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Create Your Own Mechanical License

July 1, 2014
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Get paid royalties when other artists record and release your songs

WHILE ROYALTIES on record sales continue to be an ever-shrinking contributor to a songwriter’s income, there are still opportunities to make money from other artists cutting your songs. Subscription-based tip sheets such as Row Fax (rowfax.com) list recording projects for which songs are currently being sought by both major and independent labels. And websites such as musicxray.com let anyone pitch songs—for a substantial fee per submission—to labels and producers for their upcoming projects. It’s also not uncommon for musicians to record a song written by another songwriter in their network.

You are legally entitled to get paid a royalty for each unit released on a physical medium (such as CD, cassette, or vinyl) or sold in a digital format (for example, a download or ringtone) by the artist covering your copyrighted song. Such a dividend is known as a mechanical royalty, and the license that permits a cover song to be released and sets the rate of royalty payment is called a mechanical license.

The Harry Fox Agency (HFA) issues mechanical licenses and collects and distributes the royalties from there to its affiliated music publishers, in exchange for 8.5% of the take. But if you’re not a publisher, or if you simply want to keep all royalty proceeds for yourself, you can do your own mechanical licensing. This article will detail some of the key elements you should include in your in- house mechanical-license document. For simplicity’s sake, I’ll limit the scope to licensing physical releases and digital downloads.

Don’t Forget the Basics Your mechanical license should include the name of the artist cutting your song as well as the record company’s street and email addresses and phone and fax numbers, along with the name of a contact person at the company. The catalog number of the single and, if appropriate, the album the song will be included on should also be noted, along with the album’s title. If the license is for a physical release, each authorized release format (CD, LP, and so on) should be noted. When licensing digital downloads, the document should note the URLs for all Web pages from which downloads will be executed. The license should also state the recording’s UPC and ISRC numbers, the title of the song, its playing time, and the release date.

Stipulate How Much and When You’ll Get Paid When licensing a song to a small independent label, I have the company specify the number of units they want to reproduce for sale or offer for download, and require payment of all royalties up front. This payment is likely to be the only money you’ll ever see from an indie label, so make sure the mechanical license stipulates that recordings not be distributed until the license has been signed and returned to you along with payment in full. The current royalty rate is 9.1 cents for a recording lasting five minutes or less, or 1.75 cents per minute, or fraction thereof, for a recording over five minutes long.

When licensing a song to a major label, spell out when you will be paid for royalties due you each quarter: A reasonable schedule is “within 45 days after March 31, June 30, September 30 and December 31 of each year.”

Protect Yourself Your mechanical license should require the licensee to keep complete books of all transactions related to their record sales of your song. It should prescribe your right, on 30 days’ written notice and at your expense, to audit, examine, and make copies and extracts of those books—so you can determine whether or not you’re being paid your due. The license should further stipulate that if the audit shows an understatement greater than 5 percent, the licensee will pay for the cost of the audit plus interest at the maximum rate permitted by law for all sums due. The license should dictate that failure to account for and pay the required royalties will result in the license being automatically revoked and terminated 30 days from the date you give the licensee written notice of their violation by certified mail; without that clause, a delinquent licensee can continue selling limitless copies of your song while owing you royalties until you’re six feet under.

Get Credit For a release on a physical format, the mechanical license should stipulate that the release’s label copy or permanent container must have inscribed on it your name, the copyright date, and the name of your publishing company and its affiliated performing rights organization (for example, BMI). After all, every unit that’s distributed is a promotion of your song. Make sure the next artist who wants to cover it knows how to find you.

Michael Cooper is the owner of Michael Cooper Music (BMI) and a contributing editor for Mix magazine.

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