composer of a Score starts working on the Score before the long-form agreement is signed or fully negotiated. In order for the composer to receive a portion of his fee prior to the execution of the long-form agreement, the producer of a motion picture will often require the composer to sign a Certificate of Authorship before any money is paid to the composer. In this manner, the composer is foreclosed from claiming an infringement of Copyright in the event the long-form agreement never gets signed.
22.CHR is an abbreviation of “contemporary hit radio” (a/k/a “top 40 radio”).
23.Co-Administration Agreement: A Publishing Agreement between two or more Publishers, each of which has Administration Rights in the portion of the song owned by the applicable Publisher.
24.Collection Costs typically refers to attorney’s fees and costs if a lawsuit is filed to collect monies under a contract and to the fees and costs charged by an auditor in the event of an audit.
25.Commercially Satisfactory is typically found in recording agreements. It means that a Record will not be deemed Delivered to the Label until the Label is satisfied that Record has a realistic potential to sell a reasonable amount of Records. This is typically a subjective judgment made by the Label, although some recording agreements state that a Record will be deemed “commercially satisfactory” if it is consistent with the style and quality of the artist’s prior Records. See Technically Satisfactory.
26.Compilation Album refers to an album containing various recordings featuring more than one artist.
27.Comps refer to “free” tickets to a concert.
28.Conflict of Interest refers to a situation that arises when a person has competing clients or interests that are adverse to each other. For example, a lawyer has a conflict of interest in representing more than one client in connection with a contract or dispute between the lawyer’s clients (e.g., a lawyer preparing a Producer Agreement when he represents both the Producer and the artist). Another example is when an artist’s Personal Manager owns the Label to which the artist is being signed.
29.Controlled Composition is a term found in recording agreements and Producer Agreements that is typically defined as follows: “a musical composition written, in whole or in part, by an artist or Producer and/or owned or controlled, directly or indirectly, in whole or in part, by the artist, or an entity owned or controlled, in whole or in part, by the artist or Producer.” Most recording agreements, especially those in the United States, contained “controlled composition clauses.” These clauses, among other things, set forth the Mechanical Royalty rates for controlled compositions, which are usually expressed as a percentage of the Statutory Rate (e.g., 100% or the Statutory Rate or 75% of the Statutory Rate). Original arrangements of songs in the public domain (i.e., songs no longer protected by Copyright) are typically deemed controlled compositions, but, under most controlled composition clauses, earn Mechanical Royalties at a rate less than the rate applicable to original songs written by the artist (e.g., proportionate to the credit given the arrangement by a Performing Rights Society). Controlled composition clauses also contain the maximum amount of Mechanical Royalties that are payable by the Label for each Record configuration. For example, under these terms, the artist’s Mechanical Royalties for controlled compositions will be reduced such that the total Mechanical Royalties for an album will not be in excess of 10 or 11 times the minimum Statutory Rate, for an EP, will not be in excess of five times the minimum Statutory Rate, and for a Single, will not be more than two times the minimum Statutory Rate. If the Mechanical Royalties otherwise payable for the controlled compositions are reduced to zero, the artist may be liable for any additional excess over the stated maximum amounts.
30.Conversion Costs refer to the costs of converting music recorded for an audiovisual production (e.g., a motion picture or television program) for use on a Phonorecord or vice versa.
31.Co-Publishing Agreement is a Publishing Agreement pursuant to which the songwriter (or his publishing company) agrees to share his copyrights in one or more songs with another Publisher, who, in addition to getting a portion of the copyrights, is granted exclusive Administration Rights for the entire song(s).
32.Copyright: §102 of the Copyright Act defines the subject matter of copyright as follows.
§ 102 Subject matter of copyright: In general
(a)Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories:
(1) literary works;
(2) musical works, including any accompanying words;
(3) dramatic works, including any accompanying music;
(4) pantomimes and choreographic works;
(5) pictorial, graphic, and sculptural works;
(6) motion pictures and other audiovisual works;
(7) sound recordings; and
(8) architectural works.
(b)In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.
Subject to various exclusions, copyright owners in the United States are granted the rights enumerated in §106 of the Copyright Act:
§ 106 Exclusive rights in copyrighted works
Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individualimages of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
33.Copyright Act: When used in this glossary, the “Copyright Act” refers to the Copyright Law of the United States, Title 17 of the United States Code. See www.copyright.gov/title17.
34.Copyright Royalty Board (abbreviation: CRB) is a three-judge panel appointed by the Librarian of Congress to, among other things, determine compulsory rates under the Copyright Act, for example, the compulsory rates for Mechanical Royalties. (See §801 of the Copyright Act.)
35.Coupling refers to a Label putting a Master on a Record (usually an album) featuring more than one artist, such as a Compilation Album.
36.Cover can be used as a noun or verb and refers to a recording or the recording of a song by an artist other than the original songwriter.
37.Crew refers to all of the people hired by an artist to work on a concert tour and who travel from Venue to Venue on the tour, other than those people who perform on stage with the artist (see Sideman).
38.Cross-Collateralization refers to the recoupment of an Advances from various sources. For example, if an artist signs a recording agreement and a Publishing Agreement with the same company (or affiliated companies) and the agreements are “cross-collaterized,” then an Advances paid under the recording agreement may be recouped from the royalties payable under the Publishing Agreement as well as royalties payable under the recording agreement and vice versa.
39.Custom Record refers to a Physical Record manufactured specifically for a consumer who selects the individual recordings to be embodied on the Physical Record. This manufacturing process may be in the form of a vending machine.
40.Cutouts refer to Physical Records that are distributed for retail sale on a non-returnable basis. (See Returns.) Typically, the Physical Record will be defaced in some manner (e.g., the corner of the cardboard cover of a vinyl album is clipped or a hole is drilled into the corner of the compact disc Jewel Box). No Artist Royalties are payable under a recording agreement for cutouts.
41.Delivery: Under a recording agreement, “Delivery” is a defined term that means more than the artist merely delivering the physical recordings to the Label. The following is a typically definition:
“In order for a Masters to be ‘Delivered’ under this Agreement, it must be contained on two-track 1630 tape, fully edited, mixed, leadered and equalized for each configuration (e.g., compact disc, analog cassette, etc.) or in such other format of which the Label advises the artist, otherwise in the proper form for the production of the parts necessary for the manufacture of commercial Records, which tape shall be delivered together with all materials, clearances, consents, approvals, licenses and permissions necessary to commercially release the applicable Masters on Records. Each Master shall be subject to the Label’s approval as being technically and Commercially Satisfactory. Further, the Masters and each album shall only be deemed ‘Delivered’ when the applicable Masters have been delivered to the Label’s offices and accepted by the Label as being technically and commercially satisfactory to the Label and otherwise in full compliance with the material provisions of this Agreement. Further, unless the Label consents otherwise in writing in its sole discretion, no Master shall be recorded as a ‘live’ recording, as an instrumental, or as a joint recording with another recording artist; no Master or album shall be of a specialized “theme” (e.g., a Christmas Record); and no album shall be Multiple album.”
42.Demo Deal refers to an agreement between a Label and an artist pursuant to which the Label agrees to advance the costs of a certain number of demo recordings. The Label is typically given for some period of time an exclusive Right of First Negotiation to negotiate an exclusive recording agreement with the artist. If the Label has exercised its Right of First Negotiation, but the parties do not enter into a recording agreement, then the artist will have the right to enter into a recording agreement with another Label. However, the Label who funded the demos may also have a Matching Right. If the artist enters into a recording agreement with a Label other than the company who funded the demos, the artist will typically be required to reimburse the company who funded the demos for the costs of the demos.
43.Discounted Records refer to Physical Records sold by a Distributor under a sales incentive program where the Records are invoiced at less than the Distributor’s “standard” published wholesale price.
44.Digital Phonorecord Delivery (abbreviation “DPD”) is a term used in the Copyright Act to refer to the Digital Transmission of a Phonorecord.
45.Digital Transmission generally, refers to Downloads and “streaming,” but recording agreements make the definition of this term very broad. For example:
“‘Digital Transmission’ means the selling or other distribution of master recordings or records via digital transmission over any Electronic Network.
‘Electronic Networks’ means all electronic communications networks, whether utilizing technology existing as of the date hereof or devised hereafter, including the Internet, the World Wide Web, telecommunications networks, intranets, extranets, wide area networks, cellular and other telephony networks, cable networks, electrical and other networks.”
(a)Strictly speaking, a distribution agreement refers to an agreement with a Distributor (rather than a Label). Under this type of agreement, the Licensor (e.g., the artist or another Licensor of the Sound Recording(s)) is responsible for all manufacturing and distribution costs, although the Distributor may loan these costs to the Licensor. The Distributor is entitled to a distribution fee, which is typically measured as a percentage of the Distributor’s wholesale receipts from the sale of the Licensor’s Records (generally, this fee is between 15% and 20% of the Distributor’s receipts). The Licensor retains ownership of the Records and the Co-Publishing Agreement is a Publishing Agreement pursuant to which the songwriter (or his publishing company) agrees to share his copyrights in one or more songs with another Publisher, who, in addition to getting a portion of the copyrights, is granted exclusive Administration Rights for the entire song(s). Copyrights in the Sound Recording and is responsible for paying Recording Costs, Artist Royalties, Mechanical Royalties and union payments based on Record sales (see Net Receipts). If the Distributor is being engaged to manufacture the Physical Records in addition to distributing the Physical Records, then the agreement is referred to as a “P&D Agreement” (i.e., a pressing and distribution agreement). Distributors are often granted the right to distribute Records by Digital Transmission, but this is not always the case. Distribution Agreements are usually limited to a specific territory (e.g., the United States or the United States and Canada) and limited to a period of time (e.g., three to five years).
(b)Often, people also refer to a recording agreement as a “distribution agreement.” Under a genuine recording agreement, the artist is not generally responsible for manufacturing or distribution costs or for the payment of Mechanical Royalties or union payments based on Record sales (see Net Receipts), nor can these costs be recoupable from the Artist Royalties. The artist is paid a royalty derived from the PPD or SRLP of his Records.
