Who Owns the Masters? Info every studio owner should know

[DrFord]

DUC friends and family,

I just finished a consultation with a recording artist client, in negotiations with a small independent label. As I reviewed the deal, it surprised me how little the label and client knew about ownership rights. After I sited several free information resources (glad I had my laptop) the scope of the contract had to be re-written.

So I wanted to share some info with you fine Ducaroos who may find this useful. I am going to quote a few readily available sources of the info you can get on the web. For detailed information about Publishing rights and your own career, please speak with a representative from BMI / ASCAP / SESAC / Harry Fox or any other authority on Rights Management. I am not a lawyer, and as such I am not allowed to give you legal advice. My goal with this article is simply to give you the best and most current information I can gather, in a form that makes sense.

Just remember that whatever the contract says goes... so knowing this stuff BEFORE is essential, because once you sign the contract, it is binding!

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Who owns the masters?

So you bought a DAW, and you invited your friend over to record a song. No "deals" were made, no verbal agreements, just a mutual enjoyment of music and some friendly songwriting. After the song demo is recorded, your friend shows it to his Dad, who gives it to a friend at Universal. In one week the demo is released "as is" and your friend is now an international pop star.

Sounds crazy right? Well it happens, but not often. So who gets paid and what? Well it all goes back to your original investment of time and equipment. Since no money was exchanged between the artist and the equipment owner, the ownership of the master goes solely to YOU the equipment owner.

Why?

Wikipedia states:
Definition

The phrase "original master recording" began in the period of acoustical audio recording - one "cuts" a recording because the sound is literally cut into the record. The resulting record was then used as the "master", or original prototype from which further vinyl or acetate copies could be pressed. There is only one original master recording, and that's the recording made at the time of the original recorded performance, but the term "master" is commonly used to describe almost anything used as a source.

For us, this translates directly to the Mixdown made into a WAV file / MP3 or whatever method you used when you selected "Bounce to Disk." In this way, the hard drive that stores both the Pro Tools session and the Mixdown can be declared as the "Master".

Wiki cont.
A multi-track [recording] may be remixed many times, in different ways, on different days, by different engineers, giving the possibility of several masters (AM radio version, mono version, LP stereo version, single version, guitarist's personal version with lead solos emphasized, etc). Any of these would have the designation "first generation", but not necessarily "master", which means there could be many alternate mixes.

Each of these alternate mixes could then be released, and each would be considered a "master" to which ownership can be declared. Masters can only be used, if a "Master use right" is obtained.

Harry Fox Agency:
What are Master Use Rights?

Master use rights are required for previously recorded material that you do not own or control... ...Master use rights can only be obtained from the owner of the master recording.

Who owns the master recording and how is it determined?

Wikipedia:
Ownership of the master

Song masters and album masters are considered intellectual property. As with physical property, ownership is acquired by purchasing it, creating it or inheriting it. In this sense, the intellectual property concept applies similarly in the purchase of a house, a car or any other property. The ownership to the master will however not necessarily correspond with the title to the copyright in the audio work. Thus, the sale of a master tape will in most jurisdictions not necessarily imply the transfer of copyright to the songs recorded.

Before a song or album master is released, the value of the master is determined by the cost to produce it. After release, the value of the master is determined by its potential to sell CDs. The master and all rights associated with it may be sold for several times the production cost or "recoup-able cost".

Here's the first question you need to ask, "What was agreed upon before the session?" In the case that nothing was agreed upon, the title lies with the executive producer or financier. He who pays the studio time, owns the product. If the artist being recorded did not offer monetary compensation in exchange for the services of your studio, then the time was financed by the studio owner. Cost to the studio can be derived from several sources, such as wages to employees, cost of materials, cost of equipment, utilities cost, consumption of perishables etc.

In the event that an agreement was made as to monetary compensation for services, a work for hire contract should be used.

U.S. Copyright Office / Library of Congress
What is a work made for hire?

Although the general rule is that the person who creates the work is its author, there is an exception to that principle; the exception is a work made for hire, which is a work prepared by an employee within the scope of his or her employment; or a work specially ordered or commissioned in certain specified circumstances. When a work qualifies as a work made for hire, the employer, or commissioning party, is considered to be the author. See Circular 9, Work-Made-For-Hire Under the 1976 Copyright Act.

