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by Jeffrey & Todd Brabec
One of the most important areas in any recording artist agreement
negotiation is that related to how the performer gets paid for
self-written compositions ("controlled compositions" in industry
lingo) on an album, EP, single or other recordings released
by the record company. A controlled composition is defined in
a number of ways depending on the record company, but it always
includes musical compositions written by the performer and musical
compositions that are either owned or controlled by the performer's
publishing company. These provisions (known as "controlled-composition
clauses") tend to be as hotly negotiated as any clause in the
contract (including artist royalty rates, advances, video budgets,
guaranteed releases, new technology issues and deductions),
since they have a major impact on how much money a performer
can make as a songwriter and, in many cases, how much money
the performer will not make because he or she wrote a song.
Mechanical Rates
Most record companies will try to reduce the amount of mechanical
royalties (i.e., songwriter and music publisher royalties
due for the sale of audio recordings) that they have to pay
to their songwriter/recording artists. For example, most record
companies will pay the writer/performer only 75% of the statutory
mechanical rate per musical composition written by the artist
for each CD, tape, or record sold in the United States.
To illustrate: The mechanical royalty computations for one
copy of a 10-song album would look as follows:
| |
7.55¢ |
Statutory rate (2001) |
| x |
75% |
Controlled rate |
| |
5.66¢ |
Per-song royalties |
| x |
10 |
Songs on album |
| |
56.6¢ |
Aggregate album mechanical royalties |
Under the above scenario, if one-million albums are
sold in the United States, the record company would pay $566,000
in songwriter/publisher mechanical royalties
(56.6¢ x 1,000,000=$566,000),
rather than the statutory $755,000
(75.5¢ x 1,000,000=$755,000).
For information, the statutory rate will be increased to
8¢ for 2002-03 (with a 75% reduced rate being equal to 6¢
per composition).
Sales Plateau Royalty Increases
Occasionally, these controlled composition rates can be increased
based on a recording artist's success in the marketplace (e.g.,
an album or single achieving certain predetermined sales levels),
but such increases are always subject to negotiation and are
rarely given voluntarily. To illustrate, if the writer/performer
has to accept a 75% rate on all self-written compositions,
some agreements will provide for the record company to pay
a 75% rate for sales of each album up to 500,000 units, increase
the royalty to 82.5% or 85% for sales between 500,001 and
1 million, and further increase the mechanical royalty rate
to full statutory or 100% for all albums sold after 1 million.
A sample sales incentive/royalty increase clause may read
as follows:
"With respect to the writer/performer's self-written compositions
that appear on any album recorded hereunder, the controlled
composition royalty rate shall be increased from 75% to 82.5%
for all full-priced sales in excess of 500,000 but not in
excess of 1,000,000. For full-priced sales in excess of 1,000,000
but not in excess of 1,500,000 units, the 82.5% rate shall
be increased to 90%. For full-priced sales in excess of 1,500,000
but not in excess of 2,000,000 units, the 90% royalty rate
shall be increased to 97.5%. And for full-priced sales in
excess of 2,000,000 units, the mechanical royalty shall be
100% of the minimum statutory rate."
Increased Royalties for Later Albums
If a writer/performer has to accept a 75% mechanical rate
in the recording artist agreement, it is often possible to
negotiate a higher rate for subsequent albums. For example,
if a writer/performer has signed a 7-album recording agreement
with a record company (e.g., 1 album plus options for 6 more),
the mechanical rate might be increased from 75% to 82.5% or
85% for compositions on the fourth and fifth albums or even
to 100% on the sixth and seventh albums. Variations in this
area depend on one's bargaining power and the experience of
one's representatives. All are based on the principle that
if a writer/artist has recorded more than 3 or 4 albums for
the same record company, the albums must be fairly successful
and thus be generating profits for all parties. That being
so, the writer/recording artist should not be penalized for
being a songwriter. A sample clause might read:
"Notwithstanding the 75% Controlled Composition statutory
rate provisions of this Agreement, it is agreed that all musical
compositions written by the writer/artist which are embodied
on the fourth and fifth albums recorded hereunder will be
paid at 85% of the statutory rate. For musical compositions
written by the writer-artist that are embodied on the sixth
and seventh albums, payment of mechanical royalties for musical
compositions written by the writer/artist shall be paid at
100% of the statutory rate."
© 2001 Jeff Brabec, Todd
Brabec.
This article is based on information contained in the new,
revised paperback edition of the book "Music, Money, And Success:
The Insider's Guide To Making Money In The Music Industry"
written by Jeffrey Brabec and Todd Brabec (Published by Schirmer
Trade Books/Music Sales/435 pages). Click
Here to buy this book.
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