(c)The following example will illustrate some of the differences between the agreements described in the foregoing paragraphs (a) and (b). Assume that the wholesale price of an album is $10.00. Also, assume that under a Distribution Agreement described in paragraph (a) above, the Distributor is entitled to a 15% distribution fee. Under a Distribution Agreement, the Licensor would be entitled to $8.50 per album sold (i.e., $10 less the 15% fee). However, out of these monies otherwise payable to the Licensor, the Distributor will be reimbursed for all of its manufacturing, distribution and other costs (for example, retail advertising know as “co-op advertising). Also, the Licensor would be obligated to pay all third parties (e.g., Artist Royalties if the artist is not the Licensor, royalties to Producers and Mixers, Mechanical Royalties, and union payments (see Net Receipts). Depending on the volume of sales and other costs incurred by the Licensor (e.g., costs of Independent Promotion, Marketing, Tour Support, and video costs), the net earnings realized by the Licensor may be around 50% of the monies paid by the Distributor to the Licensor ($4.25 in my example above). In contrast, assume that under a recording agreement, the artist is entitled to an Artist Royalty equal to 16% of the PPD. In this case, the Artist Royalty would be equal to $1.60 per album (i.e., 16% of $10.00), subject to the recoupment of Recording Costs and other costs incurred by the Label that are typically recoupable under a recording agreement (for example, all or a portion of Tour Support, Independent Promotion, Independent Marketing, and video costs).
47.Distributor refers to an Independent Distributor or to a branch distributor operated under one of the major record company groups (currently, Warner Bros., EMI, Universal, and Sony Music) who distributes Records released by the Labels owned the applicable major record company group.
48.DMCA is an abbreviation for the Digital Millennium Copyright Act passed by Congress in 1998. Congress granted public performance rights in digital audio transmissions in 1995. (Prior to that no pubic performance rights were ascribed to Sound Recordings.) The DMCA revised these rights to provide for compulsory licensing for digital audio transmissions over non-interactive websites. (See Mechanical Royalties and SoundExchange.)
49.Double Commission is used in connection with a clause in a contract that prohibits a party from, in effect, from collecting more than one commission from the same income. For example, a Talent Agent may have multiple agreements with an artist. However, with respect to a particular payment, the Talent Agent can be paid a commission only under one of those agreements for a particular payment.
50.Downloads refer to the Digital Transmission of a Sound Recording that creates a permanent copy that can be thereafter accessed and played by the end user. A “tethered download” refers to a Download that can only be accessed and played on a limited number of computers or other devices. A “limited download” is a Download that becomes inaccessible by the end user after some period of time or number of plays.
51.E&O Insurance: In the music and entertainment industry, this term applies to an insurance policy that protects the policyholder from third party claims. For example, a television network, a film distributor, or DVD distributor will almost always require the producer of an audiovisual program to secure E&O insurance to protect the network or distributor from any third party claims that the work violates a third party’s rights (such as a claim for Copyright infringement, trademark infringement, or defamation). If a claim covered under the policy is made, the insurance company will pay for the costs of defending the claim as well as any award granted to the claimant, subject to a deductible and a maximum limit of liability expressed as a dollar amount. If someone is a “named insured” under an E&O policy, then the policy will cover any claims against that (subject to certain exclusions). If someone is an “additional insured” under an E&O policy, then that person will only be covered for claims against the “named insured.”
52.EP means a Record sold and marketed as a so-called extended play Record and not as a Single, 12” Single, or album. A typical definition in a recording agreement may define an EP as a Record embodying fewer Master Recordings or less playing time than an Album, but more than three (3) Master Recordings (a Record with less than four Master Recordings would typically be a Single or 12” Single).
53.Firm Album refers to an album (a) that the Label is contractually obligated to allow the artist to record under his recording agreement and (b) for which the Label is contractually obligated to pay Recording Costs. Note that this obligation is most likely subject to a Pay or Play clause.
54.First Use refers to the right of a Copyright owner to determine who will be the first artist to record a particular song. For example, a Publishing Agreement may give the songwriter a right to approve the “first use” of a song.
55.Flat Fee refers to a specific amount of money payable to someone, regardless of the amount of income attributable to that person’s activities or the amount of time that person rendered in performing the services. For example, if a lawyer agrees to negotiate a contract for a specific amount of money (e.g., $5,000), rather than a fee based on the income the artist earns under the contract or a fee based on the lawyer’s hourly rate, then the lawyer is agreeing to a “flat fee.” A “flat fee” in a recording agreement refers to a specific amount of money received by a Label from a Licensee, rather than receiving royalty from the License.
56.Free Goods refer to the following groups of Physical Records. What these groups all share in common is that no Artist Royalties and no (or only a portion of) Mechanical Royalties are payable by the Label for free goods under a recoding agreement.
(a)True free goods are promotional copies of Physical Records that are distributed to promote the Record and not for sale or re-sale (for example, Records distributed to radio stations to promote airplay and to record critics with the hope of getting a favorable review). These Physical Records for stamped with the words “For Promotional Use Only” or a similar designation so that the Records will not become Returns.
(b)Real free goods are Records distributed as Discounted Records. For example, if the Distributor offers its wholesale customers a 5% discount off the standard wholesale price (perhaps, in exchange for the customer purchasing a certain quantity of records), then 5% of those shipments will be deemed non-royalty bearing free goods. Historically, artists have tried to protect themselves from excess free goods. For example, the recording agreement may state that no free goods may be distributed to promote the sale of Records by any other artist. Also, free goods may be limited to a maximum percentage or amount (for example, no more than 15 album free goods for every 85 albums sold). Labels get around this limitation, or, at least, raise the percentage for “special campaigns of limited duration.” However, I have found that Labels may offer these “special campaigns of limited duration” on an almost full time basis (e.g., 50 out of 52 weeks a year).
(c)Fake free goods are Records that are simply deemed non-royalty bearing under a recording agreement. This can best be illustrated by an example. Assume the Distributor sells 100 albums for $1,000 (i.e., $10.00 each). However, in accounting to the artist, the Label will take the position that the customer purchased 85 of the albums at a wholesale price of $11.76 each and received 15 albums “for free.” Since the Labels who did this accounted on a Royalty Base Price derived on the SRLP, an increased wholesale price did not affect (i.e., increase) the calculation of the Artist Royalties. [For years, Sony Music and its predecessors, who have historically derived the Royalty Base Price from the wholesale price (rather than the SRLP), and, in effect, arrived at the same place by paying the artist based on 85% of Net Sales.]
57.Gold Album: When an album sells 500,000 copies (i.e., units) in the United States, the RIAA will certify the album as “gold.” 10 Digital Transmissions of individual tracks by a particular artist will count as one album for this purpose. Many of the other territories in the world have different sales plateaus for “gold.” For example, the sale of 40,000 copies of an album in Canada is a “gold” album. (See wikipedia.org/wiki/List_of_music_recordingsalescertifications to see a list of foreign certifications.)
58.Hall Management refers to the company that manages and controls a Venue.
59.Harry Fox refers The Harry Fox Agency, Inc., which is a company in the United States that Publishers can use to issue Mechanical Licenses and collect Mechanical Royalties for a fee retained by Harry Fox (currently 6.75%), rather than doing it themselves. A major advantage for many small Publishers is that Harry Fox periodically conducts audits of the record companies and engages in industry wide negotiations (e.g., an across the board agreement with webcasters). The costs of a record company audit by a small Publisher may be cost prohibitive.
60.Holdback refers to a period of time during which a Record cannot be released. For example, assume an artist is exclusively signed to Record Company A and that Record Company B is releasing a soundtrack album and is seeking to have the artist record a new track for the soundtrack album (a “Soundtrack Master”). Record Company A may be willing to waive its exclusive rights to the artist so that the artist is permitted to record the Soundtrack Master, provided that Record Company A has the right to include the Soundtrack Master on a subsequent artist album to be released by Record Company A (for example, a greatest hits album). Record Company B may agree to this so long as Record Company A does not release an album containing the Soundtrack Master until a certain period of time has transpired after the date the soundtrack album is released by Record Company B (for example, 12 months).
61.Independent Distributor: There are two types of independent distributors, i.e., those that are affiliated with a major distributor (e.g., RED which is owned by Sony Music, Caroline which is owned by EMI, ADA which is owned by Warner Bros., and Fontana which is owned by Universal) and those that are not (e.g., Koch, Navarre, and Razor & Tie).
62.Independent Promotion refers to an independent contractor being hired, usually by a Label, to promote an artist’s Single to radio programmers and disc jockeys in order to secure radio airplay of the Single.
63.Inducement Letter: If a company (which may be a Loan-Out Company or a company that is not owned by the artist) (either of which is referred to herein as the “Furnishing Party”) is entering into an agreement to furnish the services of an artist (for example, a recording agreement between the company and a Label), then the other contracting party (referred to herein as the “Receiving Party”) may require the artist to sign an Inducement Letter in order to “induce” the Receiving Party to enter into the particular agreement. An Inducement Letter typically includes the following terms: (a) the artist represents and warrants that he has read and understands the agreement; (b) the artist represents and warrants that the Furnishing Party has the right to enter into the agreement and to bind the artist to the terms of the agreement to which the Furnishing Party is subject; (c) the artist personally guarantees the representations, warranties and other obligations of the Furnishing Party as set forth in the agreement; (d) the artist agrees to look solely to the Furnishing Party (and not to the Receiving Party) with respect to any royalties and other monies payable to the artist as a result of the agreement; and (e) the artist agrees to perform directly for the Receiving Party in the event that the Furnishing Party no longer has the exclusive right to the artist’s services.
64.Institutional Sales are referred to in recording agreements and mean Record sales to educational and other governmental institutions (such as libraries), which may or may not include PX Sales. Most recording agreements state that the Artist Royalty rate for institutional sales are substantially less than the Artist Royalty rate for the sale of Top-Line Records.