Let's stay on the idea that no "work for hire" agreement was made. If a verbal Agreement was made that you would take money for studio time, then you have effectively entered into a binding contract.

CALIFORNIA CIVIL CODE -- CONTRACTS -- SECTIONS 1619-1622

1619. A contract is either express or implied.

1620. An express contract is one, the terms of which are stated in words.

1621. An implied contract is one, the existence and terms of which are manifested by conduct.

1622. All contracts may be oral, except such as are specially required by statute to be in writing.

"Certain types of contracts do have to be in writing to be valid, under laws known collectively as the "Statute of Frauds." These types of contracts include sales of land and other interests in real property, agreements which, by their own terms, cannot be performed within a year, and contracts for sales of goods priced over $500...

or Contracts for the services of $5,000 or more.

...For almost all other agreements, writing is not necessary for them to be legally binding. However, as mentioned above, proving the existence, and exact terms, of a verbal agreement is often very difficult (it boils down to a "he said, she said" matter), so putting any important agreement in writing, even if it isn't technically covered by the Statute of Frauds, is always a good idea."
-WikiAnswers

For more information, see California Civil Code Chapter 923 - "Statute of Frauds"

In the event that no verbal, written, or expressed contract was made, nor payment received for services rendered, the ownership of the "Masters" stays with the financier, or studio owner.

Wikipedia:
Masters with respect to independent music and major label recording contracts

In a typical independent artist/production deal, the artist will pay the studio up front to produce songs or an album of songs. In this deal, the artist, having financed the project, owns the master. If the studio, production company or record company finances the master, sometimes called a "spec" deal, then that studio or company owns the master.

An independent artist may also do a distribution deal where the independently produced master is temporarily licensed to a major label, and then returned to the original owner; the artist, manager, producer or investor as the case may be.

Sale of the master vs. sale of albums

A recording may generate revenue for the artist and studio/record company simultaneously, regardless of who owns the master. The breakdown of revenues from CD sales, also called "mechanical royalties", is determined by the terms of the recording contract. Mechanical royalties are divided between the artist and the studio or record company in accordance with the terms that the artist has negotiated with that company.

Now that we have firm definitions or owning the "Masters," lets take a quick look at songwriting, publishing, mechanical, and Sync fees. Since you wrote /co-wrote the song, non-contract splits automatically split evenly based on U.S. Law set forth by the Library of Congress. If there are two songwriters, the split is Songwriting and Publishing evenly at 50 /50. If there are three songwriters, Songwriting and Publishing are evenly split at 33.3 /33.3 /33.3.

Upon entering into a Publishing deal, an individual or company "reps", "plugs", or otherwise connects your song or "Master Recording" to an artist to get "cut" or a placement in (various media) broadcast. The most common exchange is to offer "Publishing" in exchange for the services of your Publisher. A "Draw" is when the Publishing company offers you a monetary "stipend" in addition to the services offered. A "Draw" sounds great, but is it worth it? Well the answer is completely individual and case by case. If Beyoncé cut your song, and it will be released as her first single off her upcoming album, I would recommend you keep as much publishing and songwriting as you can keep. With a "Draw" the publishing company often takes a greater share of publishing and songwriting in exchange for the upfront money the gave you. This is a typical error made by up and coming songwriters, where lack of foresight and patience can earn a publishing company the "Lion's share." In addition, it is very common that a top artist may require a portion of the songwriting in exchange for "cutting" your song. After all, without their voice, there would be no royalties for the songwriter.

ASCAP
How are Royalties calculated?

A major source of income for many songwriters and music publishers are the
mechanical royalties due from the sale of CDs, tapes, records, and downloads
containing musical compositions. Under the U.S. mechanical rate (known as the statutory rate)...

The new schedule of mechanical rates, which will be in effect though December 31, 2012, is:

Physical recordings: 9.1 ¢ for recordings five minutes or less; for recordings over 5 minutes, 1.75 ¢ for each minute, rounded up.

Permanent Digital Downloads: 9.1 ¢ for recordings five minutes or less; for recordings over 5 minutes, 1.75 ¢ for each minute, rounded up.

Mastertone Ringtones: 24¢ (for non-derivative uses)

Interest on late payments: 1.5% per month, or 18% per year.

