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by Steven Winogradsky
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Music Licensing Income:
What Every Composer Should Know
Copyright © 1998
In last month’s column, composer royalties from mechanical licenses and sheet music were discussed. Both of these types of income are paid by the user to the music publisher who, in turn, pays the writers their share, according to the contract.
This month, the focus will be on synchronization licensing, the act of marrying, or “synchronizing”, audio to video. A sync license is necessary whenever a visual image is accompanied by sound. This most often involves television programs, videos or motion pictures, but can also involve computer games, internet sites and other media not yet developed.
Synchronization licensing is part of the right of reproduction granted exclusively to copyright owners in the Copyright Act. Although the word "synchronization" is not mentioned specifically, publishers are given the exclusive right to authorize the reproduction of their music in copies, such as television programs, motion pictures and home videos. In other words, publishers can grant the right to producers to "synchronize" their music with a visual image, either on video or film. This grant is usually non-exclusive and is totally discretionary with the publisher. Permission may be denied for any reason whatsoever.
Generally a synchronization license does not include the right to utilize the title of the song as the title of the production or to incorporate the story of the song into the production, although those rights can be negotiated.
Because many of the types of programs into which music can be licensed also generate public performance revenue, it is essential that the publisher of the licensed music obtain a copy of the music cue sheet for the production. Failure to get a copy of the cue sheet, or not filing that cue sheet with the performing rights societies, can cost both the composer and publisher a substantial amount of money that cannot be recovered in later years.
Television
As a right of reproduction, it is important to understand what type of television program requires a synchronization (sync) license. All programs shot on film, a reproductive medium by definition, require a sync license. However, because there is no reproduction, live programs do not require a sync license (although they are still covered under the performing rights licenses). Examples of these programs are news programs, sporting events and special events like "The Jerry Lewis Telethon" or "The Academy Awards".
In addition, certain programs recorded on video tape do not require a license. The Copyright Act allows a transmitting organization (such as a local station or television network) to make an "ephemeral recording" of no more than one copy of a particular program if the recording is made solely for the purposes of broadcast. This is the so-called "live on videotape" exception.
In this case, programs like "The Tonight Show", which are recorded on videotape earlier in the day for broadcast at a later time, do not require a sync license for their original broadcast. Extending this provision by custom and practice, neither do the first run episodes of any other program on videotape, such as "Home Improvement". Reruns of videotaped programs, however, do require a sync license. The very fact that they are broadcast again means that they were recorded so that they could be reproduced. As such, reruns are outside the scope of this exception. As a practical matter, since virtually all prime time programs are repeated, television producers of videotaped programs negotiate for sync licenses prior to taping their programs. This gives them some negotiating leverage and the ability to prevent the use of a song that may not, for whatever reason, be licensable.
Other than the specific contract language, negotiating for a sync license involves two main elements: permission and a determination of the license fee. As an exclusive right of the copyright owner, permission must be obtained for the use of the work in the program. Granting of permission and the setting of a license fee is totally within the discretion of the copyright owner, as there is no compulsory license provision as there is in mechanical licensing.
Because of the changing patterns and uncertainty of television distribution, it is common for producers to negotiate for a number of different licensed rights and options for future exploitation in order to fix their costs at the outset of production. For the use of a composition in a single episode of a television program, the license terms consist of 1) media (ex: free television, basic cable television, pay television, home video); 2) territory (ex: World, United States, World excluding United States); and 3) length of license term (ex: one year, five years, perpetuity). Remember that for each term licensed, a sync license earns a flat fee, no matter how many times a program is broadcast within that term. All of these, including the type of use and duration of the music in the program, go into determining whether permission will be granted and the amount of the license fee.
Motion Pictures
In licensing for motion pictures, many of the same concepts apply. The one key difference is that for motion pictures, producers will want to acquire all rights in all media in perpetuity for a fixed price ("buyout"). This includes media not currently known or developed. This is a major negotiating point.