65.Intra-Company Rate refers to the royalty rate that is paid by a foreign Distributor who is affiliated to the domestic Label. For example, if an artist is signed to Warner Bros. Records in the United States, then Warner Bros. Records in the United States is considered the domestic Label. When a foreign affiliate of the domestic Label (for example, Warner Bros. Records in Australia) sells a Record by that artist in Australia or New Zealand, Warner Bros. Records in Australia will pay a royalty computed at the intra-company rate to Warner Bros. Records in the United States. The reverse would be true when Warner Bros. Records in the United States sells a Record in the United States by an artist who is signed to Warner Bros. Records in Australia.
66.J-Card refers to the paper sleeve inside the Jewel Box that forms the outside artwork packaging of a compact disc.
67.Jewel Box refers to the plastic case that contains a compact disc(s).
68.Joint Recording means a recording that features more than one artist (e.g., “Stop Draggin’ My Heart Around” by Stevie Nicks and Tom Petty And The Heartbreakers).
69.Joint Venture Deal typically describes an agreement between a Label and company set up to primarily to render A&R services (see A&R Department). Typically, the Label (a) advances some or all of the costs to record, manufacture, distribute, promote and market records by one or more artists (including Recording Costs, manufacturing and distribution costs, Artist Royalties, royalties payable to Producer, Mechanical Royalties and payment to the unions (see Net Receipts), Tour Support, and costs related to Independent Promotion and Marketing), and (b) agrees to pay the A&R company a percentage (typically, 50%) of the “net proceeds” from the sale of Records. In other words, the Label recovers all of its out-of-pocket costs before paying the A&R company any “net proceeds”; however, in multiple artist deals, the joint venture agreement may prohibit or limit the Label’s right to Cross-Collateralizatize the costs related to different artists.
70.Joint Work: In §101 of the Copyright Act, this term is defined as follows: “A ‘joint work’ is a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” In the United States, in an absence of a written agreement between the authors, each author is deemed to own an equal undivided share of the joint work. For example, if one songwriter writes all of the music to a joint work and another songwriter writes all of the lyrics to a joint work, each songwriter will nevertheless own 50% of the music and the lyrics. If subsequently, the songwriter of the music has someone else write new lyrics to his music, the new song will be a “derivative work” (see §101 of the Copyright Act) based on the original song. In other words, the songwriter of the lyrics of the original song will own a portion of the Copyright in the new song, even though none of his lyrics were used in the new song. Further, in the absence of an agreement between the artist and the Producer, a Sound Recording could be deemed a “joint work,” the Copyright in which would be owned by both the artist and the Producer. In the United States, each joint owner of Copyright has the right, in the absence of an agreement between the joint owners, to license the entire Copyright to a third party. This is based on the rationale that a Copyright owner cannot infringe his own Copyright. The Licensor’s only obligation to the other joint owner(s) would be to account to the joint owner(s) and that the license cannot destroy the value of the Copyright. (For example, if artist/songwriter writes a song with another person, then each party could license the First Use of the song in the Untitled States without the consent or even knowledge of the other. This could be quite distressing for the songwriter/artist who was intending to be the first artist to record the song. Further, any joint owner can issue a Synchronization License for the entire song so long as the license does not extend beyond the United States. In this regard, it may be quite distressing for an artist to find out that his song is being used in a television commercial without his consent or knowledge.) Unlike the United States, in many foreign territories, all of the joint owners would need to issue a single or multiple licenses in order for a Licensee to use a joint work.
71.Key Man Clause refers to a clause in a contract that entitles a party to terminate the term of the contract if a particular person no longer works for the other contracting party. For example, a key man clause in a recording agreement would give the artist the right to terminate the recording agreement if a particular person (e.g., the chief executive or current owner of the company) is no longer responsible for the day-to-day operations of the company. It would be very, very unusual for a major Label to agree to this type of clause. In contrast, because of a Personal Manager’s personal relationship with his clients, many personal management agreements make the manager a “key man.”
72.Key Member: Under Leaving Member Provisions, if a member of a musical group, who is designated, or deemed to be, a non-Key Member, leaves the group, then the Label will not have the right to “drop” the group under the Leaving Member Provisions.
73.Label refers to the record label that releases an artist’s Record and, most likely, is not the Distributor of those Records, although in many cases the Label and the Distributor are affiliated to each other (i.e., under common ownership). For example, “Columbia Records” is a Label within the Sony Music Group, and Sony Music is the Distributor of all of the Records released by Columbia Records in the United States.
74.Label Deal is an agreement between two Labels almost always for more than one artist and is typically structured along the lines of a Joint Venture Deal (a sharing of “net proceeds”). However, the party who has the recording agreements with the artists (the “Artist Label”) may be entitled from the other party to a royalty for each artist on a Cross-Collateralized or non-Cross-Collateralized basis. In Billboard and other music charts, the name of the Artist Label generally precedes the name of the Label who provides the financing and distribution.
75.Lead Sheet is a written piece of paper containing the lyrics and music of a song. The songwriter is often obligated to deliver lead sheets under a Songwriter Agreement.
76.Leaving Member Provisions: (a/k/a group provisions): If the “artist” under a recording agreement consists of more than one person (i.e., a musical group), the recording agreement will contain a section that gives the Label some or all of the following rights if a member leaves the group (a “Leaving Member”) or the group disbands:
(a)The Label may terminate the recording agreement (i.e., “drop” the group). This termination may also have the effect of making every member of the group a “Leaving Member,” any or all of which may, at the Label’s discretion, be subject to an exclusive recording agreement for their solo Records in accordance with paragraph (c) below.
(b)The Label may continue with group without the Leaving Member, perhaps on terms more advantageous for the Label (i.e., lesser Advances and Artist Royalties).
(c)The Label may “pick-up” the Leaving Member (i.e., deem him to be subject a exclusive recording agreement) with some or all of the following consequences:
(i)The Advances and Artist Royalties payable to the Leaving Member for his solo records will be substantial less than what the group is or was entitled to under the group’s recording agreement.
(ii)The group’s unrecouped balance (see Recoupment) existing as of the date the Leaving Member became a “Leaving Member” may be recoupable from the Artist Royalties otherwise payable to the Leaving Member for his solo records.
(iii)The Leaving Member’s proportionate share of the Artist Royalties from the group’s Records may be used by the Label to recoup the Advances and other recoupable costs paid or incurred by the Label from the Leaving Member’s solo Records.
(iv)The Label may be entitled to more albums from the Leaving Member than the number of albums remaining to be Delivered by the group. For example, a Leaving Member Provision may state that the Label will have the right to no less than two (2) albums from the Leaving Member, even though the group may only owe the Label one more album at the time the Leaving Member left the group.
77.Library Music refers to a company that owns a variety of music recorded by artists relatively unknown to the public (e.g., a recording by an orchestrate in Eastern Europe), which music is available for licensing for use in audiovisual programs (such as television programs, motion pictures and trailers, and commercials).
78.Licensee refers to the recipient of enumerated rights under any type of licensing agreement.
79.Licensor refers to the grantor of enumerated rights under any type of licensing agreement.
80.Loan-Out Company: This is a company (i.e., either a corporation, a subchapter S corporation, or a limited liability company (i.e., an LLC)) that is owned and controlled by an artist, which the artist uses to enter into agreements and to conduct one or more aspects of an artist’s activities. (A loan-out company can also be in the form of a partnership if the “artist” is more than one person.) Many Loan-Out Companies are formed by artists in order to take advantage of more favorable tax results (e.g., a company may be able to take certain deductions that an individual is not permitted to take) as well as to limit the artist’s liability from third party claims. For recording agreements and other contracts for the artist’s services and/or the artist’s name and likeness rights (i.e., Merchandising Agreements), the Label or merchandiser may require the artist to sign an Inducement Letter. Artists of any significant stature almost always use a Loan-Out Company for, at least, touring purposes in order to minimize the artist’s exposure to third party lawsuits while on the “road” (for example, a lawsuit that arises from an audience member being injured while attending an artist’s concert).
81.Marketing means a Label’s efforts to get brick and mortar retail outlets to place or display a Record prominently in the store. Many Labels hire independent marketing companies to fulfill this function.
82.Masters and Master Recordings are is almost always used in contracts in the music industry to refer to finished Sound Recordings and audiovisual recordings, and are also used to refer to Phonorecords and, especially, Digital Delivery Phonorecords.
83.Master Use License is a license that is the equivalent of a Synchronization License, except that the Licensor is granting the right to reproduce and distribute a Sound Recording, rather than a song. Under most recording agreements, 50% of the Label’s Net Receipts under a Master Use License are deemed All-In Royalty Artist Royalties.
84.Matching Folio refers to a printed book containing Sheet Music of the songs on a particular album (almost always including photos and biographical information of or concerning the artist).
85.Matching Right: A party to an agreement who is entitled to match the terms of a third party offer is said to have a matching right. For example, in a Demo Deal, the artist may be obligated to present the Label who financed the demos (the “Original Record Company”) with all third party offers received by the artist from other Labels that are acceptable to the artist. The Original Record Company will have the right, for a limited period of time, to enter into a recording agreement with the artist upon the terms of a third party offer. In other words, the artist will have the right to enter into a recording agreement with the third party only if the Original Record Company fails within a stated time period to accept the terms being offered by the third party.
86.Mechanical License is a license between a Publisher (or its agent, e.g., Harry Fox) and a Label pursuant to which the Label is granted the right to reproduce and distribute Phonorecords and Digital Phonorecord Delivery of a particular song in exchange for the Label paying Mechanical Royalties. The terms “mechanical license” and “mechanical royalties” originated with piano rolls. According to Wikipedia: “A piano roll is a roll of paper with perforations (holes) punched in it. The position and length of the perforation determines the note played on the piano. The roll moves over a device known as the ‘tracker bar’, which first had 58 holes, was expanded to 65 and then was upgraded to 88 holes (generally, one for each piano key). When a perforation passes over the hole, the note sounds. Piano rolls were in continuous mass production from around 1896 to 2009.” Hence, a piano roll caused a “mechanical” reproduction of a song that was used to cause a “mechanical” performance of the song. Pursuant §115 of the Copyright Act, a Publisher cannot refuse to grant a mechanical license for a song if the song has been reproduced and distributed in the United States on a Phonorecord or Digital Phonorecord Delivery under the authority of the Publisher (in other words, such circumstances give rise to a compulsory license). Stated more practically, anyone can Cover a song once it has been commercially released on a Phonorecord or Digital Phonorecord Delivery. The Copyright Royalty Board promulgates the
87.Administration Agreement rates for a compulsory mechanical license under §115. With certain exceptions (see my law review article “The Statutory Overriding Of Controlled Compositions”), the Publisher may voluntarily agree (i.e., negotiate) to give the Label more favorable terms than those promulgated under §115.
