What Does Sound Exchange Do?

I’ve described how a song contains two different legal elements: 1) the underlying song or composition; and 2) the recorded performance of the song.  Whenever a song is performed a royalty is owed to the songwriter (or the songwriter’s publisher) for the use of the underlying song or composition.  ASCAP and BMI collect and administer that royalty.

So how does a recording artist get paid when the record performance gets played?  Traditionally, when a sound recording gets played on the radio or in a business, no royalty is owed for the use of the sound recording.  That is, the sound recording artist (the band) and its label do not get paid for the use (playing) of the sound recording.  Only the songwriter gets paid a royalty for the use of the composition.

However, the Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 granted a performance right for sound recordings.   But it only applies to digital transmissions – internet and satellite radio must pay the sound recording owner (label or band) for the performance of the sound recording.

Sound Exchange is a private, non-profit organization authorized to administer and collect the performance royalty for digital plays of the sound recording.  Sound Exchange issues licenses to internet and satellite radio and collects a fee.  Sound Exchange monitors play of songs on internet and satellite radio.  Sound Exchange then pays the sound recording copyright owner (label), the performing artist (the band), and even featured performers, a royalty based on the number of plays a song receives.  And although the royalty rate is fractional, many plays can add up to significant revenue.

Because the performance right for sound recordings only applies to digital transmission, traditional radio and businesses do not have to pay a royalty for use of the sound recordings they play.  This was traditionally seen as good promotion for the artist.  But most songs receive the majority of its play on traditional radio and in retail, restaurants, bars and clubs.  A major war is going on in Congress between record labels and artists against corporate radio over the Performance Rights Act, which would apply the royalty for use of the sound recordings to traditional radio and others.

Next time:  What is an ISRC and an ISWC?

Who Is Harry Fox?

Last time I discussed how Mechanical Royalties are moneys a songwriter receives when another artist records their song.  When an underlying song (composition) is recorded and reproduced a Mechanical Royalty is owed to the owner of the underlying song (publisher and/or songwriter) for the use of the underlying song.  The Mechanical Royalty is typically paid by the record label to the song writer or publisher for use of the underlying song in a recording.  The same mechanical royalty applies for digital downloads (internet) or physical (cd or album) reproductions of a song. 

If you are recording a song that you wrote, your label owes a Mechanical Royalty to your publisher (more on this in the next issue).  If you record a cover version of a song that has already been recorded, you or your label must obtain a mechanical license and pay a Mechanical Royalty to the publisher/songwriter of the underling song. 

            Harry Fox Agency is a private company that issues mechanical licenses and collects mechanical royalties.  Publishers or songwriters sign up with Harry Fox Agency.  When a recording artist wants to record a song represented by Harry Fox Agency, the artist or label contacts Harry Fox Agency, who issues the mechanical license.  The Harry Fox Agency then collects the Mechanical Royalty, for the use of the underlying song, and pays the publisher or songwriter.

            That is how a songwriter gets paid for the use of his/her song when it is recorded.  The Harry Fox Agency coordinates issuing Mechanical Licenses and collecting Mechanical Royalties.  To record a song not listed with the Harry Fox Agency, a recording artist must contact the publisher or songwriter directly and obtain a mechanical license. 

            In the next Night Light newsletter I talk about what happens with Mechanical Royalties when you record your own songs. 

How Does a Songwriter Get Paid When His/Her Song is Recorded?

Last time I discussed “what is a song” and explained that a song contains two distinct legal parts: 1) the underlying song or composition; and 2) the recorded performance of the song.

            The underlying song is notes on a page of written music, the composition or that thing created by the songwriter.  There can be only one underlying song or composition.  Every time an underlying song is performed the songwriter is entitled to a royalty, which is called a performance royalty or publishing royalty, typically collected by ASCAP or BMI, usually through a publisher who pays the songwriter.  The recorded performance of the song is usually owned by the person paying for the recording – typically he label - who pays the performing artist a royalty based on sales of the recording.  There can be many recorded performances an underlying song. 

            So how does a songwriter get paid for the use of his/her song when it is recorded by artists?  This is the often misunderstood Mechanical Royalty. 

A bit of history:  Before recorded music, in the 1900s songs got popular on the vaudeville circuit.  Musicians would buy the sheet music to perform songs.  The sheet music was published by music publishers, who then paid the songwriter a percentage of the sheet music sales.  Then player pianos were invented.  Player pianos used a thick piece of paper punched with notches that caused the piano keys to play the song – a mechanical process.  Live piano players were no longer necessary and sheet music wasn’t being sold as much.  But the underlying song was being reproduced or performed by the piano scrolls used by player pianos.  The publishers lobbied Congress and the Mechanical Royalty was created.  The Mechanical Royalty was a royalty that the manufacturers of the piano scrolls were obligated to pay to publishers for use of the underlying song.  When albums and tapes were invented, the mechanical royalty was extended to those formats, which were also mechanical reproductions (a needle in a groove and electrical current from tape to tape head).  When cds were invented there was no mechanical process involved (only digital code), but in the 1980s, after much debate, the mechanical royalty was extended to cds.  And the same thing happened with digital downloads.

            When an underlying song is recorded and reproduced, in any format, a Mechanical Royalty is owed to the owner of the underlying song (publisher and/or songwriter) for the use of the underlying song.  The Mechanical Royalty is typically paid by the record label to the song writer or publisher for use of the underlying song in a recording. 

The amount of the mechanical royalty has increased over time and is now $.091 for songs 5 minutes or less, based on each recorded copy of the song.  (17 US Code 115).  The same mechanical royalty applies for digital downloads (internet) or physical (cd or album) reproductions of a song. 

            The Mechanical Royalty is somewhat difficult to grasp, but first understanding the different rights and royalties for an underlying song or composition and a recorded performance of a song is the first step.  This is just a basic outline.  Over the next several Night Light newsletters I will address more about Mechanical Royalties and other royalties that can provide revenue to songwriters, publishers and recordings artists.