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Soundtrack Albums
by Steven Winogradsky
Copyright © 1998
A soundtrack album has become such a popular, and sometime profitable, method of promoting a film to the point that it has become something of a necessity for certain types of films. At the time of this article, 15 out of the top 100 albums listed on the Billboard charts are soundtrack albums. Being able to release a soundtrack allows for the creation of music videos utilizing music and scenes from the film that allow for "free" advertising on "MTV"-type channels. It allows a film to benefit from having music in it by a popular artist. At the same time, a film that is "hot" can attract major artists to participate, sometimes at fees that are reduced due to an additional source of revenue other than just the master license for the film.. It can also assist in financing a film, depending on the size of the advance a producer may receive. In certain cases, however, the only purpose of a soundtrack album is to appeal to the vanity of the producer, director or composer.
Soundtrack albums consist of three different types of music: (a) instrumental underscore written especially for the film; (b) songs written and/or recorded especially for the film, either using the actors from the film as the artist or a well known artist to perform; and (i) previously existing master recordings that are licensed for use in the film. Soundtrack albums may contain one or all of these three types.
The amount of each of these types of music in the soundtrack album will, in many ways, determine the royalty the record company releasing the soundtrack will pay the film company and other parts of the negotiation. In rare cases, there may be two separate soundtrack albums; one consisting of the underscore and the other of songs written or licensed for the film. The film "Batman" was such a case, with one album featuring songs by Prince and one that included the underscore by Danny Elfman.
If a soundtrack album is contemplated by the film company, negotiations will commence with record companies for the release of the album. With multi-faceted companies like Warner Bros. or MCA/Universal, many of the soundtrack albums from their films are released on their sister company record label. While not implying that the film company will not be dealt with at arms length, the parameters of the deal have been previously fought over, with each company knowing what terms the other will agree to and which they will have to negotiate. In some ways, this makes the negotiation easier since the two companies have dealt with each other on numerous occasions and have worked out the basic structure of an agreement. The cross promotional aspects in this case work to the advantage of both companies.
Other times, if there is no affiliated record company, the film producer has the freedom to shop the album to whomever he pleases. Certain labels may be better than others for a particular album, depending not on the negotiation but also on their marketing strengths and weaknesses. A soundtrack album featuring rap and dance music would probably not be best served by a label specializing in country music. Like every other aspect of a film, the soundtrack album is something of a collaborative effort by the record company and the film company.
Freedom of choice, however may not always be available. There may be times when only a particular record company will release the album. There are, for example, labels that specialize in soundtrack consisting solely of underscore. As these types of albums tend not to be huge sellers, a label used to dealing with this market may offer the best chance of maximizing the potential income from the album rather than a "pop" label. In other cases, the label of a major artist may insist, as part of the agreement to allow that artist's song in the film, that they release the soundtrack album. Having more than one major artist only complicates this type of situation. In such cases, it is not uncommon for one label to release the soundtrack album while another releases a single from that album so that both companies may exploit and profit from the music in the film.
As mentioned previously, the music on a soundtrack album may come from various sources. For underscore, the composer agreement covers the rights necessary for the music to be included on the soundtrack album, giving the film company, as copyright owner, the right to license the music created. The same generally applies to songs written specifically for the film. For recordings of existing compositions that are created for the film that are recorded by a featured artist already under contract to a record company or for previously existing compositions and recordings being licensed for the film, a separate negotiation must take place in addition to the sync and master licensing discussed above. For existing compositions, mechanical licenses must be negotiated with the music publishers. This allow the record company to manufacture "phonorecords", i.e. audio-only devices such as vinyl records, audio cassettes and compact discs.
There is a statutory rate proscribed by The Copyright Act (as of this writing, the rate is 7.55 cents per copy for uses up to 5 minutes in length, subject to periodic review), but a lower rate may be negotiated. It is the responsibility of the film company to negotiate these rates, but the record company must pay the necessary royalties. Often, the record company will impose a ceiling of 10 times the statutory rate on the total amount of mechanical royalties that they will pay on the album. A similar restriction will be imposed on singles, EP's, etc. Sometimes, however, the record company will impose a ceiling of 10 times 75% of the statutory rate.
