For the third installation of our royalty’s discussion, we will walk through the flow of money for a main-stream radio song. So far we have outlined the major players and defined the various types of royalties that each may be entitled to. Let’s put those players to work and see who gets paid.
Jeffrey Mandain is an aspiring songwriter from St. Louis, Missouri and after years of toil and a few tears, he writes a song called “Whiskey For My Hound Dog.” Mandain cannot play a single chord on the guitar, so he calls his friend Jack Preacher to help put the song to music. Preacher puts together a sorrowful guitar melody that speaks to everyone that hears the rough track that he records in Mandain’s garage. Neither Mandain nor Preacher know anything about royalties, copyrights, or how to get the song from Mandain’s garage to the bright lights of show business, so they call S&E Entertainment, a local publishing company. Recognizing the potential of “Whiskey For My Hound Dog,” S&E agrees to work with Mandain and Preacher and pays them $10,000.00 for a 50/50 split of the copyrights to the song’s music and lyrics. Since S&E is a savvy publisher, they get the exclusive right to exploit Mandain and Preacher’s portion of the copyright, which means they can sign licensing contracts as if they owned 100% of the copyright.
Soon after signing the contract, S&E registers Mandain and Preacher as songwriters on ASCAP, a performing rights organization, and registers “Whiskey For My Hound Dog” as a musical composition with ASCAP. S&E also registers the song with the Harry Fox Agency, the mechanical rights agency that S&E prefers to use.
So far, we have established a few of the players:
- Songwriters: Mandain and Preacher
- Publisher: S&E
- Performing Rights Organization: ASCAP
- Mechanical Rights Agency: Harry Fox Agency
Preacher received $5,000.00 and Mandain received $5,000.00 from S&E in exchange for 50% of the copyright and the ability to license the music and lyrics (the musical composition).
S&E immediately goes to work and calls Buzz Village Records, a promising record label in St. Louis. Buzz Village recently signed a budding star in Leia Sonalta, a young pop singer with a sultry voice. S&E and Buzz Village agree that “Whiskey For My Hound Dog” would be the perfect single to break Sonalta into the mainstream music world, and the two companies sign a contract that grants Sonalta a recording license to record a version of the song. Buzz Village pays S&E $1,000.00 for the recording license, and Sonalta records the track at Buzz Village’s in-house studio, including Preacher’s guitar work in her version. The recording is wildly successful and Buzz Village immediately presses 1000 CDs to send out to local radio stations.
Now we have a few more players and more money involved:
- Record Company: Buzz Village
- Performer: Sonalta
S&E received $1,000.00 from Buzz Village for the recording license, and distributes $250.00, $250.00 to Preacher, and keeps $500.00. (Remember S&E owns 50% of the copyright now). Buzz Village now owns the copyright to the master recording of Sonalta’s version of “Whiskey For My Hound Dog,” based upon their contract with the artist. Finally, Buzz Village pays $91.00 to S&E in mechanical royalties because they press 1000 copies of the musical composition (1000 CDs x 9.1 cent statutory rate). S&E distributes this money to Preacher and Mandain based on their contract ($22.75 each and $45.50 to S&E).
For purposes of this example and ease of math, let’s assume that under Sonalta’s contract with Buzz Village, Buzz Village retains the copyrights to her recordings and they split all profits from her albums 50/50. Any discussion of recoupment by the record label or any other aspects of a recording contract are outside the scope of this article.
Totals
• Preacher: $5,272.75
• Mandain: $5,272.75
• S&E: -$9,454.50
• Buzz Village -$1,000.00
• Sonalta $0.00
Sonalta’s version of “Whisky For My Hound Dog” is a smash hit! It plays on the radio constantly and record stores are clamoring for the opportunity to carry Sonalta’s album in their stores. Buzz Village quickly presses 100,000 CDs that all sell out in a week (retail price - $15 per CD). Cover bands across the country start playing “Whiskey For My Hound Dog” in bars and small venues, and Sonalta goes on a nation-wide tour to support the album. Also, websites allow users to stream the song and download short snippets of the song. Buzz Village and S&E also assign a synchronization license with a major movie studio to feature the song as the main title. The studio pays $10,000.00, which S&E and Buzz Village split 50/50.
Things have started to get interesting. Buzz Village pays $9,100.00 to S&E in mechanical royalties for pressing the 100,000 CDs. S&E also receives $5,000.00 for the sync license. ASCAP pays S&E $20,000.00 in performance royalties for the radio play, the cover bands, and Sonalta’s nation-wide tour (yup, she has to pay too even though she made it famous). S&E and Buzz Village also agree that Buzz Village will pay 2 cents for every copy of the album because Sonalta demanded to have the lyrics printed in the album notes ($2,000.00). SoundExchange pays $5,000.00 to both S&E and Buzz Village for all of the digital streaming that occurred on the Internet and the Musical Works Fund pays S&E $1,000.00 in AHRA royalties for all the people that illegally copied the album at home.
When you work out the math and distribute the money according to the contracts, the totals are:
• Preacher: $14,297.75 (lyrics only belong to Mandain)
• Mandain: $15,297.75
• S&E: $9,095.50
• Buzz Village $742,900.00
• Sonalta $750,000.00
Clearly, I made up the amounts involved and I did not account for a tremendous number of costs that go into the activities described in this example, such as pressing costs, artwork, shipping, overheard, etc.. Not to mention, I did not account for any of the intricacies that are part of the licensing and recording contracts between these parties. However, this example does outline the different ways that the Players use the Royalties for the final Payoff. Moreover, this cycle continues forever until the copyright holder dies or sells the copyright to someone else.
Matthew T. Nagel is an entertainment attorney at Wuestling & James in St. Louis, Missouri and an adjunct professor at Fontbonne University and Washington University School of Law. If you have questions, you can reach him at Nagel@wuestlingandjames.com.
* Articles are primarily educational and do not purport to constitute legal advice. No attorney-client relationship is created between the author and any reader of this article. If you have legal concerns or questions be sure to consult with an attorney licensed to practice in your jurisdiction.
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