CMU:DIY Notes

Lecture Notes | Music Licensing

Published on Wednesday 10 January 2018

These notes accompany the CMU:DIY lecture ‘Music Licensing’ and provide a beginner’s guide to music copyright and collective licensing.

In addition to these notes, you can also download the slides for the ‘Music Licensing’ lecture HERE. For more on music copyright you might also want to check out the ‘Dissecting The Digital Dollar’ reports and guides HERE.


INTRODUCING MUSIC RIGHTS

Making money from music
There are three main ways you can make money out of your music. You can…

1. Create and exploit intellectual property.
2. Stage and monetise live performances.
3. Build a fanbase and monetise the fan relationship.

Intellectual property
When it comes to the intellectual property side of music, most artists create four distinct kinds of IP.

First, every song you write is protected by copyright. We call these the ‘song rights’ or the ‘publishing rights’.

Second, every recording you make is protected by a separate copyright. We call these the ‘recording rights’ or the ‘master rights’.

Third, all the photos and illustrations you create are also protected by copyright – the ‘artistic rights’.

Fourth, your brand – so your actual name, performer name or band name – can be protected by a thing called trademark.

Trademarks have to be registered, which costs money, so they are not generally a top priority for new artists. However, copyright exists as soon as songs are written, recordings made and visuals created, so you need to know a little bit about copyright from the off.

Copyright ownership
Because copyrights are automatic – meaning nobody formally claims ownership of the copyright in any one song, recording or visual – the law has to tell us who the default or presumed owners are.

In the UK, by default a song copyright is owned by whoever writes the song. By default a recording copyright is owned by whoever arranges for the recording to take place. By default the copyright in a photo or illustration is owned by the photographer or illustrator.

Where multiple people create a copyright-protected work together, they co-own the resulting copyright. This happens a lot with songwriting. If you co-write a song with another person, you together co-own the song copyright.

It’s for you as collaborators to decide how you are going to split the copyright, ie what percentage of the copyright (and any subsequent money) does each co-writer get?

Copyright assignment
It’s important to note that, although copyright law provides these default ownership rules, copyrights can also be transferred.

For example, one member of a band might arrange for a recording to take place and therefore be the default copyright owner, but they might decide to share the copyright with their bandmates.

Copyright law allows such transfer and calls it ‘assignment’. Though when copyrights are assigned, there should be a written agreement so everyone is clear on who owns what.

Copyright terms
Copyright doesn’t last forever, though it does last for a long time.

In Europe, the copyright in a song, photograph or illustration lasts for the lifetime of the creator and another 70 years.

The copyright in a recording lasts for 70 years after its release.

Copyright controls
Copyright is all about control. As a copyright owner you get to control what happens to your song or your recording.

UK copyright law provides copyright owners with six specific controls:
• The reproduction control.
• The distribution control.
• The rental control.
• The adaptation control.
• The performance control.
• The communication control.

In the music industry, the reproduction and distribution controls are often grouped together and referred to as the ‘reproduction rights’ or ‘mechanical rights’.

Meanwhile the performance and communication controls are often grouped together and referred to as the ‘performing rights’ or ‘neighbouring rights’.

Making money from music rights
Copyright makes money whenever another person or company wants to exploit one of your copyright controls.

So they want to reproduce, or distribute, or rent, or adapt, or perform, or communicate one of your songs or your recordings.

Whenever that happens, they must get your permission to exploit your copyright controls. You charge for your permission (aka licensing), which is how copyright makes money


MUSIC LICENSING
When a copyright owner sells permission to – or ‘licenses’ – a third party to utilise their copyright controls, a deal needs to be done between the copyright owner and the licensee.

In the music industry, there are three main ways copyright owners license, and which method is used generally depends on what the licensee wants to do with the song or the recording.

Option One: License direct
The licensee finds the copyright owner and negotiates a bespoke deal. This happens when a brand wants to use your song or recording in an advert. They must find you and make you an offer. You will negotiate a deal, agree terms and write a contract.