For music written for the film, the film company, as publisher, has the ability to license the mechanical rights at any rate they deem appropriate. Since third party publishers of existing compositions have no vested interest to reduce their mechanical royalty, the film company may be put in a position of licensing its mechanical rights for less than the full statutory rate. In fact, many soundtrack agreements have a provision requiring the film company to license any so-called "controlled compositions" at 75% of the statutory rate. "Controlled compositions" are those written by owned or controlled, directly or indirectly, by the film company. Where the record company imposes a ceiling of 10 times 75% of the statutory rate, the film company (as publisher) may actually receive less than 75% in order to come under the ceiling..
For new songs recorded by an featured artist, the artist's record company (if they are not releasing the soundtrack) will want to be compensated for the use of their exclusive artist on another label. This will take the form of an "override" royalty, that is, a royalty paid to the record company over and above that paid to the artist themselves.
For previously existing master recordings, the record company/copyright owner of the master will generally require a royalty based upon the manufacture's retail sale price ("MRSP"), pro rata to the number of tracks on the soundtrack album. This royalty will generally include the rights to the artist's performance, name, likeness and biography in connection with the soundtrack as well as the royalty for the producer of the master being licensed. There will be certain artists, however, that will require separate permission and payment for the use of their recordings. There may also be restrictions in the ways that the soundtrack record company can utilize these existing recordings, such as not being able to re-mix them for use on the soundtrack or not being able to release a particular master as a single. Conversely, as part of the negotiation, the soundtrack label may impose certain restrictions on the licensing record company, such as not releasing it as a single or withholding it from an artist's "greatest hits" album for a certain period of time so as not to compete with the soundtrack album.
The royalties paid to the original record company, since they are based upon MRSP, will be subject to a series of deductions for foreign sales, club, premium and mail order sales, mid-priced and budget sales, on the same percentage as the royalty paid from the soundtrack label to the film company.
The record company releasing the soundtrack album will pay the film company a royalty on every unit sold based upon MRSP and subject to deductions for packaging, foreign sales and category variations, as outlined in the sample agreement. As listed, there are different rates for albums vs. singles, domestic vs. foreign sales, full retail vs. discounted sales, etc. The packaging deductions also vary by type of configuration of the software. Most of these types deductions are fairly standard in the recording industry, whether for soundtrack albums or those by a recording artist but there is some room for negotiation as to the percentage of the deduction. Standard accounting provision will be included as well as language allowing for the keeping and distribution of reserves against returns, promotional copies and "free goods" that are contained in every record deal.
The film company will them be required to pay royalties to the artists whose works are contained on the album. Sometimes, the record company will agree to make the artist royalty payments directly and deduct them from the film company royalty.
It is possible for the film company to receive an advance against future royalties that can assist in financing the film or, at the very least, go to assist the music budget for the film, allowing the producer to attract higher quality talent. The size of this advance will depend greatly on the stature of the artists on the soundtrack, the nature of the music (i.e., underscore, songs, etc.), the overall budget of the film and many other intangibles having to do with the perceived value to the record company.
The soundtrack agreement will contain reciprocal assurances having to do with the release dates of the film and release dates of the soundtrack album. Generally, the film company will require that the album (or at least a single from the album) be released approximately 30-45 days prior to the release of the film in each territory so as to promote and generate interest in the film. To do so, the record company will require that fully edited masters be delivered approximately 90 days prior to the release of the film so as to allow for manufacturing and distribution of product. Included in this requirement will be the necessary artwork, photographs, logos and all consents. Also reciprocal will be provisions for record company credit in the closing credits of the film and in certain types of paid advertising as well as film company credits and logo on the soundtrack album packaging.
The agreement will typically also have a clause providing for the creation of a music video using footage from the film. Generally, the film company and record company split equally the costs of the music video, with the film company usually having creative control. Since the video promotes both the film and the album, the costs to the record company are usually not recoupable against royalties.
While it may seem that every film released has a soundtrack, because of the difficulty in negotiation the rights described above, it’s probably not as many soundtracks released as film producers would like to have released.