By Jeff Brabec and Todd Brabec
The compulsory mechanical CD royalty rate for 2007 is 9.1¢ per composition (sometimes called the "minimum statutory rate) or 1.75¢ per minute for songs over 5 minutes (the latter timing royalty being sometimes referred to as the "long song" rate).
This statutory mechanical rate represents the songwriter/music publishing royalties payable for songs contained on all physical audio recordings which are made and distributed from January 1, 2007 through December 31, 2007 regardless of the date of the mechanical license or the date that the particular recording was initially released.
This royalty rate applies unless the music publisher and songwriter have agreed to a lesser rate in the mechanical license or controlled composition clause of the recording artist agreement (e.g., 75% statutory).
The agreement between the music publishers, songwriters and record companies which established the 2007 rates established what the mechanical royalty would be for the 2 year period from 2006 through 2007.
The statutory mechanical rates for 2007 are:
||PER MINUTE RATE
To illustrate, if an album is first released in the United States in 2007 and a composition on that album is licensed at the minimum statutory rate, the publisher and writer of the composition would receive a combined 9.1¢ for each album sold during the year 2007.
These monies would be paid by the record company to the music publisher, which would then pay the songwriter his or her share of the royalties per the terms of the songwriter agreement (e.g., 50%, 75%, etc.).
The following chart tracks the sales of one composition on an album licensed at a statutory rate over a 1 year period.
In our example, the album is released in early 2007 and sells 100,000 copies in the United States in 2007.
|TOTAL MECHANICAL ROYALTIES
|COPIES MANUFACTURED AND DISTRIBUTED
The example does not apply when the songwriter and publisher have agreed to a reduced mechanical royalty which is usually a fixed per song penny rate which never changes.
This usually occurs when the songwriter is a recording artist and has to agree to the demands of the record company in the recording artist agreement that the mechanical rate has to be reduced and "fixed" at a certain date (e.g., usually the date that the album is either recorded, delivered or released) with no change in the future despite U.S. Copyright Office approved increases in the per song statutory mechanical royalty rate.
This type of mechanical royalty rate reduction also occurs when the songwriter is a record producer and writes compositions for the album being produced.
For 2008 and subsequent years, rates for physical phonorecords, permanent downloads, limited downloads, interactive streaming and ringtones will be determined by the Copyright Royalty Board unless a voluntary agreement is reached by the parties in interest. Until the rates are settled, parties have been paying at the 2007 rate.
© 2007 Todd Brabec, Jeff Brabec
For more information, check out the book Music, Money and Success: The Insider's Guide To Making Money In The Music Business (Schirmer Trade Books/Music Sales/502 pages) available for sale at Amazon.com, Barnes & Noble, Borders, Music Sales Group and www.musicandmoney.com.