Comments on Negotiating Songwriter Agreements
The Songwriter Agreement establishes the basic relationship between the songwriter and the publisher. It assigns control of most issues involving the copyrights to the publisher, subject to certain areas of control retained by the songwriter and the songwriter sharing in the royalties earned by the work. As in most agreements, there are certain provisions that are deemed “standard” boilerplate based upon industry custom and practice but many points are totally negotiable by the parties depending on the stature of the songwriter, the economic realities and the flexibility of the publisher.
The following represents some of the major contractual areas of negotiation in most songwriter agreements.
1. Term Of Services
The initial area of negotiation is the term during which the songwriter must provide his or her active songwriting services to the music publisher. In most agreements, there is an initial one (1) year contract period with options on the part of the publisher to extend the term for additional one (1) year contract periods. For example, the agreement might provide for a one (1) year period with three (3) to six (6) separate option periods. On occasion, the initial period is for in excess of one (1) year (e.g., a two (2) year initial period made up of two (2) separate one (1) year periods) with additional options or for a set period of years with no options (e.g., the term consisting of a three (3) year contract period with no options).
In the case of writer/recording artists, the term is usually tied to the delivery of recorded and released product (e.g., one (1) album with separate options for an additional three (3) albums or two (2) albums containing at least 75% of compositions written by the songwriter) or is co-extensive with the songwriter’s recording artist agreement.
2. Copyright Ownership
There are two (2) ways that the publisher can gain ownership of newly created works under this type of agreement: (1) the works are assigned from the songwriter to the publisher; or (2) the songwriter is deemed to be an employee of the publisher, making the new compositions “works-made-for-hire.” The distinction is a crucial one.
The term of copyright for works-made-for-hire is 95 years from date of publication or 120 years from creation, whichever comes first. As of this date, the standard term of copyright for works created on or after January 1, 1978, however, is life of the composer plus 70 years. While not only allowing for the possibility of a longer copyright term, the standard term also provides for termination of the assignment to the publisher after 35 years from the date of publication or 40 years from the date of the grant, with the songwriter (or his or her heirs) gaining control of the copyright.
With established writers, the majority of agreements being entered into are co-publishing agreements whereby the major publisher and the songwriter’s publishing company co-own the copyright to all compositions on a 50/50 basis. On occasion, if there are pre-existing recorded and released compositions in the writer’s catalogue, these might be only administered by the major publisher (with the songwriter maintaining total copyright ownership) but, in most cases, the back catalogue will be controlled on the same basis as the newly written compositions. As in all areas, however, this is a matter of negotiation and bargaining power.
3. Exclusivity of Services
Most agreements provide that all songwriting/composing services will be exclusive to the music publisher during the active term of the agreement. This does not mean, however, that the songwriter may not co-compose with other writers who are signed to different publishing companies, only that the songwriter’s portion of those compositions are controlled by this publisher. In addition, some exceptions may be negotiated in the area of writing for motion pictures or commercials when the production company demands all or a portion of the copyright as a condition to the writing assignment.
4. Minimum Delivery Commitment
Virtually all songwriter agreements contain delivery commitments on the part of the songwriter which must be met before a contract period can end. These minimum commitments can either be phrased in terms of delivery of newly written compositions to the publisher (e.g., a minimum of eight (8) newly written compositions) or the delivery and commercial release of a minimum number of compositions (e.g., ten (10) newly written compositions delivered with four (4) being recorded and released in the United States via a record label with national distribution). If the writer is a recording artist, the minimum commitment might relate to a minimum number of compositions recorded and released under the writer’s recording artist agreement (e.g., one (1) album per contract period which features the songwriter as a recording artist and contains at least seven (7) compositions written by the songwriter). There are countless variations on this theme; many of which are dictated by the expectations of the parties and the amount of money being paid the writer in advance monies.
