Mechanical Licensing for the Maladroit
Mechanical licensing isn’t a topic that often comes up in casual conversation among composers, but it’s a facet of the music industry that every composer needs to know about. Sure, we’re not in it for the money, but there’s no reason to pass up a revenue stream, no matter how insignificant it may seem. You’ve probably already joined BMI, ASCAP, or SESAC and receive royalty checks for performances, but are you getting your fair share when it comes to everything in your catalog that has been released on CD?
Maybe your composition department didn’t offer any courses covering the practicalities and day-to-day operations of the recording industry, so let me help you get up to speed in one area in particular. When we peer into the crystal ball of any composer’s career, it’s pretty safe to assume that the future holds at least one commercially released recording. If you reach this milestone as a self-published composer, make sure you’re equipped to collect all your royalties from album sales, downloads, and airplay. The good news is that it doesn’t take too much time and effort to sort everything out.
Mechanical Licensing 101: Who Needs Them and Why
If you have an outside publisher handling your music, you don’t have to worry about mechanical licensing—they will do the job for you. But self-published composers need to make sure that they have a mechanical license in place with the record company before the CD is released. If the music publisher doesn’t have a compulsory license (a mechanical license at the statutory rate set by law) in place with the record company before the date of first distribution, they have effectively forfeited their right to collect any royalties from the sale of that particular CD. Don’t expect any retroactive payments, though a music publisher can choose to sue the record company for infringement if this happens. Of course in new music circles, it’s unlikely that anyone is going to burn bridges and let a bunch of lawyers walk away with all the profits and artists’ royalties.
What’s a mechanical license? Simply put, it’s an agreement in which a music publisher grants a distributing party the right to reproduce and dispense copyrighted musical compositions via CDs, records, tapes, and certain digital configurations, such as iTunes and subscription-based Internet services. Typically, the distributing party in the agreement is a record label, and most reputable labels will take due diligence to insure that they have licensing agreements in place with each music publisher before releasing an album. Not everyone follows the law to a tee, however, and there’s nothing wrong with taking a proactive approach rather than waiting for the record company to come knocking on your door waving the paperwork in your face.
Time Out: Are You Ready To Rumble?
Since the deal is brokered between the music publisher (we’re assuming that’s you) and another party, it makes things a lot easier if you have your publishing business in order before you get started. For instance, do you have a business certificate, or DBA (doing business as), in place? Left coast composer Alex Shapiro outlined the process in an earlier article, but my experience in Brooklyn was quite different.
My first obstacle was to locate the required forms. Here in New York, the necessary paperwork isn’t freely available online. Get this—you have to buy the documents at $2 a pop in person at stationery stores and copy centers, or $9 each via the Blumberg legal forms website. I’m sure I wasn’t the first clueless composer to navigate my way through the Brooklyn county clerk’s office, finally to land at the correct station, window #2, and get the lowdown. Flanked by a vista of drone-like workers stamping and filing piles of paper in the background, the smiling employee instructed me on how to obtain the proper forms and, before I went on my merry way, he wished me bountiful royalties. He really digs composers.
Like a classic film noir set-up, I entered the lobby of an office building down the street and spied my destination: an innocuous newsstand. In addition to selling chewing gum and Vitamin Water, the man behind the counter sold the necessary Blumberg forms. On top of that, he’s also a notary—a nice sideline considering his proximity to the city’s courthouse and other municipal offices. A glance at my ID and a total of $12 later, I had all of the forms signed and notarized. Back at the county clerk’s office I embarked on a second Draconian journey from numbered window to numbered window collecting the proper stamps and embossments, and dropping $120 in the process. But in a matter of about an hour, I was in business—literally.
At this point, you should also consider opening a business checking account. Not only will you be able to cash those royalty checks, but with a debit/credit card setup in the business’s name, it suddenly becomes very easy to separate personal spending from business expenses.
Getting Through the Fine Print
Now that everything is in order, you are ready to execute a mechanical license. Despite the fact that all these dealings may be totally unfamiliar, there’s no reason to be daunted. Setting up a direct license with a record company is easy. In fact, the record company does most of the work. The best time to contact the record company’s royalties department is about a month before the release date. By then, the administrators should have all the final timings for the compositions on the disc and the rest of the necessary data they need to put together the licenses. When the contract arrives, read it over, make sure everything is correct, including the spelling of your publisher name and address, the timing of the track, and that you are to receive 100 percent of the statutory rate.
Of course, if you’re anything like me, completing this sort of paper work is a total drag. Isn’t there someone who can take care of all this stuff?