88.Mechanical Royalties refer to the royalties payable under a Mechanical License that the Label pays to the Publisher(s) for the reproduction and distribution of the underlying song contained in a Phonorecord or Digital Phonorecord Delivery. (See Statutory Rate.)
89.Merchandising Agreement refers to an agreement where Merchandising Rights are granted, either in general or for a limited channel of distribution (e.g., retail or touring) or for all products or one or more specific products (e.g., a merchandising agreement for solely for posters) usually in exchange for the merchandiser paying the artist royalties and, perhaps, an Advances.
90.Merchandising Rights refer to the right to reproduce and distribute merchandise (e.g., posters, T-shirts, hats, belt buckles, books, and other apparel) containing the name, logo, photograph and other likeness of an artist and biographical material concerning the artist.
91.Mid-Price Record refers a Record that is sold by a Distributor at a price that is below the Distributor’s then-prevailing price for Records sold as Top-Line Records, but above the price for Budget Records in the same configuration. This lower price is typically equal to or less than 80% of the price for Top-Line Records, but more than 66-2/3rds of the price for Top-Line Records.
92.Mixed Folio refers to a printed book containing sheet music of songs by different songwriters.
93.Mixer: In the past, Sound Recordings were recorded on large, multi-track tapes (for example, a 48 track tape) with each sound (e.g., an instrument or vocal) on a separate track. Now, the tracks are generally digitally recorded, but the concept is the same. The “mixer” is the person at the end of the recording process who determines the mixture of these various tracks (for example, the volume of each track in relationship to the other tracks). Mixers are usually paid a flat fee for their services, but in some cases, they may have negotiated a royalty as well as a fee.
94.Moral Rights: (a/k/a droit moral). In certain European territories, a moral right is a right retained by an author to keep his works from being “mutilated” even if the author has sold the work or the Copyright in the work. Except for works of visual art (see §106A of the Copyright Act and see §101 of the Copyright Act to see what is and what is not a “visual art”), moral rights are not recognized in the United States.
95.MOR Radio is an abbreviation for “middle of the road radio,” which is a genre of music that, according to Wikipedia, includes the following types of music: easy listening, traditional pop music of the pre-rock & roll era, orchestral ballads, musical theater songs, smooth jazz, and soft rock.
96.Most Favored Nation Clause (a/k/a MFN) is a clause in a contract where one party (the “Giver”) agrees to the give the other party (the “Recipient”) the benefit of any corresponding terms given by the Giver in any other contract with any other person if the corresponding term is more favorable to the Recipient. For example, a Synchronization License could state that the fee payable to the Publisher (i.e., the Licensor) by the Licensee shall not be less than the fee that the Licensee agrees to pay to any other Publisher for the right to synchronize another song in the applicable motion picture.
97.Multiple Album originated with an album package that included more than one vinyl disc for a single price. Today, this term includes a compact disc package with more than one compact disc. (A “box set” is a multiple album typically containing recordings over the artist’s entire career.) The definition of a “multiple album” under a recording agreement now includes Digital Phonorecord Deliveries based on the number of tracks or the playing time of the all of the tracks being sold as part of the album package, even though the concept of separate discs is not applicable to Digital Phonorecord Deliveries. The reasons multiple albums are referred to in recording agreements are two-fold. First, Labels generally do not want the artist to Deliver a multiple album, because multiple albums, which bear a higher price in order to offset the higher manufacturing costs, do not usually sell as many units as a single-disc album. Therefore, in most recording agreements, a multiple album can only be Delivered by the artist with the consent of the recording company. Second, recording agreements typically contain the following reduced Artist Royalty rate formula for multiple albums: the artist’s album royalty rate is reduced by a fraction, the numerator of which will be price of the multiple album and the denominator of which will be the Label’s standard price for a single-disc album sold as a Top-Line Record multiplied by the number of discs (or the equivalent thereof) in the multiple album package. For example, if the SRLP of a two-disc multiple album is $24.98 and the Label’s standard price for a single-disc album is $18.98, then the Artist Royalty rate for the multiple album will be reduced to equal 65.8% of the Artist Royalty rate otherwise payable to the artist (i.e., $24.98 divided by $37.96 (i.e., $18.98 x 2)).
98.Music Supervisor is the person hired by a motion picture or television program producer to consult with the producer and the director of a motion picture or television program and recommend what music should be contained in the soundtrack of the picture or program, in addition to the music created by the film composer. For example, the music supervisor may recommend a particular artist to record new music specifically for a film and may recommend a Master that has already been released on a Record to be in the film. Music supervisors often get directly involved with negotiating the terms for the use of the music in the motion picture or television program.
99.Net Artist Rate: see Retroactive to Record One.
100.Net Publisher’s Share: (a/k/a NPS): When someone wants to buy a publishing Catalog (i.e., a catalog of musical compositions), the Catalog is typically valued by multiplying the average NPS over the most recent five to three years by a multiple of between five and fifteen. The NPS means the gross income collected or credited to the Publisher who controls the Catalog less songwriter royalties and royalties paid by the Publisher to any co-publishers. Whether or not the gross income is calculated “At Source” or on a “net receipts” basis with respect to foreign income is a matter of negotiation.
101.Net Receipts is typically defined in a recording agreement as follows: “gross receipts earned and actually received by the Label that are solely and directly attributable to the actual use of the Masters, less all of the Label’s expenses with respect thereto, including, but not limited to, the costs of collection and amounts required to be paid by the Label in respect of such use (a) for taxes, shipping, and insurance, (b) to the AFM Phonograph Record Manufacturers Special Payment Fund, the AFM Music Performance Trust Fund, the AFTRA Pension and Welfare Fund, and any similar fund now or hereafter created by reason of any collective bargaining agreement, the AFTRA Contingent Scale Payments, and (c) for Mechanical Royalties or other payments to the Copyright proprietors (or their designees) of the musical compositions embodied on such Masters.”
102.Net Sales mean Records sold by the Label (or its Distributor) to independent third parties for whom payment has been paid or credited, less Returns and Reserves against Returns.
103.New Technology Records is a term is usually found in recording agreements and refers to all forms of Records, whether utilizing technology existing as of the date of the applicable agreement or devised thereafter, which do not, as of the date of the agreement, constitute a substantial portion of the Records currently being sold to the public in the United States, for example, DAT, DCC, and DVD Audio Records. Labels almost always insist on paying a reduced Artist Royalty with respect to New Technology Records, at least, until the format becomes a significant percentage of sales in the United States. Records sold through Digital Transmission have for years been deemed New Technology Records, but this is no longer the case for most Labels.
104.Normal Retail Channels mean Net Sales of Records sold as Top-Line Records through Brick and Mortar Stores and for Downloads. Under most recording agreements, only these types of Physical Record sales and Top-Line Records sold as Downloads are accorded the full, non-reduced Artist Royalty rate. “USNRC Net Sales” is often used in a recording agreement to refer to Net Sales of Records as Top-Line Records through Normal Retail Channels in the United States. The highest Artist Royalty rate a Label in the United States will agree to pay is for USNRC Net Sales of albums.
105.One-Stops refer to an interim record distributor who buy Physical Records from the original Distributor and then re-distributes the Records to smaller record stores (a/k/a “mom and pop” stores).
106.Orchestration refers to sheet music for each of the members of the orchestra or other musical group. Many film composers hire orchestrators to write the “parts” for the instruments used in performing a Score; however, some composers writer their own orchestrations.
107.Out-of-Context usually appears in Synchronization Licenses and Master Use Licenses. If the Licensee is not granted “out-of-context” rights, then the Licensee has the right to reproduce and perform the song or Sound Recording in trailers and other advertisements for the applicable motion picture or television program only in the scene or scenes and in the manner the song or Sound Recording is used in the applicable motion picture or television program. Conversely, if the Licensee is granted “out-of-context” rights, then the Licensee can also use the song or Sound Recording in trailers and other advertisements for the applicable motion picture or television program without being tied to the scene or scenes or the manner the song or Sound Recording is used in the applicable motion picture or television program.
108.Override typically refers to a royalty to someone other than an artist, Producer or Mixer. For example, if an artist is signed to one Label, but, during the term of the recording agreement, the artist wants to move to another Label, the current Label may be willing to terminate the term of its recording agreement with the artist only if the new Label agrees to pay the former Label money in the form of a non-recoupable payment and/or an override royalty for which there may also be an Advances recoupable from the override royalties.
