CONTROLLED COMPOSITION CLAUSES
The 8¢-per-song statutory mechanical royalty can be reduced under certain circumstances (for example, if the writer is the recording artist, or if the record is sold for a lower price, like as a midline, record-club, TV-only, special-products compilation, or budget album), in which case the royalty figures may be less than those mentioned above. However, such reduced rates are voluntary and occur only if the publisher agrees, or if the songwriter is a recording artist and has accepted such lower royalties in the negotiation of the record contract.
Here's where things get complicated, so bear with us, and read carefully. Many agreements -- the majority, in fact -- contain language which provides that if the recording artist or producer has written or co-written a song, has ownership or control of a song, or has any interest in any composition on the album or single, the mechanical royalty rate payable by the record company for that composition is reduced. (They offer no reason for this, except that it saves them money!) Such compositions are referred to as controlled compositions.
Most contracts attempt to establish a 75% rate (specifically, 6¢, which is three-quarters of the 8¢ full statutory rate) for all controlled compositions. The figures are computed at the mechanical rate in effect at either (a) the time the recording is produced, (b) the date of the recording contract with the artist, (c) the date that a particular album commenced recording (or should have commenced recording per the contract), or (d) the date the recording is originally released (regardless of whether the same recording is released again at a later date on another album). Got that?
In other cases, the record company will establish a maximum aggregate mechanical penny royalty limit for an album (for example, 10 songs x 6¢ = 60¢ per album). Under these clauses, the artist or producer guarantees that he/she will secure reduced mechanical rates on all songs on the album so that the maximum penny rate (in this case, 60¢) payable by the record company to music publishers and songwriters for all songs is not exceeded. If this maximum aggregate album-royalty rate is surpassed -- for example, if the writer/artist wants to put 12 songs rather than 10 on the album -- the difference is normally deducted from the artist's or producer's record, songwriter, and publishing royalties, or, as in the case above, the per-song royalty rates for the writer/artist or writer/producer will be reduced proportionately. Yes, this stuff is complicated!
Now, let's take a look at how this arithmetic affects a specific situation: Let's say that the writer/performer has a 10-song x 6¢ maximum royalty rate on his/her album (in other words, 60¢ total) and, instead of writing all 10 songs, writes only eight and records two songs from outside writers -- or includes songs with samples by outside writers -- who demand the 8¢ statutory 2002-03 rate per song. In this case, the mechanical royalties would look like this:
60¢ |
album-royalty maximum
payable by record company |
- 16¢ |
two outside songs at
8 ¢ each |
44¢ |
|
/ 8 |
the number of artist-written songs |
5.5¢ |
per-song royalty to artist/writer and publisher |
As you can see, the writer/artist's mechanical royalty has been reduced to 5.5¢ per song from 6¢ per song due to the inclusion of two outside-written songs on the album. By the same token, as the writer/artist records more outside-written songs, the artist's per-song royalties for his/her own works will be reduced further. Sometimes, in fact, when a writer/artist has recorded a substantial number of songs by other writers, he/she has been put in a position of receiving NO royalties for his/her own songs, since the aggregate album-royalty maximum has been paid out to outside songwriters and publishers. OUCH! But it can get even worse: There have actually been instances in which the writer/artist's mechanical royalties have been in the minus column for every album sold because of the operation of these controlled-composition clauses. Additionally, the era of multiple remixes has given rise to a clause which provides that the writer/artist will only receive a mechanical royalty for one use of his/her song, regardless of the number of versions contained on the single or album.
If you think this seems confusing now, imagine how it feels to read it for the first time, as you're about to sign your first recording contract!
Next: Performing Rights Payments
Copyright © 2002 by Todd Brabec, Jeffrey Brabec. All Rights Reserved. Note: The figures and comments contained in this article are based upon the authors' experiences over the years with many specific situations. Ranges of fees, as well as comments, do vary based upon individual negotiations and situations. |