Indeed there is. For a mere 6.75 percent commission from royalties collected, the Harry Fox Agency will execute mechanical licenses on your behalf, as well as collect and distribute your royalties for you. If you’re ready to affiliate your music publishing business with HFA, here’s the 411. Note that, although their literature states that in order to apply for representation by HFA your publishing company must own or control at least one musical composition currently under a mechanical license by a third party, there’s a way to sidestep this catch-22 if this happens to be your first foray into licensing. You can save yourself the step of directly licensing your first release yourself if you include, along with your affiliate application, a signed letter from the record company stating that they are seeking a license from you at the statutory rate. (Note that HFA doesn’t engage in agreements that do not adhere to the statutory rate set by law without your permission.)
Expect to spend around 15 minutes filling out the straightforward HFA affiliate application. The only information you may have to look up is your business checking account number and your bank’s ABA routing number. If you have any questions, HFA’s client relation agents are friendly and helpful—that is, if you can get anyone to pickup your call. I had about a 50:50 success ratio.
If you decide to affiliate with Harry Fox, the agency considers it a lifetime commitment. They will not drop you, even if the next time someone requests a license from you happens sometime after the reappearance of Halley’s Comet. On the other hand, you are free to terminate the relationship whenever you wish. Being an affiliated publisher doesn’t preclude you from licensing directly if you so wished. However after joining, you may never have to think about licensing ever again. As a general rule, record companies check with the Harry Fox Agency first, which in turn takes care of everything. As an affiliated publisher, each title you submit to HFA will be registered on their web-based applications: Songfile (used for licenses of 2,500 copies or less) and eMechanical (used for larger-market licensing).
If your music is primarily issued by foreign record companies based in one country, you might consider looking into affiliating with that nation’s corresponding mechanical and digital licensing agency. However, this can get a little messy considering the roles of foreign societies don’t always match up exactly with the way things are done here in America, not to mention that eligibility requirements for admission into foreign agencies are often a lot more stringent. You should carefully research the benefits and drawbacks before affiliating with any performing rights or licensing agency. There are no local alternatives to the Harry Fox Agency other than going the do-it-yourself route. If your music is commercially released overseas, HFA works with foreign agencies to collect your royalties, but not before a 5 to 20 percent commission is deducted by the foreign society (royalties in other countries tend to be higher to begin with) on top of the standard HFA commission.
If you’re not constantly harassed for licenses by record companies on the scale of, say, Paul McCartney or Dolly Parton, it might make sense for you to execute direct licenses each time your work is commercially released and save yourself the HFA commission fees. However, as one record company executive told me, Harry Fox collects. In fact, HFA conducts examinations to verify the accuracy of the payments remitted by licensees and claims that, in many cases, the affiliated publisher’s royalty compliance recoveries are in excess of the commission they pay for their service. Also, in the unlikely event that your music ends up being released without your knowledge, as an HFA affiliated publisher you’ll have the resources of the nation’s largest mechanical licensing, collections, and distribution agency on your side. As representatives of roughly 28,000 music publishers both big and small, they maintain a vigorous anti-piracy stance. In collaboration with foreign societies, HFA has collection and monitoring services in over 95 territories around the world. So in a way, what you’re really paying for is all of these above-and-beyond services. The lone, self-published composer certainly isn’t capable of this level of fiscal consciousness, especially if they’re planning to turn in that next commission on time.
So, how much “collecting” are we talking here? Admittedly, not much. Currently, the statutory rate is $.091 per unit sold for compositions that are five minutes in duration or less, or $.0175 per minute of fraction thereof per copy for compositions over five minutes. If for some reason your CD hits the Billboard charts, those fractions of pennies can really add up. However, the average classical CD sells between 1000 to 2000 copies worldwide, and I’m sure Andrea Bocelli helps to inflate this figure handsomely. If your 20-minute symphony sells 500 copies, that’s $175 ($163.19 minus HFA’s cut). So at the end of the day, you should probably consider yourself very lucky if you managed to rake in triple digits. But if you affiliate with HFA, it won’t really take any of your time or attention beyond watching the direct deposits trickle into your account on a quarterly basis.
Why not get your ducks in line and enjoy a little mad money? You’ve got nothing to lose. As I type, the Music Publishers Association is lobbing congress to consider certain digital distribution models, like satellite radio services for instance, as both a mechanical right and a performance right. So who knows—if the publishers get their way, royalties from HFA and your performing rights organization could be getting bigger very soon.