109.Packaging Charges (a/k/a container deductions) have been used in recording agreements and have nothing to do with the actual costs of the packages that contain Physical Records. Historically, single-disc vinyl albums carried a 10% packaging charge, and, when tape records (e.g., 8-tracks and cassettes) came into the market, tapes carried a 15% or 20% packaging charge. The way this deduction worked was that Artist Royalties were typically calculated at the SRLP of the Record less a packaging charge. For example, if the SRLP of a vinyl album was $8.98 and the Artist Royalty rate was 10%, then the Artist Royalty would be equal to 10% of 90% of $8.98, not 10% of $8.98. This deduction of a packaging charge was merely a way to reduce the effective penny rate payable to the artist. (Note that the effective penny rate for Artist Royalties is further reduced by Free Goods.) I can imagine that the concept of a packaging charge was created by some “clever” person at a Label who came up with the rationale that, when a consumer buys an album, the consumer is not only buying the disc Record, he is also buying the printed cardboard cover that contains the disc. One could rationalize that the artist should get paid an Artist Royalty only for the Record, but not for the package. Therefore, a packaging charge should be deducted off the SRLP in order to arrive at the Royalty Base Price. When compact discs were introduced in 1982, they were more expensive to manufacture than cassette tapes records, which were, at the time, the most popular Record configuration. This higher expense was because in the early 1980s there were very few manufacturing facilities for compact discs. Because of this higher cost, the Labels uniformly imposed a 25% packaging charge for compact discs, even though compact discs were being sold at a significantly higher price than tape cassettes. Although compact discs quickly became much less expensive to manufacture, the Labels never waivered off of this 25% packaging charge for compact discs. The fiction of a “packaging charge” became completely illogical with the advent of Digital Transmissions, because there is no “package” involved in a Digital Transmission. In recent years, most Labels have abandoned the concept of “packaging charges” (along with standard Free Goods), and now compute royalties based on the wholesale price (see PPD) without a packaging charge. [Note: if the artist wants special packaging for a Physical Record (e.g., a non-standard booklet in a compact disc package), most Labels will charge the artist for the additional costs in the form of a reduction in the Artist Royalty for the applicable Record. This charge is wholly different than what is known as a “packaging charge” or “container charge.” See Special Packaging Charges.]
110.Paid Attendees is typically used in Merchandising Agreements as a reference to persons who attended a concert with a purchased ticket. In this regard, in a Merchandising Agreement, the artist may be subject to a minimum guaranteed number of paid attendees, e.g., the term of the Merchandising Agreement may be automatically extended until the artist has performed in front of “x” number of paid attendees.
111.P&D Agreement: see Distribution Agreement.
112.Performance Rider: The basic terms of an agreement for an artist to perform at a concert are typically negotiated by the Promoter and the artist’s Talent Agent (with the Talent Agent acting at the direction of the artist and the artist’s Personal Manager). These basic terms typically include (a) the date and Venue of the concert, (b) the time the doors of the Venue will open and the approximate start time of the artist’s performance, (c) the approximate length of the artist’s performance, and (d) the flat fee or the percentage of box office receipts (with a minimum guarantee) payable to the artist. The Talent Agent has a printed form agreement (the “Agency Form Agreement”) that, for performances in the United States, has been approved by the American Federation of Musicians (the AF of M), and, if the Talent Agency is located in California, by the California Commissioner. The Agency Form Agreement is sent by the Talent Agent to the Promoter along with a Performance Rider and a Technical Rider. The Performance Rider is usually drafted by the artist’s attorney and called a “rider,” because it overrides and supersedes anything contained in the Agency Form Agreement. The Agency Form Agreement is usually printed on the front and back of a single piece of paper whereas the Performance Rider may well be in excess of ten pages. The Technical Rider is usually an addendum to the Performance Rider and contains the power and stage specifications, security specifications, and catering and backstage amenities. The Technical Agreement needs to be shared by a number of different people involved in the production of the concert; therefore, its is usually contained in separate agreement that can be distributed separate and apart from the main Performance Rider.
113.Performing Rights Society refers to organization with Publisher members and songwriter members who are granted the authority to license the public performance of songs to Licensees, such as radio stations (terrestrial and satellite), television stations and networks, webcasters and any website that performs music, whether on the Internet or over mobile technologies, and Venues where recorded or live music is performed. §101 of the Copyright Act defines this term as follows: “A ‘performing rights society’ is an association, corporation, or other entity that licenses the public performance of nondramatic musical works on behalf of Copyright owners of such works, such as the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), and SESAC, Inc.” These performing rights societies are quite proactive, i.e., they will pursue persons who publicly perform music with a license, including the filing of lawsuits.
These licenses are in the form of Blanket Licenses. Subject to certain exemptions set forth in §110 of the Copyright Act, what constitutes a Venue is quite broad. It can include places like bars, discos, country clubs, gyms, as well as clubs, theaters, “sheds,” arenas, and stadiums. In the United States, the performing rights societies are prohibited, pursuant to antitrust consent decrees, from granting movie theaters a license to publicly perform the soundtrack of a motion picture (this right is usually included in a Synchronization License for a motion picture) and from granting a license for the “dramatic” performances of music. In this regard, ASCAP’s website states that following public performances are not licensed by ASCAP:
ASCAP does not license Dramatic Works (opera, ballet, music theater, etc.); nor broadcasts of Dramatic Works; nor Concert performances of complete Dramatic Works. Either you or your publisher must license these events directly.
•Performances within religious services are not licensed by the Society.
•US Armed Forces performances are not licensed by the Society.
•Elementary, Junior and Senior High Schools (Kindergarten-12th grade) are not normally licensed by the Society.
The performing rights societies in the United State do not issue Mechanical Licenses. In many territories outside of the United States, the performing rights societies also issue Mechanical Licenses, and, therefore, are sometimes referred to as “performing/mechanical rights societies.” Some of the foreign societies also issue Synchronization Licenses.
The Performing Rights Societies in the United States and in many other territories pay roughly 50% of the net royalties from their Blanket Licenses directly to their songwriter members and pay roughly 50% of the net royalties from their Blanket Licenses directly to their Publisher members.
A songwriter in the United States cannot concurrently be a member of more than one performing rights society. Most Publishers are “affiliates” of both ASCAP and BMI and may also be an “affiliate” of SESAC, although they must have a unique name for each performing rights society. In order for a Publisher to collect the Publisher’s Share of performance royalties from a performing rights society, the Publisher must be a member of the performing rights society to which the songwriter is a member.
114.Personal Manager is usually thought of as the alter ego of the artist. Contractually, under a personal management agreement, a personal manager is engaged by the artist to give the artist professional advice. In California, personal managers are not contractually obligated to secure employment or engagements for any artist, unless they are a licensed Talent Agent, which very few are. However, many personal managers, in fact, spend a lot of their time securing employments and engagements for their artist clients. The artist usually determines the extent of the manager’s actual authority. Some artists let their manager interface with everyone else in their professional life (and sometimes their personal life), while other artists take a more hands-on approach to dealing with the other people in their lives. Most artist attorneys and Business Managers rely on the personal manager as the decision maker on the artist’s behalf, and, in most cases, leave it to the personal manager to determine what issues or decisions need to be run by the artist.
115.Phonorecords: §101 of the Copyright Act defines this term as follows: “‘Phonorecords’ are material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term ‘phonorecords’ includes the material object in which the sounds are first fixed.” [Emphasis added.] Note the distinction between a “Sound Recording” as a work whereas a “phonorecord” is the material object in which the work is embodied. See Sound Recording. [By analogy, if you analogies a Sound Recording to a trademark, then a T-Shirt containing the Sound Recording is analogous to the Phonorecord, and the trademark (i.e., the name having trademark protection) is analogous to the Sound Recording.]
116.Physical Records refer to physical Records pre-recorded with Master Recordings prior to its distribution to the consumers and not created through the transference of sound through a Digital Transmission to the consumer’s home device. Examples of currently existing Physical Records are vinyl discs and pre-recorded analog tape cassettes, compact discs, videocassettes, and DVDs. An example of a non-Physical Record is a Record created on a consumer’s computer hard drive, recordable CD or DVD, or other digital storage facility by the Direct Transmission of recordings to such hard drive, recordable CD or DVD or other digital storage facility.
117.Platinum Album: When an album sells 1,000,000 copies (i.e., units) in the United States, the RIAA will certify the album as “platinum.” 10 Digital Transmissions of individual tracks will count as one album for this purpose. Many other territories in the world have different sales plateaus for “platinum.” For example, the sale of 80,000 copies of an album in Canada is a “platinum” album. (See en.wikipedia.org/wiki/List_of_music_recording_sales_certifications to see a list of foreign certifications.)
118.Play or Pay refers to a clause in a recording agreement that lets the Label get out of its obligation to pay for the recording of an artist’s album in exchange a payment by the Label to the artist. To illustrate, assume that the recording agreement obligates the Label to pay the Recording Costs of one or more albums. If the Label refuses to honor that obligation without legal cause (for example, the artist’s material breach of the recording agreement), then, without a “play or pay” clause, the artist could potentially sue the Label for breach of contract. A “play or pay” clause states that, if the Label refuses, without cause, to allow the artist to record an album, then the artist’s sole remedy will be to receive a payment from the Label (which is almost always an Advances). In the initial draft of a recording agreement, this payment may be as little as the payment of Union Scale for the unrecorded masters. The standard now is that the payment will be the “recording cost differential,” i.e., the amount of the Recording Fund for the unrecorded album less the Recording Costs that were spent on the immediately prior album. (The rationale is why should the artist end up with more of the Recording Fund in his pocket than the net amount the artist would have received if the album had been recorded?) Note that the “recording fund differential” may result in no payment to the artist if the Recording Costs for the prior album were more than the amount of the Recording Fund for the unrecorded album. It is usually better for the artist to have the “play or pay” payment computed as a flat amount (e.g., 50% of the Recording Fund for the unrecorded album). Almost all Labels will agree to state in the recording agreement that the artist’s exercise of the artist’s “play or pay” right will result in a termination of the term of the recording agreement.
119.Power of Attorney refers to a clause in a contract that give a party the right to sign documents in the “name, place and stead” of the other party. This clause typically applies to Copyrights such that the owner of a Copyright is given the right to sign documents confirming the owner’s ownership of the Copyright.
120.PPD (a/k/a published price to dealers) is the wholesale price that a Distributor charges to Rackjobbers, One-Stops and other retailers.
121.Premium Record is a Record manufactured by or for a third party company in large part to promote the third party company. For example, a Record specifically made for McDonald’s that will only be sold or given away at McDonald’s restaurants (for example, at a reduced price in conjunction with the sale of a “Happy Meal”) would be a premium Record. Under most recording agreements, Artist Royalties for premium records are computed on the Label’s actual wholesale receipts from the third party company. Historically, almost all of the Labels would give the artist prior approval over all premium records. However, in the light of the current need for the Labels to generate income from whatever sources may be available, Labels are starting to push back on this approval right.
