Production Music Contracts | Before You Sign - EMusician

Production Music Contracts | Before You Sign

UNDERSTAND THE RISKS AND REWARDS OF PRODUCTION MUSIC CONTRACTS
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Even if you don''t know what production music is, you''ve no doubt heard it in a movie cue, TV commercial, radio broadcast, or elsewhere. When producers for film, TV, radio, the Internet, or any other media outlet need inexpensive, pre-existing, original music for their productions, they often use production music. The same piece of music might be licensed for nonexclusive use to several—or even hundreds—more producers for different projects and media, thereby creating a recurring stream of revenue for the content owner.

Some musicians create and own their own libraries of production music (organized according to genre, application, mood, or other criteria), but producing content for an established company can result in a greater number of licensing opportunities. If a production-music company offers you this kind of gig, you will be expected to compose, record, and possibly mix a specific number of songs or ad spots, with or without vocals, in a certain genre (such as pop, country, or jazz). In return, you''ll be paid a flat fee and possibly limited royalties in a work-for-hire arrangement. In this situation, the company that employs you—or, more typically, subcontracts your work—is considered the sole author, publisher, and copyright owner of the compositions and sound recordings you produce for it.

This article will detail some of the terms you might be offered in a production-music contract and how to recognize and avoid signing a nightmarish deal. Some contracts are fair and equitable to both parties. But if you''re not careful, signing a bad contract—one tilted heavily in the production-music company''s favor—can cost you more money than you earn and expose you to potentially devastating legal liabilities.

I''m not an attorney. But by using the information in this article, you''ll be able to spot and hopefully renegotiate any risky or predatory clauses before you refer the contract to a costly attorney for review. If the production-music company won''t bend on terms you absolutely can''t accept, you can walk away without having spent a dime on attorney''s fees.

ALL TOGETHER NOW
Most production-music contracts stipulate an all-in arrangement. In this type of agreement, the company pays you a flat fee—usually in installments as specific phases of your work are completed—to use both as a recording fund and for your personal compensation. You must agree to be responsible for all costs incurred in completing the productions. These may include hiring a studio, engineer, and musicians; travel expenses; blank media; and all bills for phone calls, shipping, and postage necessary to carry out your work.

The costs of paying other people to contribute their talents to your productions can easily exceed the flat fee you earn, so the all-in agreement makes the most sense for composers who can play all the music themselves and record and mix all the tracks in a home studio. Although some production-music contracts also pay royalties to the composer, they may not amount to much if the music is rarely licensed. The balance of any flat fee you haven''t spent on production may be the only significant money you ever see for your hard labor.

To ensure that you''ll make a profit, it''s imperative that you work up a detailed budget for your productions and compare it to your flat fee before you sign any agreement. You should also divide your estimated profit by how many hours it will take for you to do the work. If the resulting hourly wage is less money than you can make doing other kinds of work (for example, hiring your studio out or playing gigs) and your schedule typically stays busy, you may not want to accept the production-music work unless the flat fee can be negotiated higher or there are additional incentives such as royalties offered.

In negotiating your contract, you should always ask to receive 100 percent of the writer''s share of performance royalties associated with licensing your work. (The writer''s share is typically 50 percent of the total performance royalties earned; the remaining 50 percent is the publisher''s share, which the production-music company typically receives.) The contract should specify that you''ll be paid your performance royalties directly by whichever performing rights organization (PRO) you belong to (BMI, ASCAP, or SESAC in the U.S.).

Make sure the contract states that you''ll get paid royalties quarterly (four times per year) and grants you audit rights. Some companies insist on paying you only twice a year so they can earn interest on your money while it sits in their bank account for an additional three months. And without the right to audit the company''s books, you''ll have no way of finding out whether you''re being paid everything that is owed to you.

Performance royalties usually won''t amount to much unless your music is placed in either a TV series or a movie that is played in foreign theaters. (Movies played in theaters in the U.S. don''t earn performance royalties.) Performance royalties for TV ads are usually negligible; you''ll probably earn only tens or hundreds of dollars from licensing one album''s worth of music during the course of one or more years. But once in a blue moon, your music might be used in an application where significant performance royalties are earned, and you should get your fair share.

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Producing content for an established company can result in a greater number of licensing opportunities than trying to market it yourself.

WHERE THE BIG MONEY IS MADE
Performance royalties are important, but the majority of revenue is earned from synchronization fees. A sync fee is money paid by a producer for the right to synchronize music to, for example, a motion picture for theatrical release, a video in a commercial TV ad, or images and animation in a videogame.

Sync fees can be very lucrative. The sync fee for typical production music included in a 30-second Ford commercial on TV would likely be around $10,000; a longer ad might pay more than twice that amount. The sync fee for a major motion picture could bring in tens of thousands of dollars. You should try to negotiate a share for yourself of any synchronization fees your music earns. Think how exploited you''ll feel if your music ends up in a major movie in domestic release and all you earned was a modest wage from your flat fee. Meanwhile, the production-music company will be rolling in it. They know the value of sync fees and will likely resist giving you a share of this most important revenue source.

