FROM THE DESK OF

FROM THE DESK OF... SHELLY HARRIS

UNRAVELING THE RED TAPE

by Shelly Harris / Attorney

QUESTION:

Our band recently received a contract (entitled “Mechanical License”) from a company that wants us to give them a non-exclusive “right, privilege, and license during the term of the copyright” to "reproduced, market, and sell” some specifically named songs that we have written as a band. The contract says it will use the compositions for “manufacture and sale” in the U.S., and that they will give the owners of the song 15 cents per each “phonorecord” manufactured, sold, and paid for.

Is this a good deal? What can they use the named and recorded compositions for, and it the rate they are offering to pay reasonable? We like the fact that it is a “non-exclusive” contract, but we don’t like it that it will go on for the entire term of the copyright of the songs.?

ANSWER:

This is an interesting contract in that it seems to grant the licensee more than just the "Mechanical License" that it states it is in its heading. Keep in mind that a Mechanical License is the right another party or artist has to make a cover version of a previously recorded composition, even without your approval, provided they pay the statutory rate per unit manufactured.

From what you have explained, this company may or may not use your own original sound recordings in addition to your original compositions, which goes far beyond a true Mechanical License, and in fact becomes a potential distribution contract as well. In return, however, they would be paying you roughly twice the Mechanical License royalty rate, which is great if they only use your compositions, but not really a good deal if they use your own original recordings, despite the fact that the deal is non-exclusive. Keep in mind that you could get an offer from another distribution company, or, especially, a full-blown record label that could want to use some of the songs named in this contract, but only if they have exclusive rights. Since this contract purports to have the rights to the recordings and compositions for the entire term of the copyright, that could create problems for you in securing future, more ulcerative deals involving any of these recordings.

In my opinion, it is NOT a good thing at all if they won't back down or negotiate another time period other than "the term of the copyright of said Compositions." This company seems to be gambling or speculating by signing promising new artists and composers who could get signed with a label that wants an exclusive record deal -- wherein some or all of the songs that you are licensing could be included. In that case, this company's licensing rights would have to be bought out, if any of those songs were to be included in any subsequent deal. The perpetual licensing terminology would give them tremendous bargaining power, even though it's a non-exclusive contract. (As you know, a label or any other entity investing any real capital in the promotion or distribution of the songs/performances would not take kindly to another company "piggybacking" on their efforts, since the company you are referring to would still be able to distribute the same songs, too, under this contract.)

There may also be a problem because this agreement is not promising to actually manufacture or sell the records within any particular time frame, or in any particular quantity. You could try and negotiate on that, too, and if they refuse, then I think that it is very clear that they are pursuing this contract not to make any immediate money, etc., on the recordings right now, but, rather, they are prospecting that the songs may become popular or known via another avenue, then they could release those same songs after the fact -- and in competition with another label or distributor.

Email your entertainment business questions and comments to Shelly at: shellyharrislaw@aol.com

[Note: Names are always changed in these Q & A’s; in addition, it is always in your best interest to consult an attorney of your choice directly regarding any particular legal issue or problem you might have.]

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