5. Extension of Contract Periods
If the minimum delivery commitment is not met by the songwriter, the then current contract period is usually automatically extended until a certain number of days subsequent to the fulfillment. For example, if the songwriter has a four (4) composition release commitment per contract year, and only three (3) compositions have actually been released on CDS by the end of a contract period, that contract period may be extended until between ten (10) to thirty (30) days after the release of the fourth (4th) composition. The publisher will usually have the right to exercise its option for an additional period during this ten (10) to thirty (30) day post-fulfillment period. During the extension period, the publisher does not have to make any option decisions because an option exercise is predicated upon the songwriter fulfilling the minimum commitment. The songwriter will many times try to limit the extension period to a set period of time (e.g., no longer than three (3) years) regardless of fulfillment or to a recoupment of advances criteria (e.g., if 150% of all advances have been recouped, the suspension will be lifted).
6. Option Exercise
The publisher usually has the right to exercise its option for additional contract periods at any time prior to the expiration of the then current period or by a certain number of days prior to the expiration of said period (e.g., at any time before fifteen (15) days prior to the end of the current period. The language in certain agreements states that the publisher may exercise its option to renew at any time prior to the expiration of the current period but that the term shall not end until the songwriter notifies the publisher in writing of publisher’s failure to renew prior to the end of the then-current contract period and gives the publisher an additional ten (10) days to renew. Without such notice from the songwriter, the publisher may continue to operate indefinitely under all terms of the agreement.
Other agreements might call for the publisher to notify the songwriter in writing of its exercise of the option to renew no less than thirty (30) days prior to the expiration of the then-current period. Failure of the publisher to renew in such a manner automatically terminates the agreement at the end of the period. This will allow the songwriter time to make arrangements for future administration of his or her catalog immediately upon termination.
If the songwriter is a recording artist and the agreement is based on the delivery of albums, the option pickup can either be within a few days after commencement of recording of the new album, delivery to and acceptance by the record company of the new album or commercial release of the new album.
7. Royalties to the Writer
With one exception, the publisher collects all revenues associated with the works and, except for print royalties, most of the income earned by the work will be split 50% to the songwriter and 50% to the publisher, minus certain recoupable expenses incurred by the publisher. Print royalties can many times be based on a per cent royalty for sheet music and a percentage basis for folios. The exceptions for print royalties are historical in nature and may not be entirely valid in today’s marketplace, where it may be more equitable to split these royalties equally as well.
The exception to the publisher collecting all the revenues is in the area of public performance royalties. ASCAP, BMI and SESAC are U.S. performing rights societies that pay composers and publishers directly for the royalties collected. They also collect foreign performance royalties from their counterparts overseas and make direct payments to the composers and publishers. Given the changing landscape of public performance rights for radio and television, however, provisions should be made for the direct licensing of these rights by the publisher and/or songwriter. While the publisher will want full control over granting of public performance rights directly, there should be some protections for the writer’s interests to prevent the possibility that public performance rights could be granted at reduced fees or even a waiver of fees to the detriment of the writer.
While a songwriter, in an attempt to retain as much control as possible, may want to negotiate his or her share of these rights directly, it is impractical for thee songwriter to be involved in every transaction. Therefore, there could be language granting the publisher the right to license both shares of these rights using the standard blanket fees charged by ASCAP or BMI as a guide to “market value” of these rights. It should be noted, however, that if a TV or film producer wishes to obtain a source license (i.e., a buyout of performance rights at inception) it is virtually impossible to judge the value since the parties are unable at the time of negotiation to determine how many times and in how many markets the program containing the music will be broadcast. As in most buyout situations, the parties are speculating as to the success (or lack thereof) of a project without any hard facts to rely on.
If there is more than one (1) writer of a song, the royalties may be divided in a number of ways. It is important to determine what percentage each writer is to receive and to document that in the agreement prior to any exploitation of the work. It is general industry practice that music and lyrics to a song receive equal weight, so if one party writes the music and one party writes the lyrics, they would each generally be entitled to 50% of the composer’s share of royalties.
Such a division is not always that simple, especially if there are more than two writers. For example, if one person composes the music with two co-writers contributing the lyrics, the split would usually be 50/25/25. Absent an agreement clearly stating each co-writer’s share, however, the Copyright Act dictates that all co-writers would share equally, no matter what their actual contribution to the work. The agreement should clearly state the method for determining each writer’s share.