Another way in which a production-music company might try to shortchange you is by directly licensing the performance rights normally granted by your PRO. This is not an inherently devious arrangement—some producers insist on procuring a direct license—but it can be worked to your disadvantage. When a company grants performance rights directly to a producer, it typically adds any performing rights fee to the sync fee to arrive at one lump-sum fee. The component parts of the lump-sum fee (including your performance royalties) may not be separately delineated. In this case, your contract with the production-music company will probably set forth a formula calculating what percentage of the total fee is assigned to your performance royalties. Guess who the formula favors?

If the contract disallows your earning any portion of the sync fee, the production-music company will try to formulate your performance royalties to be the smallest percentage of the total direct-licensing fee it can get away with. That way, it gets to keep the lion''s share of the direct-licensing fee and you get paid only a tiny one-time payment instead of recurring performance royalties (which you would have received had you licensed the work through a PRO). What''s more, by agreeing to be paid such a small share of direct-license fees, you incentivize the production-music company to bypass your PRO as often as possible.

Of course, not all direct-licensing arrangements work this way. Sometimes a separate fee may be collected by the production-music company for the granting of performance rights. In this case, the company may try to deduct an administration fee off the top before paying you your share (the writer''s share) of the proceeds. This is absurd. It''s a publisher''s job to administer copyrights, and it''s a presupposed service they should provide to you in return for your surrendering to them the publishing income earned from your music. Imposing an additional administration fee is an attempt to get paid twice for the same service. Fight to have any such fees removed from your contract.

RISKING IT ALL
Production-music companies have no way of knowing whether the compositions they pay you to create are original and don''t infringe on someone else''s copyright. For this reason, they usually include legal safeguards to protect themselves should an infringement suit be brought against them. The problem is, this portion of the contract usually makes you assume any and all legal liabilities, whether deserved or not.

For example, the contract may stipulate that “you indemnify the company for all litigation costs, attorney''s fees, and any other unspecified damages, loss, or expense arising from any breach or alleged breach of representations or warranties made herein by you.” Your warranties might include statements that your compositions are original and that all musicians you hired to play on your productions were contracted for in a buyout arrangement and aren''t owed any royalties.

One problem with the foregoing indemnity clause is that anyone can falsely allege that your compositions infringed their copyright, and you''ll be completely on the hook for all legal fees the production-music company spends defending its own copyrights in your music—even if the case is dismissed for being frivolous. To protect yourself, you must insist that any breach by you has been reduced to a final adverse judgment by a court of competent jurisdiction (not by the local traffic court!) or has been settled with your written consent. Fight any clause in your contract that permits the production-music company to settle the lawsuit without your approval and makes you pay for all legal expenses. Such a clause would, in effect, allow the company to use your bank account to make a nuisance suit go away. The bottom line is that it is a publisher''s duty to defend its copyrights. The burden shouldn''t fall on you unless you are at fault (you did actually steal someone else''s song) or you still own part of the copyright and are earning a portion of the publishing income (in which case, legal expenses should be shared by you and the production-music company).

The production-music company may successfully sue another person or company for unlawfully copying your melody or lyrics covered in your work-for-hire agreement. In this case, you should share in any net proceeds recovered in the suit, after first deducting the production-music company''s legal fees and expenses. Beware of language in your contract that unfairly attempts to assign all net proceeds exclusively to the production-music company. Had your melody and lyrics been lawfully licensed to the defendant, you surely would have made money. It''s only fair, therefore, that you share in any proceeds recovered through the suit, even if your cut is just a small portion of the total.

No matter the terms of your contract, you should strongly consider forming a Limited Liability Company (LLC) before doing production-music work. Having an LLC will protect your home and personal belongings from any adverse judgment rendered against you in a lawsuit. If the damages are high enough, you can still lose all business assets you own, including your studio equipment. But at least you''ll still have a roof over your head.

REALITY CHECK
The production-music market is saturated. Many companies—and many thousands of compositions—now compete for the same licensing opportunities. As a result, the majority of music ends up never being licensed, or licensed for peanuts. Back-end payments (royalties and sync fees) may not amount to much, so you should make sure any advance you are offered is substantial enough to make all your work worthwhile.

Weigh the risks against the benefits of signing. If you feel like you''re going to have to take a shower after signing, walk away.

Thanks to the Internet, the power to market and distribute production music is no longer the exclusive domain of major companies. If you don''t like the deal being offered you, roll your own.

Contributing editor Michael Cooper thanks Andrew Keresztes, Craig Sharmat, Mike Levine, and Ted Greenwald for their helpful information.