Legal Aspects of the Music Industry: TERMS

©

Composition Copyright:

Songwriter, Producer, Lyricist,
Publishing Company

* Mechanical
* Synchronization
* Derivative Works
* Public Performance of
Composition

℗

Sound Recording - Copyright
Recording Artist, Producer,
Record Company

* Master Use
* Derivative Works
* Public Performance of
Sound Recording through DAT (Digital Audio Transmission)

Administration

Management of the copyright. An administrator has the right to:
- enter into contracts regarding the songs,
- make decisions about how they are used,
- collect royalties
- sue infringers
- Handle filings (copyright, PRO, MLC, etc.)

ARRANGEMENT

SAME SONG NEW PERFORMER
When creating a cover arrangement, changes may be made to the original to fit genre, instrumentation, or current stylistic trends.

The arrangement “shall not change the basic melody or
fundamental character of the work, and
shall not be subject to protection as a
derivative work ... except with the express
consent of the copyright owner.”
17 USCS § 115(a)(2)

## Footnote

It’s handled like a cover which requires a mechanical license.

Unless it makes the changes listed in 7 USCS § 115(a)(2) – then It’s a derivative work needing a derivative works license.

Business Certificate / DBA form

DBA (“doing business as”)

A DBA Statement is required by local governments if you’re doing business under an assumed name.

- Filed with the clerk of the county (or may be village, town, or city clerk) , wherever your band considers its principal place of business
- You must give the names and addresses of the people doing business under a name different than their legal names.

Business Entity: LLC (Limited liability company)

To form an LLC your band must file papers with the state government. Each member is shielded from personal liability for band debts. The business will have to file an informational tax form regarding money made and deductions taken, but income is reported and taxes are paid on each individual’s tax return.

Business Entity: Corporation

To form a Corporation your band must file papers with the state government. Each shareholder in the corporation is shielded from personal liability for band debts. The business will have to file a corporate tax return and pay corporate tax rates

Business Entity: Partnership

In a Partnership there are two or more owners
1. Your band splits the profits and losses among the members.
2. Each member is personally liable for all partnership debts.
3. The partnership is also a pass-through tax entity (meaning income passes through the business to the owners before it is taxed.)

Business Entity: Sole Proprietorship

In a Sole Proprietorship there is one owner


1. You own and operate the band yourself and are personally liable for business debts.
2. You pay the other band members as employees or independent contractors.
3. You report business income on your individual tax return.
An arrangement referred to as a “pass-through” entity, because the income passes through the business to the owners before it is taxed.)

Collaboration agreement

used when two or more people write together. The agreement can be used for one song or many songs, and it sets forth the percentages and rights of the songwriters.

Collect: ASCAP/BMI/SESAC

U.S. PERFORMANCE RIGHTS
ORGANIZATIONS (PRO) - Composition

* ASCAP and BMI are open to any
songwriter with published
songs.
* SESAC is by invitation only
* As a writer, you may only join one
PRO worldwide.

Collect: Harry Fox Agency

Issues tangible
mechanical licenses

Collect: Mechanical Licensing Collective (MLC)

Issues mechanical licenses for digital copies
primarily through interactive steaming

Collect: SoundExchange

SoundExchange collects and distributes royalties when a recording is publicly performed on a non-interactive digital source.

COVER

SAME SONG
NEW PERFORMER

The typical cover will:
* Have the same instrumentation as the original.
* Try to recreate a prior recorded performance.

Dispute resolution: Arbitration

A process in which an arbitrator is paid to decide how a case should be resolved. The decision of the arbitrator is “binding” and is as enforceable as a court judgment. The decision usually cannot be appealed (also because attorneys are often not required).

Dispute resolution: Mediation

A process in which a neutral third party called a mediator (usually an attorney or expert in the music business) is paid to help the parties reach a solution. The mediator is trained in getting parties to discuss issues that are in the dispute and reach mutually satisfactory agreements.

Exclusive Rights in Copyrighted works (6)

Reproduction
Distribution
* Public Performance of the composition
* Derivative Works
* Public Display
* Public Performance of the sound
recording in digital audio transmissions

17 U.S.C. §106 Exclusive Rights in Copyrighted Works

First Use right

the right to grant a license for the first release of a song to the public.