Option Two: License via a third party
The copyright owner allows a third party to license on their behalf. The third party then does the deal on behalf of the copyright owner. This happens with DIY artists and the streaming platforms. Realistically the likes of Spotify and Apple Music don’t have time to negotiate deals with every single DIY artist. So they negotiate deals with distributors like AWAL, CD Baby, Distrokid, Ditto, EmuBands, Spinnup and TuneCore. As an artist you ally with one of those companies, allow them to license your recordings to the streaming services, and ‘piggy back’ on the deals they have already negotiated.

Option Three: License via the collective licensing system
In certain scenarios the music industry chooses to license as one. So, all the artists and record labels (more or less) put all their rights into one pot and appoint a collecting society to license on their behalf. And all the writers and music publishers (more or less) put all their rights into one pot and appoint another collecting society to license on their behalf. Licensees can then get two ‘blanket licences’, one covering all recordings (more or less) and one covering all songs (more or less). The collecting societies collect the money and pass it on to the artists, labels, writers and publishers, in theory based on how often their music was used.


COLLECTIVE LICENSING
Collective licensing usually applies for cover versions; live performance; radio; TV; whenever recorded music is played in a public space like a pub, cafe, club, shop, gym or workplace; and with some though not all digital music services.

Collecting Societies
Where collective licensing applies, both rights owners (like record labels and music publishers) and music creators (like artists and songwriters) join one or more collecting societies.

Some people refer to collecting societies as ’collective management organisations’ (CMOs) or ‘performing rights organisations’ (PROs).

Most collecting societies focus on just one set of music rights – ie either publishing rights or recording rights. On the song rights side, you may also have separate societies representing the different copyright controls, so one society for mechanical rights and another for performing rights.

The UK Collecting Societies
In the UK, on the song rights side, PRS represents the performing rights and MCPS represents the mechanical rights. Though the two societies work closely together through an organisation called PRS For Music.

On the recording rights side, the UK society is called PPL, which represents artists and labels. It also has a unit representing the labels’ separate rights in music videos.

Usually anyone looking to make use of recordings of songs will need separate licences from PRS and PPL. Though when it comes to the public performance of recordings (in pubs, cafes, clubs etc), PRS and PPL have set up a joint venture so that licensees only need deal with one organisation.

Joining the collecting societies
As a DIY artist, as soon as you start gigging and/or getting some radio airplay, it’s time to join the collecting socities, so that you can access your share of the royalties that are paid into the collective licensing system by venues, gig promoters, radio stations and suchlike.

These may be nominal sums of money initially, but could grow quite quickly as your music gets performed and played more widely.

You join PPL and allow it to represent your recording rights in the collective licensing domain. You join PRS and allow it to represent the performing rights in your songs. You join MCPS and allow it to represent the mechanical rights in your songs. Because PRS and MCPS work together, you can join both via the same website.

PPL is free to join, so you should sign up as soon as you start putting out recorded music. PRS currently costs £100 to join (it’s a one off joining fee), so you probably want to join once you start gigging, as that’s where you first royalties are likely to come from. MCPS costs another £100 to join, but you need to sign up to access all the digital royalties you are due and if your songs get used on TV.

Once joined up you then need to tell the societies about every recording you’ve put out and every song you’ve written. And you need to keep the system up to date as you put new tracks out and write new songs.

How the money flows
1. If a record label releases recordings of a song on CD or vinyl, it usually already controls the recording copyright, but needs a mechanical rights licence from whoever controls the separate song rights. This is usually provided by MCPS, though PRS For Music does the administrative work.

2. If someone stages a gig they need a performing rights licence from whoever controls the rights in all and any of the songs performed. This is provided by PRS.

3. If someone plays recorded music in a public space (eg pub, club, cafe, gym, workplace), they need a performing rights licence from whoever controls the recording rights and whoever controls the song rights. This is now provided by the new PRS/PPL joint venture.

4. Whenever a radio station plays records it needs a performing rights licence from whoever controls the recording rights and whoever controls the song rights. The former is provided by PPL and the latter PRS.

5. Whenever a TV station uses music, it needs to both copy the music (in order to synchronise it into a programme) and communicate the music (when the programme is broadcast). So it needs licences to exploit both the reproduction and communications controls of both the recording and song copyrights. PPL provides a licence for the recordings. MCPS provides a licence for the copying bit on the song side. PRS provides a licence for the communicating bit.