Under the usual co-publishing agreement arrangement, where the songwriter and publisher share copyright ownership in the compositions, the songwriter will receive 75% of the non-performance income received by the publisher from licensing to third parties (i.e, the 50% percent writer’s share and one-half of the 50% publisher’s share) and 50% of the publisher’s share of performance income. The songwriter usually receives his or her share of songwriter performance income directly from the performance rights organization.
The publisher should make accountings no less than twice a year, paying any royalties that are recouped beyond the outstanding advances. The songwriter should be given a reasonable period of time (the longer the better, from the writer’s point of view) to examine and object to said accountings. It may be possible to negotiate a clause whereby if an audit discloses a discrepancy of more than a certain percentage of earnings, the publisher will pay for the cost of the audit.
Advances can be structured in a number of various ways depending on whether the writer is a pure songwriter or songwriter/recording artist. With an established songwriter who controls his or her own catalog, the previous earnings can be used as an indicator of how the amounts of the advances are determined. As a publisher, you want the advance to be large enough to entice the writer to sign with your company without too much risk that the money might not be recouped. Analyzing previous earnings is one method of determining future earning but care must be taken to avoid including an unusually high, one time fee in your calculations.
For example, if in the past year the songwriter has licensed one of his or her songs for a national commercial for $250,000.00, that would be a “spike” on the earnings graph that would have to be taken into consideration as an aberration, not the normal earnings pattern. It is better to examine several years earnings to determine the value of the catalog so that the impact of these large, one-time deals can be minimized.
Among innumerable scenarios, advances can be payable:
A. One lump sum (e.g., $50,000.00 upon commencement of the agreement) with option advances paid the same way (e.g., the full advance on commencement of each option period);
B. Monthly intervals (e.g., $4,000.00 at the start of each month of the applicable contract period);
C. A percentage upon commencement of each period with the remainder in monthly or quarterly installments (e.g., $70,000.00 payable $37,000.00 upon commencement of the period with the remaining $33,000.00 payable in eleven (11) pro-rata monthly installments of $3,000.00 each);
D. A portion on commencement of the period with additional portions payable on the fulfillment of specified minimum delivery plateaus (e.g., 50% of the advance payable on commencement of the contract period, 25% of the advance on fulfillment of 50% of the minimum delivery commitment for that contract period and 25% of the advance on fulfillment of 75% of the minimum delivery commitment); and
E. A portion on commencement of the period, a portion on the signing of a recording artist agreement, a portion on acceptance of the album and a portion upon release of the album (e.g., $200,000.00 in the aggregate payable $50,000.00 upon commencement of the initial period, $50,000.00 upon writer’s signing of a recording artist agreement, $50,000.00 upon acceptance of the first album and $50,000.00 upon release of the first album).
Additionally, there may be advances payable based on chart activity (e.g., an advance paid if a composition reaches the Top 10 on the “A” side singles chart) or the achievement of certain sales plateaus (e.g., additional advances due upon the album achieving sales of 500,000 units, 1,000,000 units, etc.). Option period advances may also be structured on a minimum and maximum basis (e.g., a $100,00.00 minimum and a $250,000.00 maximum) determined by a percentage of the earnings generated in the contract period prior to the commencement of the option period (e.g., 66b% of the mechanical income received or credited to the account of the songwriter/co-publisher in the contract period prior to the commencement of the option period). There also may be provisions which reduce an option year advance by any outstanding unrecouped advance balance, many times with a subfloor below which the advance cannot be reduced (e.g., the advance shall be reduced by any outstanding unrecouped advance balance but in no event shall the advance be reduced to less than $50,000.00).
10. Foreign Sub-publishing Fees
With respect to income earned in countries outside the United States, agreements are either on a net receipts basis, an at source basis or a combination of net receipts for certain territories and at source for others. Under a net receipts agreement, the songwriter’s 50% of royalties will be computed on the basis of foreign earning less the fee taken by the subpublisher in the foreign territory. Under an at source agreement, the songwriter’s 50% of royalties will be computed on the foreign earnings prior to the fee taken by the subpublisher.
