(See also our Primer on Copyright Legislation and our Music-Licensing Case Annex)
– Copyright terms
– Publishing terms
– Digital Service terms
Copyright
Assignment of Copyright: Transfer ownership of a copyright from one party to another. Writing is required to take effect.
Copyright: A protection given to an original work, which is “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.” This protection may be allotted to literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural and audiovisual works.
Copyright literally means “the right to copy.” This exclusive license may be provided by the original owner to another party to create copies of the work.
Protection does not extend to an idea, procedure, process, system title, principle or discovery. Furthermore, names, titles, short phrases, slogans, familiar symbols, mere variations of typographic ornamentation, lettering, coloring and listings of contents or ingredients are not subject to copyright.
Copyright Royalty Board (“CRB,” “Rate Court”): An Article I court – that is, one created under Article I of the U.S. Constitution to administer laws on behalf of Congress. This court consists of three copyright royalty judges. The board is appointed by the head of the Library of Congress, which determines the statutory royalty rates for compulsory licenses.
The board periodically sets the statutory mechanical royalty rate, which is currently $0.091 per track or $0.0175 for each minute of playing time, whichever is greater.
Derivative Work: A work based upon one or more preexisting works. The individual seeking to create a derivative work must be granted rights by the original owner of the copyright.
Examples: “translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation or any other work within which a work may be recast, transformed or adapted.”
Famous example is the Gipsy Kings’ cover of the Eagles’ “Hotel California,” a Spanish-language translation of the original song
Fair Use (17 USC § 107): Decided by a judge following the now-codified four-factor balancing test. It is a limitation and exception to the exclusive rights granted by copyright law to an author of a creative work that permits limited use of the copyrighted material without acquiring permission from the copyright holder, based on:
The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
The nature of the copyrighted work;
The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
The effect of the use upon the potential market for or value of the copyrighted work.
Examples of fair use include parody, search engines, library archiving, commentary, criticism, news reporting, research, reverse engineering, data-mining, teaching and academic scholarship.
Parody: The use of some elements of a prior author’s composition to create a new, distinct piece of work. Often considered a derivative work, the level of “transformativeness” from the original work under the Fair Use test is used in consideration.
Parody was famously litigated in the Supreme Court case, Campbell v. Acuff-Rose Music, Inc.
Partial Withdrawal: In works with more than one author – commonly known as “split works” – one copyright owner may withdraw their copyrighted portion of a song. If this happens, the entire work will not be able to be used.
Sampling: Taking material from an existing sound recording to create a new, unique work. Fair use is often employed as a defense against copyright infringement, but most artists employ a license to use the composition. (See Case Law Annex on “sampling.”)
Split Works (“Co-Authored,” “Co-Pub,” “Fractional Licensing”): A work with two or more authors. Multiple artists may retain a copyright in either the composition or sound recording. Each artist may have their own set of guidelines for how the work should be distributed, including the granting of nonexclusive licenses. Furthermore, each part of the work is subject to withdrawal by one of the copyright owners: each rightsholder has the ability to unilaterally veto, but not unilaterally authorize. Each author must be consulted when seeking to license.
Currently under review by the Department of Justice due to possible anticompetitive practices on the part of ASCAP and BMI.
Terrestrial Radio: Broadcasts across the AM and FM radio spectrum. Terrestrial radio transmitters of copyrighted music are required only to pay a singular royalty rate for songwriters and composers. These royalties are distributed by a PRO, such as ASCAP, BMI, SESAC or SOCAN.
Work for Hire: (17 USC §101): Work prepared by an employee within the scope of his or her employment. This work is specially ordered or commissioned and the employer is considered the author of the work, unless the parties agree to a division of rights.
Writer’s Share: A share of the copyright owned by the writer. Cannot be bought, sold or sub-licensed.
Publishing
American Society of Composers, Authors and Publishers (“ASCAP”): Founded in 1914, this performance rights organization (PRO) was created and is controlled by composers, writers and music publishers. Artists are required to be a member of an ASCAP publishing company to collect royalties from sound recordings.
Holds a reciprocal license with Performance Rights Society (“PRS”) in the UK to collect foreign performance royalties. If a song is played in the UK by a U.S. artist and the artist is a member, they will receive their royalties.
Often attributed as one of the leaders in jazz proliferation. Holds an annual ceremony for the Jazz Wall of Fame in its’ New York City office.
Black Box Royalties: Unclaimed royalties in which a publisher or writer is named, but cannot be traced by a PRO. Sometimes referred to as “lost writers.”
A common situation is when an artist does not belong to a publishing organization and their music is played in a foreign country. Because their interests are not represented by an organization, they are unable to receive a royalty.
Blanket License: A license which allows a user to play or perform all compositions within a performance rights organization’s catalog without limit.
The license is generally for one year and held by service providers, such as restaurants and retail outlets.
Broadcast Music Inc. (“BMI”): Founded in 1939 at the inception of broadcast terrestrial radio by radio executives in the National Association of Broadcasters (NAB) as a low cost alternative to ASCAP. The only PRO that does not require a publishing company to collect a publisher’s shares of royalties from sound recordings. All that is required is a one-time fee paid to BMI.
The first PRO to represent historically black genres of music: blues, jazz, rhythm and blues and gospel. In addition, BMI actively sought to purchase catalogs from independent publishers and artists of country, folk, Latin music and early rock and roll.
Represents most members of the American Academy of Arts and Letters.
Compulsory Mechanical License: A license granted under Section 115 of the Copyright Act, it allows any individual to rerecord a song that already has been commercially released. Permission is not required from the musician’s publisher so long as it was paid the statutory rate.
Applies on a song-by song basis.
Copies of compact discs or records – as well as copies made from digital transmissions, downloads and data streams – fall under this category.
Some copies are more expensive than others. For example, a ring tone may cost up to $0.24 per copy.
Creative Commons License: This license allows authors the ability to give up certain rights in their copyright – “some rights reserved” – while retaining others.
This license makes a work available for certain artist-dictated uses, such as noncommercial sharing and remixing.
Many artists who are members of PROs also use a Creative Commons license.
Examples of popular artists using Creative Commons licenses include Nine Inch Nails, the Beastie Boys, Radiohead and Snoop Dogg.
Direct Deal (“Direct Licensing”): When a service contracts directly with the copyright owner of the musical composition. This type of deal offers the incentive of a higher profit to publishing services, due to the ability of the service to bypass having to license from performing rights societies.
A popular example of direct licensing is Apple Music, which boasts a higher royalty rate to artists (around 10 percent) contracted through direct deals with the music label. However profitable, this mode is time-consuming, confusing and, at times, expensive for the services.
Foreign Mechanicals: Royalties paid for the sale of copyrighted material outside of the United States. Unlike mechanical royalties in the United States, foreign mechanicals do not have a fixed rate. They are paid as a percentage of the wholesale price. These mechanicals are collected through local PROs. If left unclaimed for six to 18 months (depending on the territory) the societies will consider the writer lost and distribute the royalties to local publishers as “black box” royalty income.
Mechanicals are collected by MCPS, a subsidiary of PRS, for music in the United Kingdom.
Harry Fox Agency: Established in 1972 by the National Music Publishers’ Association (NMPA), it is the primary and leading provider of rights management, licensing and royalty services in the United States.
Collects for compositions (songs) for use on compact discs, records, tapes, ring tones, permanent digital downloads, interactive streams and other digital formats that support various business models, including locker-based music services and bundled music offerings.
Manufacturing and Distribution (“M&D”): A publisher (“distributor”) will pay for an album or single upfront, then retain income from distribution until the investment is paid off and a profit made, depending on the stipulated terms in the contract.
Independent digital distributors include CD Baby, Tunecore, DistroKid and Loudr.
Many major labels retain their own distribution rights: UMG, Sony, Warner Music Group, EMI
Mechanical Royalties: Payments made to songwriters for the reproduction of copyrighted works in digital and physical formats. Certain interactive digital services, but not non-interactive Internet radio like Pandora, must pay mechanical royalties. For sales outside of the United States, mechanical royalties require the services of a publishing administrator to collect.
The Harry Fox Agency is the primarily collector of mechanical royalties in the United States.
Most Favored Nations Clause (“MFN”): A clause providing for the best negotiated agreement for royalties between parties. Under an MFB, each publisher receives the same royalty rate equal to the highest rate negotiated.
MFN clauses are popular in the construction of “greatest hits” compilations, particularly where an artist may have had a series of different publishers or labels throughout their career.
Performance Rights Organization (“PRO”): Serves the intermediary function between copyright holders and parties who wish to use copyrighted work publicly of collecting performance royalties.
Songwriters, composers and lyricists become members of a PRO to receive royalties for their work to be played on radio: broadcast, satellite and digital streaming.
Performance royalties may also be collected for the work to be played on television shows, commercials or performed in live venues, such as a sports arena.
PROs act as gatekeepers, making sure an artist who has joined their service receives adequate compensation for the written lyrics or the musical composition.
North American PROs: ASCAP, BMI, SESAC, SOCAN, SoundExchange
United Kingdom: PPL, PRS for Music
Performance Rights Society (“PRS”): The equivalent of a PRO in the United Kingdom. Unless the contract between the songwriter and publisher stipulates otherwise, U.K. societies pay equal shares of the performance royalties to the songwriter and publisher.
Phonographic Performance Ltd. (PPL):Collects and distributes royalties on behalf of publishers and performers for use of recorded music.
PRS for Music: Collects and distributes royalties for musical compositions on behalf of authors, songwriters, composers and publishers.
Holds a reciprocal license with ASCAP.
Performance Royalties: Public performance payments made to a songwriter or publisher for broadcast of a musical work. Collected by performance rights organizations such as ASCAP, BMI and SESAC in North America. MCPS collects in the United Kingdom.
Public Performance: The performance of a nondramatic work in a public space. While the number of individuals viewing or listening to the performance is a matter of dispute, the rule of thumb is that any individuals outside of immediate family or casual acquaintances constitute “the public.” If a performance in public is for a substantial number of individuals, a license is required from the owner of the copyright.
Publisher’s Share: The percentage of the music composition copyright owned by a publisher. This part may be bought, sold or sub-licensed.
Publishing Administration: Administers the rights of songwriters to make sure profits are received. This administrator only collects royalties and licensing fees on behalf of the copyright owner. In return, they receive a commission. This insures the artist’s work is distributed among the industry, to whom the artist may not have access if they had to venture to do this on their own.
Currently, the commission rate is about 10 percent.
Record Label: A brand and often a publishing administration (see manufacturing and distribution), which manages the production, distribution, marketing and promotion for sound recordings and music videos. In addition, labels often scout talent by conducting broad searches and assist in the management and development of new artists, also known as “artists and repertoire” or “A&R.” Labels often act as intermediaries between an artist and their manager, maintaining contracts and rendering promotion of the artist.
Labels acting as publishing administrators receive a share to promote the musical composition (see publishing administration).
Labels often retain copyrights of musical composition.
Registration: The act of filing music with a PRO to receive a percentage of performance royalties. The local PRO will then apply for registration with a foreign publisher to receive mechanical and performance royalties. Registration with a PRO also provides subscription to a PRO database or “catalog” for work to be distributed to interactive and non-interactive services for a fee.
A PRO may also withhold the catalog from a service as an act of bargaining power. This was most recently the case in the Rate Court decisions involving Pandora Radio.
Reversion Clause: A negotiated agreement between a publisher and songwriter. Upon a mutually negotiated date, rights retained by the publisher will return to the songwriter. This is typically decided on a per-song basis and dependent on how much work the publisher had to conduct to make the song popular. Furthermore, rights may be fully obtained by the publisher if they successfully placed the song into a major production or a cover has been obtained.
Royalties: Fees paid to rights owners for use of their work. Typically, held by record labels, publishers, writers and performers, these fees provide earnings from licensed songs for each sale or broadcast.
Royalty-Free Music (“Back-End Deal”): Income calculated from the performance of music in an audiovisual work, which does not require synchronization of a license. Income is generated from the performance, as opposed to the cue sheets.
Section 110(5) exemption (“homestyle exemption,” “business exemption”): An allowance under the Copyright Act for a business establishment to offer broadcast radio or TV broadcasts from a single apparatus, an “ordinary receiver,” without having to receive a license from the copyright owner. This section divides businesses into two major categories:
Food or drinking establishment: Must not be larger than 3,750 square feet in gross, not including a parking lot (if the parking lot is not used for commercial purposes) and the audio work must come from one source and projected on no more than six loudspeakers, of which not more than four loudspeakers are located in any one room or adjoining outdoor space.
For audiovisual works: There may not be more than four devices and no device may be larger than 55 inches. There can be a total of not more than six loudspeakers, of which not more than four loudspeakers are located in any one room or adjoining outdoor space.
Non-food or drinking establishments: Must not be larger than 2,000 square feet in gross, not including a parking lot (if the parking lot is not used for a commercial purpose) and the audio work must come from one source and projected on no more than six loudspeakers, of which not more than four loudspeakers are located in any one room or adjoining outdoor space.
For audiovisual works: There may not be more than four devices and no device may be larger than 55 inches. In total, there may not be more than six loudspeakers, of which not more than four loudspeakers are located in any one room or adjoining outdoor space.
Free Internet-radio services like Pandora and 8Tracks have not been litigated as to whether they fall under the homestyle exception.
Satellite radio, such as XM, does fall under the exception.
Society of Composers, Authors, and Music Publishers of Canada (“SOCAN”): Canadian PRO that is the result of the merger of Composers, Authors, and Publishers Association of Canada (CAPAC) and the Performing Rights Organization of Canada (PROCAN) in 1990. Functions the same way as PROs in the United States.