122.Print Agreement (a/k/a print deal) refers to an agreement between a Publisher and a company that is in the business of manufacturing printed editions of Sheet Music (e.g., Hal Leonard, Music Sales, Alfred Publishing, and Cherrylane).
123.Producer refers to the person who is in charge of the recording process in the recording studio. With some artists, the producer controls all aspects of the recording process, and the artist merely comes into the studio to sing his vocals. For established artists, the producer may merely be acting as a sounding board for the artist during the recording process.
124.Producer Agreement: In the early years of the music industry, the Label hired the Producer. In many instances, the Producer was a “staff producer,” i.e., a full-time employee of the Label. Starting in the 1960s, Labels started requiring the artist to hire the Producer. Nowadays, the artist is almost always required under the artist’s recording agreement to hire the Producer. Therefore, a producer agreement is almost always an agreement between the Producer and the artist. However, because in most circumstances, a Producer does not want to rely on the artist to pay the Producer his future royalties, most Labels will agree to account and pay the Producer pursuant to the Label’s “standard letter of direction” from the artist to the Label. Often, the Label refuses to sign its own letter of direction, and the Producer does not have the right to sue the Label if the Label refuses to abide by the terms of the letter of direction. Producer royalties are in most cases computed in accordance with the way the Artist Royalties are computed under the artist’s recording agreement; however, Producers are usually paid Retroactive to Record One. With respect to income collected by the Label from Master Use Licenses, the Producer is usually entitled to a fraction of 50% of the Label’s Net Receipts, the numerator of which is the Producer’s royalty rate for albums sold as Top-Line Records in the United States and the denominator of which is the Artist’s All-In Royalty rate for albums sold as Top-Line Records in the United States. Producers are usually subject to a Re-Recording Restriction.
125.Production Agreement or Production Deal: For an artist, a “production deal” means signing an exclusive recording agreement with a company that is probably not a real Label (referred to a “production company”). In other words, the production company does not have distribution with a Distributor at the time the Production Agreement is signed. The production company may be agreeing to finance a certain number of demos or Master Recordings. A key point for an artist to obtain in a production deal is the right for the artist to terminate the term of the production agreement if the production company is unable to get distribution through a recognized Distributor within some period of time. If the production company is able to obtain what is in essence a recording agreement with a Label for the artist, that agreement will be between the Label and the production company, but, as part of the deal, the Label will require the artist to sign an Inducement Letter.
126.Promoter is the person who contracts with an artist for a live performance. The artist would typically use a Talent Agent to negotiate with the Promoter. In addition to Promoter’s agreement with the artist (the terms of which are briefly discussed in the definition of Talent Agent), the Promoter also contracts with the Venue and all of the vendors who provided services for a concert (other than those vendors engaged by the artist). Vendors hired by the Promoter could include companies that provide security, backstage caterers, lighting operators, and stagehands. Promoters that are a part of Live Nation or AEG are often affiliated with the company that owns the Venue.
127.Proration: A prorated royalty arises when an artist, Producer, Mixer or other royalty recipient is not entitled to receive a royalty for all of the recordings on a Record. For example, the Artist Royalty for a Compilation Album will be prorated by multiplying the otherwise applicable Artist Royalty rate by a fraction, the numerator of which will be the number of recordings on the Compilation Album that feature the artist and the denominator of which will be the total number of recordings on the Compilation Album.
128.Publisher typically refers to the person that controls the Administration Rights in one or more songs.
129.Publisher’s Share means the share of income attributable to the exploitation of a song remaining after the deduction of Songwriter’s Royalties from that income.
130.Publishing Agreement is an agreement pursuant to which one or more of the Administration Rights in one or more songs is granted to a party to the agreement (such as an Administration Agreement, Subpublishing Agreement, Co-Publishing Agreement, Songwriter Agreement, or Print Agreement) or are otherwise addressed, such as in an Co-Administration Agreement.
131.PX Sales refer to Records sold for sale on military bases. Almost all recording agreements provide for a reduced Artist Royalty rate for PX Sales.
132.Rackjobbers refer to Record retailers who lease floor space for the sale of Physical Records from Big Box Stores and other large retail stores that do not primarily sell Records.
133.Record is typically defined very broadly in a recording agreement along the following lines: “any device, which utilizes technology existing as of the date hereof or devised hereafter, on or by which sound may be recorded or reproduced with or without a visual reproduction, which is manufactured or distributed primarily for home, consumer, and/or juke box use and/or use in means of transportation, including, but not limited to, analog disc records (e.g., vinyl records), tape cassettes, compact discs, New Technology Records, Masters, Records sold by Digital Transmission, and audiovisual records.” (Note: if an artist records a Master for use in a motion picture, the artist will invariably need to get clearance from Label to which the artist is signed, even if there is no soundtrack album. The reason arises from the broad definition of what constitutes a “Record” and a negative covenant in the artist’s recording agreement that states that the artist will not record a Record during the term of the recording agreement for anyone other than the Label. This negative covenant, along with the broad definition of what constitutes a “Record” would prohibit the release of the motion picture on an audiovisual record, such as a DVD.)
134.Record Clubs refer to mail-order sales of albums through a company that requires the customer to purchase a minimum number of albums over some period of time. The customer is enticed to “join” the club by the company offering the customer a certain number of “free” albums upon joining the club. Other than the “free” albums, the customer is obligated to purchase the other albums at a full retail price. If you are entering into a Distribution Agreement with a Distributor, you may be able to retain record club rights. In this manner, you may be able to negotiate a direct deal with a record club, which may result in the record club paying an Advances as well as royalties. However, record clubs are pretty much out of business in the United States. (According to Wikipedia, Columbia record club shut down its album mail-order operations in mid-2009.) The Artist Royalties under a recording agreement for record club sales are usually expressed as the lesser of (a) half of the Artist Royalty rate for albums sold as Top-Line Records or (b) 50% of the Label’s Net Receipts from those sales. Since (a) is usually less than (b), most artists are able to delete clause (a) in negotiating the recording agreement. Most agreements between a record club and record company allow the record club to distribute 50% of all of the albums under the agreement as Free Goods. Since this is stated as an aggregate Free Goods limitation, it is certainly possible that more than 50% of a particular artist’s albums will be deemed non-royalty bearing Free Goods. When the United States was more rural and, it was, therefore, harder for many people to get to a record store, record clubs sales were viewed as supplemental to sales of Records through Normal Retail Channels. However, many people view record club sales as being cannibalistic to the sale of Records through Normal Retail Channels. In light of the foregoing, it is typical for an artist to ask for a Holdback on record club sales in the artist’s recording agreement (for example, the Label will not authorize the record club release of an album until after the date six months after the date the album is initially released).
135.Recording Costs: A typical definition would read as follows: “all amounts expended in connection with the recording of Masters hereunder (including travel, rehearsal, equipment rental and cartage expenses, costs incurred in connection with re-mixing and/or ‘sweetening’, advances, fees and other monies payable to individual producers (other than royalties), transportation costs, hotel and living expenses, all studio and engineering charges, in connection with the Label’s facilities and personnel or otherwise, and all costs necessary to prepare Masters for release on all applicable media including those costs necessary to prepare final, equalized tapes therefor), plus any other costs generally recognized as ‘recording costs’ in the recording industry and incurred in connection with the recording, production, editing, re-editing, mixing, re-mixing, equalizing and mastering of the Masters.” Recording costs are almost always recoupable from Artist Royalties (but not Mechanical Royalties) under recording agreements.
136.Recording Fund refers to an Advances that is inclusive of Recording Costs for the particular album or other Record project (e.g., new Masters for a greatest hits). For example, if a recording agreement provides for an Recording Fund of $250,000 of a particular album, then the artist would be paid, as a general Advances, the amount, if any, by which the Recording Costs for the album are less than $250,000.
137.Recoupment means that the person who paid an Advances has the right to apply any royalties that would otherwise be payable to the recipient of the Advance against the Advance until such time as the aggregate royalties equal the Advance. The “unrecouped balance” refers to the amount by which the aggregate of Advances has not been recouped from royalties otherwise payable to the recipient of the Advances.
138.Referral Fee is typically a fee that a professional (such as a lawyer or accountant) pays to a third party for referring the third party a client. For example, a lawyer may refer a client to another lawyer, and the referred lawyer pays the referring lawyer a percentage of the fees paid by the client to the referred lawyer. [Note: in California, it is not a violation of the Rules of Professional Conduct for an attorney to pay another attorney a referral fee if: “(1) The client has consented in writing thereto after a full disclosure has been made in writing that a division of fees will be made and the terms of such division; and (2) The total fee charged by all lawyers is not increased solely by reason of the provision for division of fees and is not unconscionable as that term is defined in rule 4-200.” (See Rule 2-200 at www.calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=14053.)]
139.Release Commitment refers to a provision in a recording agreement that obligates the Label to release an album and specifies the remedies available to the artist if the Label fails to do so. Typically, the release commitment for the United States would be along the following lines: If the Label does not release an album within 120 days after the album is Delivered, the artist will have the right, exercisable within 30 days after the Delivery, to notify the Label that the artist intends to terminate the term of the recording agreement. The Label will then have 60 days after that notice from the artist to release the album. If the Label fails to do so within that 60-day period, then the artist will have the right, exercisable within 30 days after end of the 60-day period, to terminate the term of the recording agreement by sending the Label a second notice. What constitutes a “release” may or not be specified in the recording agreement. (I am aware of major Label claiming that sending purchase orders to Brick and Mortar Stores located in Manhattan constituted the “release” of an album in the United States.) However, at a minimum, “release” needs to be defined as the release of a Physical Record; otherwise, merely making the Record available on the Internet may be claimed by the Label as satisfying its release commitment.
In most recording agreements entered into in the United States, a release commitment for territories outside the United States may not be worth the paper it is written on. The artist’s remedy for the Label’s failure to release an album in a foreign company may be limited to the artist having the right to “present” to the Label an offer from another Label in the applicable territory (i.e., a Label other than the Label’s usual Distributor in the applicable territory) to distribute the artist’s album pursuant to terms to be approved by the Label. In most cases, even if the Label makes a deal with the other Label presented to the Label by the artist, the Label in the United States will take all of the Advances and royalties paid by that foreign Label and credit the artist with 50% of that money. (In other words, while the artist has an unrecouped balance, the artist will not actually see any of the money, but the Advances and royalties will put the artist closer to Recoupment.) In the past, Labels would give up the territory (i.e., exclude the territory from the artist’s recording agreement) if the Label failed to release two consecutive albums in a particular foreign territory; however, this is getting harder for an artist to get in a recording agreement.