11. Retention of Rights
Some agreements are for life of copyright; others provide for a set date on which the compositions will revert to the songwriter (e.g., 20 years after expiration of the term); and others provide for a reversion date which becomes effective upon the later of either a set date or recoupment of all advances (e.g., 25 years after the expiration of the term or recoupment of all advances, whichever date is later). Some agreements will provide that the major publisher will retain its rights to the compositions but that the writer’s songwriter and co-publisher share will revert to the songwriter. Irrespective, unless the songs were considered “works-made-for-hire” (see comments on ownership, above), the songwriter (or his or her heirs) has the right to terminate the publisher’s interest in the copyrights thirty five (35) years after publication or forty (40) years after the grant of rights and reclaim one hundred percent (100%) of ownership. Termination of this grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.
12. Reversion of Unexploited Compositions
Regardless of the retention rights on exploited compositions, occasionally the parties will agree that unexploited compositions will revert prior to the date specified for exploited compositions. For example, reversion may take place after a set number of years after expiration of the term or after advances have been recouped. If there is an agreement as to reversion of unexploited compositions, the negotiations will then turn to the determination of what definition is to be placed on the word “unexploited.”
In a single song agreement, sample language could be as follows:
1. The term of this agreement shall commence on the date first set above and shall continue in full force and effect for the duration of copyright (and all extensions thereof), subject to the following:
A. Publisher shall, within twenty four (24) months from the date of this agreement, secure a “use” of the Composition. “Use” shall be defined as:
I. The release of a commercial sound recording of the Composition in the customary form and through the customary commercial channels;
ii. A license authorizing the synchronization of the Composition in a motion picture, television program, home video release, commercial or any other audio-video synchronization right;
iii. A license authorizing the right to reproduce the Composition upon electrical transcription for broadcasting purposes.
b. If, at the end of the period defined above, Publisher has not secured a Use of the Composition, then, subject to the provisions of the next succeeding subdivision, this contract shall terminate.
c. Upon termination pursuant to paragraph b, all rights of any and every nature in and to the Composition and in and to any and all copyrights secured thereon in the United States and throughout the world shall automatically re-vest in and become the property of Composer and shall be reassigned to Composer by Publisher.
Some indemnity clauses make the songwriter accountable for any costs related to a claim that is inconsistent with any of his or her warranties whether or not a breach is established. Other clauses would limit indemnification only to a writer-approved settlement or a final adjudicated court judgment. There are many variations in this area and all are subject to negotiation.
14. Approvals over Exploitation
The songwriter’s right to approve the uses of his or her compositions represents a major area of negotiation between the music publisher and the songwriter’s attorney. The extreme positions are, on the one side, the music publisher having total control over how and to whom compositions are licensed and, on the other, the songwriter having total approval over all uses of his or her compositions. In most cases, the final resolution of these two disparate positions is somewhere in between the two extremes. For example, a publisher might agree to give a songwriter approval over uses of a composition in an advertising commercial or in an “NC-17” rated motion picture and reserve the right to license the composition for use in a television series or in any motion picture which is rated other than NC-17. These are based not only on the desire for control but the practical realities of licensing. For example, most television programs licensing music must have a response within 2-3 days. If the songwriter is also an artist, it may not be possible for the publisher to reach the songwriter within the time period necessary to make the deal, thereby losing the revenue opportunity. Some other areas of negotiation on the right of a songwriter to approve uses relate to grand or dramatic rights, inter-active media, mechanical licenses at less than a statutory or 75% of statutory rate, certain philosophical, social or political ideologies (e.g. an animal rights activist prohibiting the use of his or her song in a commercial for cosmetic companies who experiment on animals) changes in the lyrics and/or music to the composition, and use of the title of a composition. The above list is certainly not inclusive of the exploitation uses included in the negotiation process as, depending on the bargaining power of the various parties, anything under the sun is fair game for discussion.