Music publishing agreements series; (part 14) How do publishers work with the royalty collection societies? (Mechanical royalties) (continued)

USA and Canada

In the USA, mechanical royalties are calculated in a different manner. In the US, each song currently attracts a statutory mechanical royalty of 9.1c cents so that, for example, a ten track album will give rise to total mechanical royalties of 91 cents per album. In Canada, the current rate 7.7 cents, due to an industry agreement, like South Africa (the statutory rate was removed there some time ago). In both the USA and Canada, higher rates are paid for songs in excess of 5 minutes. New rates are set regularly. Generally, the US societies will pay the publishers, who will then pay their composers.

Remember, as discussed previously, that record companies try to limit their exposure to mechanical royalties in many territories (particularly the USA and Canada) on so-called “Controlled Compositions” (i.e. songs written or controlled in whole or in part by a recording artist) by trying to get the recording artist to agree that the record company be entitled to a discount on the prescribed rates – usually, a 25% discount (or “75% of statutory”).

They also try to limit the number of songs per record on which they have to pay mechanical royalties – for example, two songs per single and ten songs per album. Remember also that, as discussed previously, with singles now having as many as four tracks and CD albums as many as fourteen tracks these “Controlled Compositions” provisions impact significantly on a composer’s remuneration and so must be carefully studied by the composer’s professional advisers.

Mechanical royalties are also payable on commercial video sales (currently at the rate of 6% of dealer price in the UK, and 9% in South Africa).

Synchronisation fees (unlike mechanical royalties) are always open to negotiation on a case-by-case basis so that for a song being placed in big budget Hollywood film, the publisher might be paid a synchronisation fee of millions, but for an unknown song being placed in an MNet documentary, the synchronisation fee might be very small (a few hundred Rands).

Occasionally, the publisher may agree to waive any synchronisation fee if the project clearly has a promotional or marketing value which will benefit the composer in other ways. Synchronisation fees are also usually payable on commercial video sales. Certain types of synchronisation are covered by blanket industry agreements with the broadcasters (for example, general usage of songs in television programmes).

Very often, the SABC will “commission” a composition to be made for use in a particular programme. One would think that this would result in complete and outright ownership of the composition by the SABC. Surprisingly, though, it has become the norm for such commissioned works to be owned by the SABC for the purpose commissioned, but for the composer to still be able to collect mechanical and performance royalties for other uses of the song. The accuracy of the term “commissioned work” in the broadcast realm, therefore, has been watered down.

For cover recordings, a publisher will usually ask for a higher cut than normal to reward him for the extra effort he has (supposedly) made to arrange for a composer’s song to be recorded by somebody else. Typically therefore, the composer’s royalty from the exploitation of “cover recordings” will be between 50% and 65%. Because of this discount, it is very important for the term “cover recordings” to be carefully defined in the contract.