140.Re-Recording Restriction: In a recording agreement, the artist is prohibited from re-recording a song recorded by the artist during the term of the recording agreement until a date after the end of the term of the recording agreement. Typically, a re-recording restriction runs until the later of (a) the date five years after the Deliver of the last Master containing the applicable song or (b) the date two years after the end of the term of the recording agreement. Most Labels will agree to terminate the re-recording restriction at some earlier point in time after the end of the term of the recoding agreement if the Masters containing the applicable song has not been released or otherwise commercially exploited within a certain time after the end of the term of the recording agreement (e.g., 18 months). [A re-recording restriction may become an unexpected trap for some artists that are “dropped” by a Label because the Label does not want to release an artist’s album. (See Play or Pay.) In other words, the dropped artist will be prohibited from recording for anyone else the songs contained on the unreleased album until the re-recording restriction has expired. Therefore, if the recording agreement ends with some sort of written release agreement, then the artist should address the termination of the re-recording restriction in the release agreement, at least insofar as songs contained on unreleased recordings are concerned. The Label may resist this, because the Label wants the artist or his new Label to buy the unreleased album from the Label and will use the re-recording restriction as leverage to get the artist or his new Label to do so.] Producers are usually prohibited in their Producer Agreement from recording or producing the same song or songs for anyone else for a period of time after the Delivery or the release of the produced Master(s) (e.g., two or three years thereafter).
141.Reserves are a pool of money that are taken by the Label out of the Artist Royalties or Mechanical Royalties that are otherwise payable to the artist or the Publisher in order for the Label to guard against the Label paying Artist Royalties or Mechanical Royalties on Physical Records that are subsequently Returned. Reserves are often limited in a recording agreement to “reasonable reserves” and/or to a specific percentage of Records shipped within an accounting period. The recording agreement should not allow the Label to include Artist Royalties or Mechanical Royalties attributable to Digital Transmissions in its calculation of reserves as Digital Transmissions are incapable of being returned. Also, most Labels will agree to liquidate reserves within four accounting periods and to limit reserves outside of the United States to the amount of the reserve, if any, taken by the Label’s foreign Distributor. Distributors also take reserves in Distribution Agreements.
142.Retail Merchandising means the sale of merchandise through any channel of distribution other than at a Venue (for example, merchandise sold online, through mail order, and at brick and mortar retail outlets, such as clothing or department stores).
143.Retroactive to Record One: Under a Producer Agreement, royalties are often payable to the Producer “retroactive to record one” after the recoupment of Recording Costs for the Masters produced by the Producer at the “net artist rate” (i.e., a royalty rate equal to the All-In Royalty rates payable to the artist minus the corresponding royalty rates payable to all of the Producers entitled to a royalty with respect to the applicable Master). The retroactive royalty is, however, subject to the recoupment of any Advances paid to the Producer. (Note: if the Advance is high enough in relation to the amount of the Recording Costs, a retroactive payment may be a moot point, because the Advance is more than the accumulated royalties.)
144.Returns: In the United States and in many foreign territories, Physical Records are sold on a consignment basis, i.e., the Distributor’s customers have the right to return any unsold Physical Records to the Distributor for full credit (i.e., the return of the wholesale price paid by the customer for the returned Record). The Distributors do this in order to encourage the retailers to stock more copies of the Physical Records than the retailer would if it did not have the right to return unsold Records, especially for Records by new unknown artists.
145.Reversion refers to the reversion of a Copyright to the artist or songwriter who was the author of the Copyright. Most Publishers will agree in a Publishing Agreement to a reversion of the Copyrights in the songs at some point in time. For example, under a Songwriter Agreement, the Copyrights in the songs may revert upon the later of (a) the date ten years after the end of the term of the agreement or (b) upon the date the songwriter’s account becomes recouped (with the songwriter usually having the right to pay 110% of the unrecouped balance in order to become “recouped”). Very few artists in the United States have the clout to get a Label to grant them reversion rights in Sound Recording Copyrights.
146.RIAA is an abbreviation for the Recording Industry Association of America, which is a trade association that represents the major Distributors and some other Distributors in the United States.
147.Right of First Negotiation: This right obligates one party to an agreement to first negotiate with the other party to the agreement for specified period of time (e.g., 30 days) before making a deal with anyone else. For example, under a Demo Deal, the artist may be required to negotiate a recording agreement with the Label fronting the Recording Costs for the demos before the artist can commence any negotiations with any other Label.
148.Ring-Backs is a recording that one hears when waiting for someone to answer a telephone call to a mobile phone, in lieu of the ringing sound that a caller would ordinarily hear after a telephone call has been placed. Most often the recording is a recorded song.
149.Ringtone is a recording that the recipient of a telephone call on a mobile phone hears in lieu of the ringing sound that a mobile phone ordinarily makes when someone places a call to the recipient. Originally, ringtones were monophonic, which reproduced single note sequences with the sound of a toy keyboard. Monophonic ringtones were replaced with polyphonic ringtones, which had chords but no vocals. Nowadays, the standard is for a ringtone to be a clip from a commercially released Master. These are sometimes called “master-tones” or “true-tones” to distinguish them from monophonic and polyphonic ringtones. Because monophonic and polyphonic ringtones are re-recordings of songs, the ringtone company only had to obtain a Mechanical License from the Publisher(s) of the song and did not have to obtain a license from the Label or another person or entity who owns the Copyright in a Sound Recording. In the United States, it was standard for the Publishers to charge the ringtone company a royalty of 10% of the retail price with a minimum penny royalty rate of 10¢ or 12 ¢ per ringtone sold. Now, the CRB has promulgated a compulsory Mechanical Royalty rate for ringtones. The Statutory Mechanical Royalty rate for ringtones is currently 24¢ per copy. (See www.copyright.gov/carp/m200a.pdf and www.harryfox.com/public/licenseeRateCurrent.jsp.) A ringtone is usually a clip of a recorded song. If it is merely a spoken word recording, it is sometimes called a “voice tone.” Note that many recording agreements are drafted broad enough to prohibit an artist from creating voice tones as well as musical ringtones for anyone other than the Label.
150.Royalty Base Price this term traditionally referred to the SRLP less the Packaging Charge, although some Labels, such as those within the Sony Music Group, have for many years defined the royalty base price as the wholesale price, less a 10% distribution fee and less a Packaging Charge. Nowadays, most Labels use the wholesale price (i.e., the PPD) of a Record as the royalty base price and have done away with the Packaging Charge in computing the royalty base price.
151.ROW is an abbreviation for the “rest of the world.”
152.Sales Formula is a mathematical formula in a recording agreement or Publishing Agreement that states that the Advances for a subsequent album will be calculated as a percentage of Artist Royalties or publishing royalties, as applicable, earned by the artist’s prior album. Almost always, the Advance will not be less than or more than specified minimum and maximum amount, and the formula is usually limited to sales of the prior album within a limited period of time after the initial release of the prior album. For example, a sales formula could be stated as follows: “The advance for the Second Album shall be equal to 60% of the royalties credited to artist’s account with respect to top-line sales [see Top-Line Records] of the First Album (without regard to Reserves) through Normal Retail Channels in the United States as of the date eighteen (18) months after the date of the initial release of the prior album in the United States, provided that the advance shall not be less than $___,___ or more than $___,___.”
153.Samples refer to pre-existing Sound Recordings and songs that (a) are subject to Copyright protection, (b) are incorporated into a new Sound Recording, which almost always has a different name than the original song, and (c) are owned by a person other than the artist or Producer who is creating the new Sound Recording. In order to “clear” a song sample (i.e., obtain a license from the owner of the pre-existing song), most Publishers will insist upon owning a portion of the Copyright in the new song. In order to “clear” a sample from a recording (i.e., obtain a license from the owner of the Sound Recording), most Labels want an upfront fee and perhaps a royalty from the Label releasing the new Sound Recording.
154.Schlock is the sale of records by Distributors at a rock-bottom price. This is also known as “dumping” or “distress sales.” No Artist Royalties are paid under a recording agreement for schlock.
155.Score refers to the music contained on the soundtrack of an audiovisual production (e.g., motion pictures, television programs, and video games). Sometimes, the words “score” and “underscore” are used interchangeably (although I have never heard anyone refer to a “soundtrack album” that only contains score as being an “underscore album”; rather, that type of soundtrack album is referred to as a “score album”). In general, the “score” is the entire collection of compositions and other background music, music cues, and source music contained on the soundtrack. The “underscore” is a subset of a “score” that usually refers to music heard under dialogue. The term “source music” refers to music that is linked to something that is occurring on screen (for example, an actor being depicted on screen as singing a song or playing an instrument, and music depicted on screen as coming out of a radio or some other on screen source). The term “music cue” generally refers to a relatively short piece of music in the soundtrack.
156.Scrap refers to a Label recycling the raw materials that unsold Physical Records are made out of. This was chiefly done when Records were made out of vinyl and has been done for compact discs and Jewel Boxes. As far as I am aware, unsold tape cassettes have not been recycled. The record companies sell scrap to recycling companies at a nominal cost. Except in very rare cases, no Artist Royalties are paid for scrapped Records.
157.Service Mark means the name identified with services. (See Trademark.)
158.Sheet Music refers to printed music that includes notations and, if applicable, lyrics.
159.Sideman refers to a person who is hired to perform on a recording or at a concert who is not a regular member of the featured artist. For example, the members of “The Heartbreakers” are not considered sidemen in the band “Tom Petty And The Heartbreakers.” However, if Tom Petty And The Heartbreakers bring in a non-member of the band to play on the band’s records or at concerts (as a guest artist or otherwise), that person is considered a “sideman.” Background vocalists, who are not members of the band, are considered “sidemen” as well as sideman musicians.
