Music Terms and Music Business Agreements

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Understanding what different music terms mean will allow you to choose the best music business agreements when working with producers, labels, and publishers. The music terms covered in this article include: single song agreement, exclusive term agreement, co-publishing agreement, administration agreements, sync rep deals, royalty agreements, work for hire agreement, mechanical royalty, producer royalty, controlled composition clause, exclusivity, non-exclusivity, spits, beats agreements, and back-end royalty.

Single Song Agreement

Under a single song agreement, a songwriter transfers the copyright of a song, or songs, to a publisher. In return, the writer receives a part of the income earned from that composition. Usually 50%.

Exclusive Term Agreement

An exclusive term agreement was the most common type of agreement for many years. Under this deal, the songwriter agrees to assign the exclusive right to a publisher for any songs he/she writes during a specific time. For example, one to two years. This agreement usually has options for the publisher to extend the time of the contract.

Your publisher will get 50% of the royalties and the songwriter will get 50% as well. This agreement can allow the publisher to deduct defined expenses, such as the cost of producing demos. Generally, the publisher pays a songwriter an advance at the beginning of the contract. The Publisher will collect this payment back from the song’s royalties before the songwriter gets paid. Extra advance payments are due if the publisher extends the contract.

Co-Publishing Agreement

This agreement is like a traditional exclusive publishing agreement. In this agreement, the writer only assigns 50% of the copyright to the publisher. The songwriter generally gets to keep 75% of the publishing income. (That is, 100% of the “writer’s share” and 50% of the publisher’s share).  This model became the standard form of agreement as singer-songwriters became more successful and gained more leverage.

Administration Agreements

Under an administration agreement, the writer retains the copyrights of their songs. The publisher only receives the right to administer a song for a specified period of time. For example, three years, five years, etc.. In return for their services, the publisher usually receives an “administration fee”. This fee is from 10% to 25% of all income earned during the term of the agreement.

This form of agreement is rarely offered to new writers. It is generally reserved for writers who have already had great commercial success.

Sync Rep Deals

A variation of a normal publishing agreement is a sync rep deal. Sync rep deals usually do not offer up-front advances. They involve companies who specialize in ‘shopping’ songs. These songs are used in movies, TV shows, ad campaigns, and video games.

The term of a sync rep deal is generally limited to one or two years. It usually has automatic renewal terms, subject to cancellation by either party. 

Royalty Agreements

A royalty for a producer hired by an artist or small label can be based on net profits. A traditional royalty for a producer who works with a big label is 3% to 5%. 

Work For Hire Agreement

When an agreement is a work for hire agreement, the producer can keep the copyright for his contribution to the song. The label or artist would need the producer’s permission to use that contribution.

Mechanical Royalty

When an artist or label get a producer’s permission to use their contribution to a song, it’s called a “mechanical royalty”.

This mechanical royalty is a royalty tied to the underlying musical composition contained in the song.  The current mechanical rate is 9.1 cents per song per copy sold.

If the producer’s negotiated share is 50%, then he would receive 50% the 9.1 cents for each sale of the record containing the song.

Producer Royalty

The producer would also receive his producer royalty. A producer royalty is income derived from the record rather than the song.

Controlled Composition Clause

The label usually asks the producer to accept 75% of the 9.1 cents.  This music term is the ‘Controlled Composition’ clause. 

Exclusivity vs Non-Exclusivity

The most important part of signing a sync rep deal is exclusivity versus non-exclusivity. Knowing the differences between these two music terms is extremely important to getting what you want.  

Sync reps who offer exclusive deals or non-exclusive deals usually give these reasons to justify their deals.

Exclusive Deals:
  • Confusion to whom to pay. The argument is that a writer’s Performance Rights Organization (PRO) may not be able to identify the correct party to pay. In a sync rep deal, the sync rep is listed as the publisher of the song and is paid directly by the PRO. If there is more than one publisher, the PRO may not know whom to pay.
  • Motivation. Exclusive publishers claim to be more motivated if they have exclusive rights to a song.  
  • Value Reduction. The argument is that a licensee may cause two sync reps to compete against each other and offer a discount. This would decrease the value of a song represented by two different companies.
    Non-Exclusive Deals:
  • Confusion to whom to pay.  Advocates of non-exclusive licenses rebut this argument. They argue that, when you register a song with a PRO, you can add a suffix to the title. Such as ”Blue Skies — #1,” “Blue Skies — #2, etc. The cue sheet reporting the use of a song in an audiovisual work. Which all the PROs need, can identify the correct title and the right publisher will be paid.
  • Motivation. The non-exclusive reps argue that first, this is not true.  Moreover, if the rep loses interest in a writer’s songs, the writer has no chance to make money from his songs.
  • Value Reduction. The non-exclusive reps argue this is not the case. They claim licensees of such as ad agencies and music supervisors value their relationships with the reps.  They work together on a regular basis and would not jeopardize those relationships by going around a trusted rep to get a cheaper price for the same song.

With compensation, sync rep deals vary from company to company.  50% is not unusual. Some companies provide better terms to the songwriter.  For instance, only taking 20%-25% and paying the balance to the writer.  This percentage is usually based on gross income. This includes sync fees and public performance royalties.

Spits

Often in pop, R&B, and hip-hop, producers create new music by providing beats. An artist or rapper then ‘spits’ over these beats.

In this case, the producer will need two copyrights. These copyrights include the “sound recording” and a part of the “musical composition”.

Beats Agreements 

A sale is generally more expensive than a non-exclusive license. A producer with successful tracks can demand fees of several thousand dollars or more. A producer with hits can command much higher amounts.  Working with a new producer will cost a couple hundred dollars.  Some producers receive a royalty and an “advance”. An advance means the label will pay themselves that money back before you receive any royalties.

A producer can sell a beat outright. In this case, the buyer will have the exclusive right to use the beat.  A producer can give a non-exclusive license to use a beat. In this case, the producer reserves the right to use the beat for himself or license it to others.

Back-End Royalty

When an artist or indie label hires a producer to create a beat and produces a song, the agreement is a work for hire. The producer usually receives an upfront fee and can negotiate a “back-end” royalty.

Music Terms and Music Business Agreements Conclusion

When you understand music terms, you’ll understand the deals you’re being offered much better. You never want to sign something that you don’t understand, so understanding music terms is very important to the success of your music career.

The information contained in this article is for informational purposes only and is not intended to be a substitute for legal advice provided by an attorney of your choosing. TuneGO, Inc. does not warrant or represent that the information in this post is accurate for all people or in all circumstances and encourages you to seek qualified legal counsel in all instances. TuneGO, Inc. will not be responsible for your reliance on any information contained in this article.

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