In the days before home video, sync licenses either had language allowing the studios to distribute the films "in any and all media" or the license was silent on this point. When these films began to be released on video, the music publishers were unable to combat the studios with regard to additional payment for video.
Now, with the advent of all types of new media platforms, such as CD-ROM and CD-I, movies can be shown on a personal computer or television and manipulated in ways never dreamed of even 10 years ago. The major studios are requesting language for rights "in any and all media, whether now known or hereafter developed", without paying any additional fees to music publishers and suggesting that any publisher who does not grant these rights will not have their music used in these films.
One difference in motion picture licenses is that there is a grant of public performance rights for theatrical exhibition in the United States. By agreements entered into between the Justice Department and the U.S. performing rights societies, music publishers are required to issue domestic public performance licenses directly to movie producers on a per-film basis. As a result, performing rights societies in the U.S. do not license movie theaters as the foreign societies do in their respective territories. Sync licenses should include a provision granting public performance rights directly to producers for U.S. theatrical exhibition.
Home Video
Licensing music for home video (traditionally including video cassette and video disc) is similar to the types of licensing described above. One key element is that, depending on the resources of the producer, the methods of payment may differ.
For home video releases, there are three main types of payment structures. The first, as described in the section on motion picture licensing, is the buyout. This is a flat fee payment for all rights to include the composition in the video, regardless of the number of units sold. This is a calculated gamble by the producer as to the success of his project and the music publisher as to the limited appeal of the project. The advantage to the publishers is that they get a larger amount of money up front and do not have to worry about tracking future accountings by the producer. The advantage to the producer is the elimination of the cost of accounting to the publisher on a quarterly or semi-annual basis for the duration of the license term.
The second type of payment is on a royalty basis. A fixed rate, usually a number of cents per copy, is paid by the producer to the publisher for each unit sold during the license term, with regular accountings. It is common for the publishers to request an advance payment covering anywhere from 10,000 to 50,000 units, with the producer paying the royalty on each unit sold thereafter. Standard auditing provisions accompany this type of agreement.
The third type of payment, a combination of the two listed above, is called a "roll-over" or "limited buyout". Here, the producer pays an advance on a certain number of units. When sales equal the agreed upon figure, another advance is paid for an equal number of additional units. For example, if a roll-over is paid on 10,000 units, when unit number 10,001 is sold, an advance is paid on the second 10,000 units, and so on.
While a buyout is usually granted for duration of copyright, the royalty and roll-over are granted on a more limited period of time. Also, since this media is produced for home use, there is no public performance language necessary in the agreement.
Multi-Media
Licensing for multi-media product is the newest type of sync licensing and, therefore, the area in which the fewest industry standards and practices have been established. Examples of multi-media licensing are karaoke, Compact Disc Interactive (CD-I), CD-ROM (read only memory), computer games and other platforms still being developed.
As with any new media, the publishing industry is taking a cautious approach to the licensing of music, granting limited rights. In the case of some publishers who do yet not understand the media involved, they are refusing to grant rights at all until a clearer picture of the marketplace evolves. With consumer capabilities to play back this type of media still in it infancy, a grant of limited rights is usually accepted by the multi-media producers.
It should be noted that, with many types of interactive multi-media product, the use of music is not linear in the same sense as it is with compact discs or television programs. The media allows for manipulation of the music in many different ways, such as extracting the string section of an orchestral work or the bass line of a pop song, for closer examination by the user. Some programs also will allow for the user to produce their own version of the composition, much as the record producer can manipulate the various tracks in a recording studio. All these things should be considered when licensing for multi-media use.
Summary
By keeping a close watch on how their music is used, even though they might not control the ownership and licensing, composers (and publishers) can generate substantial income from the exploitation of their music far beyond what may be earned through the performing rights societies. Composer agreement should clearly spell out what shares of these types of license fees should be paid to the writers. The failure to have that in writing may prove to be very expensive or fatal when trying to collect your fair share.
SYNCHRONIZATION LICENSES