160.Sideman Exclusion: An artist who is signed to a recording agreement (i.e., is subject to an exclusive recording agreement) is prohibited under the terms of the recording agreement from recording for anyone other than his Label. A “sideman exclusion” is a clause in the recording agreement that allows the artist to perform as a sideman on records featuring another artist under specified conditions.
161.Single means a track that is featured by the Label for radio promotion. Historically, “singles” started out as 45 RPM vinyl Records and the equivalent thereof in other configurations. Singles were also released on 12” inch vinyl records and the equivalent thereof in other configurations. Currently in the United States, “singles” are rarely sold as Physical Records, but single tracks are almost universally offered as Digital Transmissions. In the provisions of a recording agreement related to the maximum Mechanical Royalties that a Label will pay (i.e., the Controlled Composition clauses), a “single” is often defined as a Record containing no more than two or three Master Recordings. Singles, other than Digital Transmissions, almost always have a lower Artist Royalty rate than an album.
162.Societies refer to Performing Rights Societies in the United States and Canada, and to performing rights/mechanical rights societies in the rest of the world.
163.Songwriter Agreement is a Publishing Agreement where a songwriter agrees that the Publisher will own the Copyrights in the song or songs subject to agreement and, corresponding, the Publisher is granted exclusive Administration Rights with respect to the song or songs, in exchange for which the Publisher agrees to pay the songwriter so-called songwriter royalties and, perhaps, an Advances or Advances recoupable out of the songwriter royalties. Except for Sheet Music, songwriters are generally entitled to 50% of the Publisher’s receipts as songwriter’s royalties. However, Performing Rights Societies pay roughly 50% of the royalties from their Blanket Licenses directly to their songwriters and pay roughly 50% of the royalties from their Blanket Licenses directly to their Publishers. Historically, Sheet Music royalties were computed as a percentage of the wholesale price of the Sheet Music.
164.Songwriter’s Share: (a/k/a writer’s share) see songwriter’s royalties under a Songwriter Agreement and see Performing Rights Society.
165.SoundExchange: www.soundexchange.com states: “SoundExchange is a non-profit performance rights organization that collects statutory royalties from satellite radio (such as SIRIUS XM), internet radio, cable TV music channels and similar platforms for streaming Sound Recordings. The Copyright Royalty Board, which is appointed by The U.S. Library of Congress, has entrusted SoundExchange as the sole entity in the United States to collect and distribute these digital performance royalties on behalf of featured recording artists, master rights owners (like record labels), and independent artists who Record and own their masters.” Prior to 1995, the owner of a Copyright in a Sound Recording did not have any performance rights under U.S. Copyright Law. In 1995, Sound Recordings were given limited performance rights. (See clause (g) of §106 of the Copyright Act, which is set forth above in the definition of Copyright. Also, see DMCA.)
166.Sound Recording: §101 of the Copyright Act defines this term as follows: “‘Sound recordings’ are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied.” [Emphasis added.] Note the distinction between a “Sound Recording” as a work whereas a “phonorecord” is the material object in which the work is embodied. See Phonorecord.
167.SoundScan: Most, but not all, Brick and Mortar Stores and online retailers in the United States report actual Record sales to consumers to a company called SoundScan. Soundscran is used by Billboard to create its album charts for album sales in the United States.
168.Special Market Department refers to the department within a record company that handles the licensing of Master Recordings to third parties and otherwise exploits the Catalog of the record company that is not a new Record release.
169.Special Packaging Charges refer to the additional costs incurred by the Label for a Physical Record package that is more elaborate than its standard record package. A typical definition of this term in a recording agreement would be the following: “all costs paid or incurred by the Label or its Distributor in creating and producing album covers, sleeves, and other packaging elements in excess of the applicable budget designated by the Label in consultation with the artist, including (a) the costs for the design of artwork (including expenses for reproduction rights and separations), and (b) the manufacturing cost for the album packages for distribution anywhere in the Territory equal to those necessary to manufacture the following packaging elements in the applicable territory: (i) for vinyl LP’s, a four-color jacket and a one-color inner sleeve, (ii) for cassettes, a six-panel inlay card with a four-color front panel and black and white other panels, and a standard color Norelco box, (iii) for compact discs, an eight-page (i.e., eight faces) booklet with four-color front and back pages and black and white other pages, and a standard color jewel box, and (iv) for any other configurations, the Label’s or its Distributor’s then current customary packaging. ‘Color’ in the preceding sentence means those colors for which the Label or its Distributor is charged a standard fee. The packaging elements referred to in clauses (i), (ii), and (iii) above are deemed to be on standard weight paper or cardboard.” Under the terms of many recording agreements, the Label reserves the right to charge the artist for special packaging costs. (Note: special packaging costs have nothing to do with Packaging Charges.)
170.Spotting refers to the process where the composer of a Score and the director of the motion picture view a final cut of the motion picture in order to determine the exact points in the motion picture where music is needed.
171.Statutory Rate: (a/k/a compulsory rate). In the United States, this term refers to the compulsory Mechanical Royalty rates promulgated by the Copyright Royalty Board under §115 of the U.S. Copyright Act. For Phonorecords and Digital Phonorecord Deliveries, the Mechanical Rate is expressed as the greater of (a) a flat penny rate (e.g., 9.1¢) or (b) per minute penny rate times the number of minutes of the recording (e.g., 1.75¢ per minute or fraction thereof). The “minimum” statutory rate refers to the flat penny rate. (See www.harryfox.com/public/StatutoryReports.jsp and www.loc.gov/cgi-bin/formprocessor/copyright/cfr.pl?urlmiddle=126.96.36.199.188.8.131.52&part=255§ion=3&prev=2&next=4.)
172.Subpublisher is a Publisher in a foreign country who is granted Administration Rights for one or more territories under a Subpublishing Agreement.
173.Subpublishing Agreement refers to a Publishing Agreement pursuant to which Administration Rights are granted to a foreign Subpublisher in exchange for the payment of royalties and, perhaps, an Advances by the Subpublisher.
174.Subscription Service refers to an online service where in exchange for a periodic recurring fee (e.g., a monthly fee), the purchaser is entitled to certain content (e.g., music), perhaps as Downloads; however, if the purchaser stops making the periodic payments, the content may become inaccessible.
175.Suggested Retail Price (a/k/a SRLP) means the retail price that a Distributor “suggests” that its customers should use in re-selling the Distributor’s Records to the ultimate consumers. For example, the wholesale price for a single-disc sold as a Top-Line Record may be $12.02 (without regard to discounts (see Discounted Records), and the corresponding suggested retail price may be $18.98. This does not mean that the retail outlets are required to sell the album or any other Record at the suggested retail price. Record companies have historically used the suggested retail price as the starting point for calculating the Royalty Base Price (from which they would deduct a Packaging Charge). Nowadays, most record companies now use the wholesale price (i.e., the PPD) in calculating Artist Royalties, in lieu of the suggested retail price.
176.Sunset Clause refers to a period of time over which, or after which, a person’s commission or other percentage of income, royalty or other payment is diminished or eliminated. For example, in a personal management agreement, a “sunset clause” generally means that the commission to the Personal Manager after the term of the management agreement may diminish or end, for example, as follows: a full commission for two years after the term, a half commission for the next two years, and a zero commission after four years.
177.Synchronization License refers to license agreement between a Publisher and the producer of an audiovisual work (e.g., a motion picture, television program, television commercial, and videogame) pursuant to which the producer is granted the right (usually the “non-exclusive right”) to reproduce a song in the soundtrack of the particular audiovisual work, for distribution in any and all media (e.g., theaters, home video devices and video on demand) and to perform the audiovisual work, inclusive of the song, in theaters located within the United States. The license usually also gives the producer the right to use the song in trailers and advertisements of the audiovisual work (see Out-of-Context).
178.Talent Agent (a/k/a booking agent) refers to a person who has the authority to secure employment and other engagements for an artist. In California, a person cannot legally act as a talent agent without a license from the California Labor Commissioner. In the music industry, the role of a talent agent is usually limited to securing concert and other “live” performances engagements for the artist. Talent agents are typically not given the authority to secure other types of deals in the music industry (such as recording agreements, Publishing Agreements or Merchandising Agreements).
179.Technically Satisfactory: This term is typically found in a recording agreement. It means that the recordings will not be deemed Delivered to the Label, unless they are technically capable of being reproduced on Phonorecords. See Commercially Satisfactory.
180.Technical Rider: See Performance Rider.
181.Top-Line Records refer to highest price category charged by a Distributor for a majority of its Record releases. For example, the current top-line price for a singled-disc compact disc album is $18.98.
182.Tour Manager is a member of the Crew whose job it is to manage a tour. The tour manager usually has highest decision-making authority over all of the other Crew members, subject to the direction and control of the artist and the artist’s Personal Manager.
183.Tour Merchandising refers to the sale of artist merchandise at a Venue.
184.Tour Support refers to a record company (or possibly another company) covering the amount by the expenses of a tour exceeds the income from a tour. Tour support is almost always 100% recoupable from Artist Royalties.
185.Trademark refers to a name identified with the sale of goods. (See Service Mark.)
186.Union Scale refers to the minimum payments required under a union or guild agreement.
187.Venue refers to concert hall or other venue where “live” performances occur, for example, stadiums, arenas, “sheds,” theaters, and clubs. A “shed” refers to an outdoor venue that has a permanent stage and usually has lawn seats at the top of the seating area.
188.Venue Fees (a/k/a hall fees) are the fees that the owner or manager of the Venue charges the artist or the artist’s merchandiser in order to sell artist merchandise at the venue. Most venues will state that their standard fee is 35% of the gross wholesale receipts from the sale of the artist merchandise, but this fee is often negotiable.
189.Work Made For Hire: §101 of the Copyright Act defines this term as follows:
A “work made for hire” is—
(1)a work prepared by an employee within the scope of his or her employment; or
(2)a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a ‘supplementary work’ is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an ‘instructional text’ is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities.