Anyone who has had their music used in television or motion pictures or has had a hit record that received substantial airplay is well aware of the income that is generated through ASCAP, BMI and SESAC for public performances. But whether the music you write is (a) a "work-for-hire" and owned by the production company, (b) controlled by a publishing company under a songwriter contract, or (c) self-published where you own the copyright, there are other uses of this music that are capable of earning substantial amounts of income for the composer.

The ability to license music for use by third parties is one of the exclusive rights given to copyright owners under the Copyright Act of 1976. If you own the publishing to your music, this gives you full control over the use of it and the fees charged for its use. If the music is owned by a publishing company or the publishing affiliate of a production company, they have the right to license this music to others under any terms negotiated and agreed upon by both parties. This right is subject, however, to an obligation to share the revenue earned by these licenses with the composer, who usually receives 50% of the net income.

It is important to remember that what is being discussed here is the licensing of music to third parties. Under most production company composer agreements, the production company has the right to include the music created not only in the production covered by the agreement, but in any other film or television program produced by that company without any further compensation to the composer. In addition, the music may be used in all types of promotion for the production, including other uses such as games, toys, etc. without additional compensation.

An example of third party licensing would be where an independent party wishes to use this music (either the underlying composition only or the actual soundtrack) in another context. This other context may be a phonograph record, television program, motion picture or other visual media or to print sheet music (as that term is broadly defined below). This would include the licensing of a film clip containing your music from the production into a program produced by this third party.

Unless self-published or negotiated as part of the production or publishing contract, the composer has no voice in how or under what terms this music may be licensed. Composers should, however, try to be aware of the uses of their music in order to determine whether they are receiving their share of royalties. For example, if your composer statement from your performing rights society lists the use of music in a motion picture or television program that would require a synchronization license , your royalty statement from the publisher should have a corresponding entry.

Mechanical Licenses

A mechanical license is the type of license used to manufacture and distribute audio-only products, such as albums, compact discs and audiocassettes. Think of it as making a mechanical copy or recording of the song. Mechanical licenses come in two varieties: negotiated and compulsory. A business interested in using a song usually tries to negotiate a mechanical license, and if unsuccessful, they seek a compulsory license. The compulsory license is the only one in which the Copyright Act sets out a specific method to obtain a valid license without the consent of the copyright owner. This compulsory license is subject to legal constraints, such as "first use" authorization, mandated accounting procedures, and a statutory rate of royalty payment. As a result, it is more desirable for the potential user to negotiate a mechanical license more favorable than a compulsory license.

Section 115 of the Copyright Act provides for a compulsory license to make and distribute phonorecords (audio-only devices, such as vinyl records, audio tapes and compact discs), when:

Recordings of the music have previously been sold to the public in the United States under a valid license from the copyright owner;
The party wishing to license the music notifies the copyright owner;
The statutory royalty is be paid for each copy manufactured and distributed, with royalties paid monthly.
The statutory rate for mechanical royalties is currently 9.1 cents for a recording up to 5 minutes in length. For recordings over 5 minutes in length, the rate is 1.75 cents per minute, or portion thereof.

As of January 1, 2006 the statutory mechanical rate is as follows:

  9.10 Cents for songs 5 minutes or less
  or
  1.75 Cents per minute or fraction thereof over 5 minutes. 
 
   For example:
5:01 to 6:00 = $.105 (6 x $.0175 = $.105)
6:01 to 7:00 = $.1225 (7 x $.0175 = $.1225)
7:01 to 8:00 = $.14 (8 x $.0175 = $.14)
 
This rate will remain in effect until the next schedule of mechanical licensing rates is determined.

Not all uses are licensed at the statutory rate, however. Some record companies will try to pay less to license a "controlled composition". The term "controlled composition" refers to any composition written, published or owned by a recording artist. A controlled composition is generally paid only 75% of the statutory mechanical rate. Of course, when not dealing with a controlled composition situation, the publisher or songwriter is free to negotiate any terms it can agree upon with the record company. This may involve a reduced royalty, but it would be based upon the mutual agreement of the parties, not an arbitrary decision by the record company. Negotiated licenses also have other benefits, such as royalties are usually paid quarterly, rather than monthly, and paid on units sold and not returned instead of copies manufactured and distributed.

Other negotiable terms include the amount of money held back as a reserve by the record company, reduced royalties on record club sales, "free goods" or promotional copies, and limitations on the recordings actually licensed.

Performance Licenses

Another of the exclusive rights a copyright holder enjoys is the right to perform the copyrighted songs publicly. The copyright holder may also authorize others to perform the musical composition publicly. Such authorizations are accomplished through the use of performance licenses. This type of license is important for music copyright holders, because it can generate substantial income through radio play, television broadcasts, movie soundtrack exhibitions both in the US and abroad, as well as live public performances.

Performing rights societies, such as ASCAP, BMI and SESAC assist music publishers and composers by issuing licenses to companies and establishments which publicly perform, or allow others to publicly perform, music as part of their business operation. These performing rights societies also monitor and audit their licensees to make sure their music usage correctly reflects the performance royalties paid to the composers and publishers. Blanket licenses are usually issued to music users and the income derived from those and other licenses are then divided up through complicated formulas and paid to the copyright owners.

Synchronization Licenses

Synchronization licensing addresses the act of combining, or synchronizing, audio works to video works. A "sync" license is necessary whenever a visual image is accompanied by sound. This most often involves television programs, commercials, videos or motion pictures, but can also involve computer games, Internet sites and other media not yet developed.

Synchronization licensing is another part of the right of reproduction granted exclusively to copyright owners under the Copyright Act. Although "synchronization" is not mentioned specifically, publishers are given the exclusive right to authorize the reproduction of their music in copies, such as television programs, motion pictures and home videos. In other words, publishers can grant the right for producers to synchronize their music with a visual image, either on video or film. This grant is usually non-exclusive and is entirely at the songwriter's or publisher's discretion.

Generally "sync" licenses do not include the right to use the title of the song as the title of the production, or to incorporate the story of the song into the production, although those rights can also be negotiated, for an additional fee, of course.

Sync licenses should not be confused with performance licenses in movies or television broadcasts as indicated above. A producer will need both a sync license and a performance license of some type to use a song in a broadcast or publicly performed movie. Because many programs into which music can be licensed also generate performance revenue, the publisher of the licensed music must take actions to obtain a music "cue sheet" for the production. Failure to review or file the cue sheet with the performing rights societies can cost both the composer and publisher a substantial amount of money, which cannot be recovered later.

Television
As a right of reproduction, it is important to understand what type of television program requires a synchronization (sync) license. All programs shot on film, a reproductive medium by definition, require a sync license. However, because there is no reproduction, live programs do not require a sync license (although they are still covered under the performing rights licenses). Examples of these programs are news programs, sporting events and special events like "The Jerry Lewis Telethon" or "The Academy Awards".

In addition, certain programs recorded on video tape do not require a license. The Copyright Act allows a transmitting organization (such as a local station or television network) to make an "ephemeral recording" of no more than one copy of a particular program if the recording is made solely for the purposes of broadcast. This is the so-called "live on videotape" exception.

In this case, programs like "The Tonight Show", which are recorded on videotape earlier in the day for broadcast at a later time, do not require a sync license for their original broadcast. Extending this provision by custom and practice, neither do the first run episodes of any other program on videotape, such as "Home Improvement". Reruns of videotaped programs, however, do require a sync license. The very fact that they are broadcast again means that they were recorded so that they could be reproduced. As such, reruns are outside the scope of this exception. As a practical matter, since virtually all prime time programs are repeated, television producers of videotaped programs negotiate for sync licenses prior to taping their programs. This gives them some negotiating leverage and the ability to prevent the use of a song that may not, for whatever reason, be licensable.

Other than the specific contract language, negotiating for a sync license involves two main elements: permission and a determination of the license fee. As an exclusive right of the copyright owner, permission must be obtained for the use of the work in the program. Granting of permission and the setting of a license fee is totally within the discretion of the copyright owner, as there is no compulsory license provision as there is in mechanical licensing.

Because of the changing patterns and uncertainty of television distribution, it is common for producers to negotiate for a number of different licensed rights and options for future exploitation in order to fix their costs at the outset of production. For the use of a composition in a single episode of a television program, the license terms consist of 1) media (ex: free television, basic cable television, pay television, home video); 2) territory (ex: World, United States, World excluding United States); and 3) length of license term (ex: one year, five years, perpetuity). Remember that for each term licensed, a sync license earns a flat fee, no matter how many times a program is broadcast within that term. All of these, including the type of use and duration of the music in the program, go into determining whether permission will be granted and the amount of the license fee.

Motion Pictures
In licensing for motion pictures, many of the same concepts apply. The one key difference is that for motion pictures, producers will want to acquire all rights in all media in perpetuity for a fixed price ("buyout"). This includes media not currently known or developed. This is a major negotiating point.

In the days before home video, sync licenses either had language allowing the studios to distribute the films "in any and all media" or the license was silent on this point. When these films began to be released on video, the music publishers were unable to combat the studios with regard to additional payment for video.

Now, with the advent of all types of new media platforms, such as CD-ROM and CD-I, movies can be shown on a personal computer or television and manipulated in ways never dreamed of even 10 years ago. The major studios are requesting language for rights "in any and all media, whether now known or hereafter developed", without paying any additional fees to music publishers and suggesting that any publisher who does not grant these rights will not have their music used in these films.

One difference in motion picture licenses is that there is a grant of public performance rights for theatrical exhibition in the United States. By agreements entered into between the Justice Department and the U.S. performing rights societies, music publishers are required to issue domestic public performance licenses directly to movie producers on a per-film basis. As a result, performing rights societies in the U.S. do not license movie theaters as the foreign societies do in their respective territories. Sync licenses should include a provision granting public performance rights directly to producers for U.S. theatrical exhibition.

Home Video
Licensing music for home video (traditionally including video cassette and video disc) is similar to the types of licensing described above. One key element is that, depending on the resources of the producer, the methods of payment may differ.

For home video releases, there are three main types of payment structures. The first, as described in the section on motion picture licensing, is the buyout. This is a flat fee payment for all rights to include the composition in the video, regardless of the number of units sold. This is a calculated gamble by the producer as to the success of his project and the music publisher as to the limited appeal of the project. The advantage to the publishers is that they get a larger amount of money up front and do not have to worry about tracking future accounting by the producer. The advantage to the producer is the elimination of the cost of accounting to the publisher on a quarterly or semi-annual basis for the duration of the license term.

The second type of payment is on a royalty basis. A fixed rate, usually a number of cents per copy, is paid by the producer to the publisher for each unit sold during the license term, with regular accountings. It is common for the publishers to request an advance payment covering anywhere from 10,000 to 50,000 units, with the producer paying the royalty on each unit sold thereafter. Standard auditing provisions accompany this type of agreement.

The third type of payment, a combination of the two listed above, is called a "roll-over" or "limited buyout". Here, the producer pays an advance on a certain number of units. When sales equal the agreed upon figure, another advance is paid for an equal number of additional units. For example, if a roll-over is paid on 10,000 units, when unit number 10,001 is sold, an advance is paid on the second 10,000 units, and so on. While a buyout is usually granted for duration of copyright, the royalty and roll-over are granted on a more limited period of time. Also, since this media is produced for home use, there is no public performance language necessary in the agreement.

Multimedia
Licensing for multimedia product is the newest type of sync licensing and, therefore, the area in which the fewest industry standards and practices have been established. Examples of multi-media licensing are karaoke, Compact Disc Interactive (CD-I), CD-ROM (read only memory), computer games and other platforms still being developed.

As with any new media, the publishing industry is taking a cautious approach to the licensing of music, granting limited rights. In the case of some publishers who do yet not understand the media involved, they are refusing to grant rights at all until a clearer picture of the marketplace evolves. With consumer capabilities to play back this type of media still in it infancy, a grant of limited rights is usually accepted by the multi-media producers.

It should be noted that, with many types of interactive multimedia product, the use of music is not linear in the same sense as it is with compact discs or television programs. The media allows for manipulation of the music in many different ways, such as extracting the string section of an orchestral work or the bass line of a pop song, for closer examination by the user. Some programs also will allow for the user to produce their own version of the composition, much as the record producer can manipulate the various tracks in a recording studio. All these things should be considered when licensing for multi-media use.

Print Licenses

Licensing printed copies of music (sheet music) is how the derivation of the term "music publishing" originated. Until the early 1900's, this was the only method music could be reproduced and distributed to the public. A print license allows for the reproduction of printed copies of music such as sheet music, folios, concert arrangements and the printing of lyrics in magazines, advertising and books.

Although not the income producer it once was, print licenses, especially for well known songs or well known songwriters, can still generate substantial income. The print music publishers have become very creative in marketing their material, such as a folio containing all the songs from a hit movie or album, or notation on guitar solos from heavy metal songs.

There is still a large market in instructional music books for people taking music lessons and for educational uses, such as choral, marching band or orchestral scores. For educational uses, it is not uncommon to grant a royalty-free mechanical license for recordings of the arrangement to be made as a promotional tool by the print publisher.

Royalties have become fairly standardized and are usually granted on a Most Favored Nations basis, which means that all parties are paid at the same rate.

A music publisher entering into a print licensing agreement should make sure that the agreement states that the copyright in any new arrangement is owned by the music publisher and that it should be considered a work-for-hire, with the music publisher considered the author of the copyright.