Under the exclusive right to distribution

Joint work

Everybody that contributed to the creative process is an owner of 100% of the rights in the finished work. They are . . .
- entitled to an equal share of revenue
- and can make administrative decisions without consulting others as long as they don’t block the other owners (e.g. they can’t sell the rights, can’t issue exclusive licenses without all owners agreeing).

License: Blanket

An agreement, typically made between a production music library (PML) and a company that wants to use music for film, TV, or video.

- the licensee obtains unlimited use of all PML music on a compact disc or disc library for a specified period.
- For continued use, the license must be renewed. Blanket licenses may range from several hundred dollars to four or five thousand dollars per year.
- More common blanket licenses would include ones from the MLC and PROs like ASCAP and BMI

License: Derivative Works

Grants the right to use sound recording and/or composition in part or in a way that alters the basic melody or character of the original work.

The rights owner may decide:
- whether to allow the use or not
- The fee and terms.
- Their ownership share of new work
- Percentage of royalties received from new work

License: Master Use

Grants the right to use all or part of an existing sound recording in a new work or new way.

The rights owner may decide:
- whether to allow the use or not
- the fee and terms - (which can vary depending on the use.)
- Flat fee for the use
- Percentage of royalties they receive from new work

License: Mechanical (digital and tangible)

Needed for the **reproduction** and distribution of compositions in all forms.

The rights owner can make exceptions such as:
* Allowing gratis use.
* Accepting a reduced rate.
* Allowing free copies for promotional use.

License: Public Performance of composition

Used whether live or recorded (ex: played through a speaker).

License: Public Performance of sound recording through Digital Audio Transmissions

An exclusive right very narrowly defined for the sound recording. It is limited to:
- Satellite radio
- digital streaming.

License: Synchronization

Grants the right to use a composition in
connection with an audio-visual work.

❖ Rights owner may decline - when issued, usually
broad rights granted.
❖ Usually a flat fee.
❖ Negotiated terms.

Per diem

(means “by the day”) payment to the band and crew for daily living expenses such as food and, in some cases, lodging

Performance Rights Organization

PERFORMANCE RIGHTS
ORGANIZATIONS (PRO)

*Issue Licenses
*Identify unlicensed uses
*Monitor performances
*Collect fees
*Distribute royalties

Public Domain

Works not protected by copyright.
Free for anyone to use in any way
without making payments
or asking permission.

Public Performance

Whenever a song is is heard (performance) outside of your normal circle of family or friends (public). Whether at a live show, on a television broadcast, over the radio, on YouTube, or on a supermarket loudspeaker.

Riders: hospitality

Detailed requirements for food, drinks, and other backstage needs. “Hospitality” refers to the food and drinks provided backstage.

(Rider - "a provison attached to an agreement")

Riders: technical

Detailed requirements for stage set up, lines in/out, mics, monitors, etc.

Songwriting Split Sheet

A signed document that outlines the shares of an individual musical work that each co-writer will own, control (admin), and receive revenue from.

Streams: Interactive stream / Licenses Required

“On-demand” or “choose-the-song” services that let the listener pick what is played. “Streaming” music is a system of playing digital tracks without having to download them.

Licenses needed for
Interactive Streaming

- Public performance of
the composition

- Public performance of
the sound recording through DAT

- Master use license.

- Mechanical license.

Streams: Non-interactive stream / Licenses Needed

The listener can’t choose a particular song, album, or the playing order. “Streaming” music is a system of playing digital tracks without having to download them.

Licenses needed for Non-Interactive Stream

- Public performance of
the composition.

- A compulsory license
for the digital public
performance of the
sound recording

Taxation: Income tax?

Paid on all income (minus deductions) and must be declared.

Taxation: pass-through?

income passes through the
business to the owners before it is taxed.

Taxation: Payroll tax?

Paid based upon employees income.

Taxation: Permissible Deductions?

The IRS (internal revenue service) allows musicians to deduct ordinary and necessary business expenses.

Taxation: Self employment tax

Paid on net income over $400 for sole proprietorships and LLCs.

Work Made for Hire

Creator never actually obtains copyrights.