by Jeffrey and Todd Brabec
Because the compulsory statutory mechanical rate has gradually increased over the past years, most record company contracts will provide that the royalty rate for a particular composition on a particular album or single will be frozen at the rate in effect on a particular negotiated date.

In this way, the record company's mechanical royalty costs for songs written by its writer/artists will be fixed and will not be subject to increase if the compulsory statutory rate goes up at some time in the future.

For example, some contracts provide that the rate will be the one in effect when the recording of an album commences; others calculate the effective date as the year in which the album is released; and still others fix the mechanical rate as of the date that an album is delivered to the record company.

Sometimes the contract will provide that the earlier of either the actual delivery of an album or the date on which the album should have been delivered is the date that should apply.

Occasionally, the controlled rate will be based on the statutory royalty rate in effect on the date of manufacture of a particular album, but this is not common.

To illustrate how one of these clauses works and how it can affect a performer's income, let us assume that a writer/artist has a mechanical royalty "lock in" date of when the album is delivered to the record company.

In our example, the album was recorded in late 2005 and delivered to the record company on December 20 of that same year. Since the minimum statutory mechanical rate in 2005 was 8.5 per composition, the writer/artist's mechanical rate would be fixed at 75% of 8.5 (i.e., 6.37).

The album is released in the United States in December 2006 and sells one million copies.

On January 1, 2006, the statutory mechanical rate was increased to 9.1 per composition. Because the writer/artist's royalty rate was fixed in comparison to the statutory rate in effect during 2005, however, the writer/artist would not get the benefit of the new increased rate, even though all of the actual album sales occurred during 2006-07.

"Greatest Hits" Albums

One area where a writer/artist can often negotiate an exception to the lock-in rate date provisions of the recording agreement has to do with "greatest hits" packages. Because "greatest hits" albums take recorded performances from a number of different albums (with many of the compositions being paid at differing mechanical rates because the albums were released during a wide span of years), some artists are able to get the record company to agree that the mechanical rate payable for all self-written compositions on such an album will be that in effect when the "greatest hits" album is released to the general public in the United States.

For example, if a number of the compositions were being paid at 75% of a 6.25 rate because they were initially contained on albums that were recorded in 1993 when the statutory rate was 6.25, the mechanical payments for these compositions for sales of a "greatest hits" album released in 2006 or 2007 (when the statutory rate had increased to 9.1) would be calculated on the 2006-07 rate rather than the lower 1993 rate.

© 2006 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).

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