Society of European Stage Authors and Composers (“SESAC”): A PRO which operates by invitation only and no longer is exclusively European. Considered the most technology-savvy of the PROs, with a focus on digital media rights, due to its early work in electrical transcription recordings in the 1950s. It is the only PRO which collects and distribute sound recording royalties on a monthly basis.
SESAC is a privately owned company and retains some income as profit. In addition, it does not publicly disclose the amount of performance royalty income paid to artists.
SESAC is often attributed with allowing broadcasters to satisfy the Federal Communications Commission (FCC) requirements for gospel recordings in the 1930s.
SoundExchange: A PRO which collects sound recording royalties for copyright owners (“SRCO”) and artists from non-interactive digital transmissions, like satellite and Internet radio, as well as cable television, webcasts and music channels.
In 1995, the Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 granted a performance right for sound recordings. Before then, sound recording copyright owners and performing artists did not receive any royalties for the live performance of their work.
Originally created in 2000 as a division of Recording Industry Association of America (RIAA). I n 2003, it became a wholly independent nonprofit organization.
Also collects royalties for comedy and spoken-word recordings.
Sub-Publishing: Contract between a primary publisher and a secondary co-publisher to handle exploration of a song by licensing and collecting royalties; sub-publishing agreements typically collect royalties from specialty, private label or foreign markets.
Example includes the agreement between PRS for Music and ASCAP for collection of foreign broadcast royalties. This scheme avoids black box royalties (see black box royalties).
Digital Services
A La Carte Service: The most popular form of digital delivery. A user cherry-picks singular songs from a musician’s library to either stream or download. Downloads are charged by song.
A popular example is Apple iTunes.
Area of Dominant Influence (“ADI”): Geographic area or market of a radio or television service.
Broadcast: Transmission or retransmission of pre-recorded works to multiple listeners through forms of “semi live” media.
Digital Download: A music file, typically encrypted and obtained through digital music stores or peer-to-peer (P2P) sharing networks. Copyright is subject to the media owner (DRM).
Forms of digital music include: MP2, MP3, MP4, ACC and FLAC.
Examples include downloads from Amazon.com or iTunes.
Digital Phonorecord Delivery (“DPD”): Digital download of a sound recording to a third-party application (see digital download).
Digital Rights Management (“DRM”): The practice of restricting and controlling the use of digital content. An example would be a DPD that can only be used on a limited set number of mobile devices.
Interactive (“On Demand”) Streaming: A digital service that offers transmission via a steady, continuous flow of data that allows the user to play a specific song without purchase.
Examples include Spotify, SoundCloud, Tidal and Apple Music.
Non-Interactive Streaming: A digital service that offers transmission via a steady, continuous flow of data in which the user does not designate specific songs they wish to hear; such choices are made by the broadcaster.
Examples include AM/FM and satellite radio.
Retransmission: A broadcast of a performance that is received and resent by a device or process. A transmission can be further transmitted multiple times to multiple places and devices.
Statutory Damages: A tort suffered by a copyright owner in cases of infringement whose magnitude is prescribed by law (“statute”). Such damages can range from $750 to $150,000 per infringement. However, statutory damages are capped at $30,000 per infringement in cases of non-willful infringement. Damages are calculated by per-infringement, meaning by song.
Statutory License: A license provided under the Copyright Act that allows the CRB to set rates and term for royalties collected and distributed for rights holders by SoundExchange.
Section 112: Provides a license to reproduce phonorecords (occasionally referred to as “ephemeral recordings”), which is necessary for a digital format.
Section 114: Provides a license for the public performance of sound recordings that result from a Section 112 transmission.
Interactive and on-demand services, such as iTunes and Spotify, are required to negotiate licenses directly with the sound-recording owners.
Streaming: An audio transmission over a data network via a steady, continuous flow of data. Data are not stored in a user’s client.
Examples of a client include a computer, cellular phone or an MP3 player with the technology to download an application to stream a piece of music.
Synchronization (“Sync”) Rights: A license often provided by a publishing company that allows for the synchronization of music with visual media (ex. film, television, advertisement, video game and website music).
Tethered Download: Music normally received from a subscription service which is encrypted and stored on a user’s hard drive, but prevents a user from acquiring it into their own library. Once the subscription is terminated, the file is deleted.
An example is Spotify’s “offline” mode.
Transmission: Wireless broadcast of electromagnetic waves sent to a device from a tower.
Willing Buyer/Willing Seller Standard: Requires the CRB to base its judgement on economic, competitive and programming information as presented by the parties in a proceeding.
In the 2006 to 2010 rounds of rate setting, the rate was so high that it exceeded the profits of some webcasters. Congress then enacted the 2008 and 2009 Webcaster Settlement Acts, which directed webcasters to license directly with SoundExchange for that period and with any service that joining from 2011 to 2015. However, this cannot be used as a benchmark for future rates.