Whenever a society collects money on behalf of artists, songwriters, labels and publishers, it then passes that revenue on to the relevant copyright owners, covering its costs by charging a commission on that income.

What about digital?
The record industry generally licenses digital services through direct deals, which means the collecting societies don’t get involved. The main exception to this is personalised radio services (which offer much less on-demand functionality) which might be licensed via the collective licensing system.

But the music publishing sector does usually licence digital services through the collective licensing system. Streaming services need to both reproduce and communicate songs, so they need licences from both MCPS (for the copying) and PRS (for the communicating). The main exception to this is the big five music publishers, who generally license their Anglo-American repertoire directly to digital platforms, albeit in partnership with the collecting societies.

BUT for DIY artists, on the recordings side you need a distributor to get your music onto the digital platforms and to access any royalties you are due, while on the songs side your royalties will come via the collective licensing system (ie MCPS and PRS).

What happens if you sign to a label or publisher?
As a DIY artist you should join PPL and PRS/MCPS as soon as you have some music out there, are gigging and – especially – if you get some radio airplay. The societies will then start collecting royalties on your behalf and passing the monies on to you.

But what happens if you then sign a record deal with a record label and a publishing deal with a music publisher?

Well, if you sign a classic record deal, the label takes ownership of your recording copyrights and, from that point onwards, it exploits the controls of the copyright, paying you a share of that money based on what you agree in your record contract. However – by law – 50% of performing rights income – ie that collected by PPL – must still come to you direct (though this is shared out between all the performers on each record including session musicians).

Meanwhile, if you sign a classic publishing deal, the publisher will take ownership of some (though not all) of the controls of your song copyrights, including the mechanical rights. It then exploits those controls and pays you a share of that money based on what you agree in your publishing contract. However, the performing rights in your songs will remain with PRS which will continue to pay at least 50% of any income it generates from your songs directly to you.

So – in practical terms…
• If you sign to a label, you stay a performer member of PPL, but your label logs your recordings and receives 50% of the money.
• If you sign to a publisher, you stay a member of PRS, but your publisher logs your songs and receives up to 50% of the money.
• And you stop being a member of MCPS and your publisher collects all that money (paying you a share subject to contract).

Challenges with collective licensing
On one level collective licensing is a good thing.

In theory it simplifies everything. Everyone gets paid the same whenever their music is used (ie the rate you receive is based on how often your music is copied, played and performed – not how famous you are). And it allows DIY artists to easily start collecting royalties whenever their music is covered, performed in public, or played on the TV and radio.

But there are some issues will collective licensing. These include…

Competition law: When everyone in the music industry licenses together that basically creates a monopoly. PPL and PRS could in theory hold a radio station to ransom, because no music radio station could operate without both a PPL and PRS licence. Competition law doesn’t like monopolies. To overcome these concerns, collecting societies are usually regulated in some way to ensure their monopoly status isn’t abused.

International dimension: What happens when your music is played in Germany but you’re a member of the UK collecting societies? Well, most collecting societies around the world are joined up, so that PPL and PRS can pretty much represent your rights globally if you so wish. Then, in this example, the German collecting societies would collect your royalties, hand the money over to PPL and PRS, which would then pay you. However, things can get complicated when money and data moves from one society to another, delaying payment and making things less transparent.

Data: How does the collecting society know who to pay? In truth, often they don’t, because monitoring every cafe, bar, shop and workplace is tricky. So how do they decide how to share out the money? This often proves controversial!

Fees: Most collecting societies are not-for-profit and cover their costs out of the commissions they charge on any royalties they process. But some societies are accused charging too high commissions and wasting money.

Transparency: How well informed are members? Many societies are membership organisations ultimately answerable to the labels, publishers, artists and songwriters who are members. But many societies aren’t that great at letting their members know what’s going on, and that can create confusion and distrust over how monies are collected and distributed.

Should there be more or less collective licensing? Some people really like collective licensing and think it should apply in more scenarios, especially in digital. Other people – because of the problems outlined here – reckon that direct licensing should be used more often. What do you think?


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