EXAMPLE:
A million-selling single would be worth a total of $91,000 in combined royalties to the publisher and writer. For an album, the above royalties would be multiplied by the number of songs on the album. For example, if 10 songs were included on an album and each received a 9.1¢ royalty, a total of 91¢ in mechanical royalties would be generated from the sale of each album. Thus, if the album sells between 1,000,000 and 10,000,000 copies, the combined writer and publisher royalties for the album would range from $910,000 to $9,100,000.

Mechanical royalties are paid by the record company to the music publisher or its representative (BMI / ASCAP etc), who then shares them with the writer based on the "200% pie" 100% Songwriting and 100% Publishing.



I hope that after reading this article, we as recording engineers, music producers, and studio owners take care to protect ourselves, our investments, our businesses, our careers, and our children. By making decisions based on the current knowledge of Copyright and Distribution laws, we force companies to act honorably. Where in so many horror stories, artists in the past were mistreated and their rights stripped from them, because of a lack of knowledge on their civil rights put forth by our country. Record Labels and Publishing companies often include articles in contracts which deliberately remove us as owners and creators from our creations.

By signing contracts we do not understand, and by not understanding the current laws and standards of the music industry, we expose ourselves to financial danger easily avoided with knowledge of our rights. When Ray Charles historically demanded to own his own masters, it was a milestone for artists. Without the knowledge as to why he should own his own masters, he would have never truly gained control of his financial future. Thank you for taking the time to read this article, I hope you found the information useful.


Doc


Wikipedia "Master Recordings"
http://en.wikipedia.org/wiki/Master_recording

Harry Fox Agency "FAQs"
http://www.harryfox.com/public/FAQ.jsp#10

U.S. Copyright Office - "Definitions"
http://www.copyright.gov/help/faq/faq-definitions.html

Lectic Law Library - "California Civil Code"
http://www.lectlaw.com/files/bul15.htm

California Civil Code - "CHAPTER 923 STATUTE OF FRAUDS"
http://www.cga.ct.gov/2005/pub/Chap923.htm

Ascap article - "Music and Money"
http://www.ascap.com/jam/read_about/...nd%20Money.pdf



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Edit In Posting 10/14/10

I wanted to edit in some new information I received today which will be helpful in certain situations.

Hi Daniel,

Per our conversation earlier today, please refer to this pdf http://www.copyright.gov/title17/92chap2.pdf section 203 grants you termination rights.
More info can be garnered from this: http://www.copyright.gov/title17/

Keep in mind that for a co-created work BOTH PARTIES have to consent to selling the work.

Calvin Rosekrans
Writer/Publisher Relations
BMI
T. (310)289-6318 F. (310)657-6947
[email protected]
Los Angeles, CA 90069

[DJ Hellfire]

Nice info! Thanks!

[Dism]

Great stuff! That gets bookmarked for sure. Can anyone say sticky? :)

[Bob Olhsson]

My understanding from discussions with an intellectual property lawyer is that everybody who works on creating a recording owns it jointly and nobody can exploit it without everybody else's permission. His impression was that whoever put up the money didn't automatically own the master unless a contract assigned ownership to them.

Incidently, the idea that record labels own the masters of all of their artists' recordings is internet mythology. An amazing percentage of artists actually own their masters and lease distribution rights to a label.

I created an FAQ about a bunch of this stuff:

http://thewombforums.com/showthread.php?t=183

[DrFord]

My goal with this article was to fill it with legitimate information, and not Myth of hearsay. If there are corrections to be made, I will happily do so. I think more than anything it is important to share knowledge for our collective to become stronger.

I ask that as Bob O did, please link resources / corrections and make no statements for the sake of argument, but to better this article.

Thanks,
Doc

[spidey01]

+11111 great stuff

[IntelDoc]

Originally Posted by DrFord

My goal with this article was to fill it with legitimate information, and not Myth of hearsay. If there are corrections to be made, I will happily do so. I think more than anything it is important to share knowledge for our collective to become stronger.

I ask that as Bob O did, please link resources / corrections and make no statements for the sake of argument, but to better this article.

Thanks,
Doc

Good info....

BTW: There is only ONE "DOC" and He is I!

Thanks!
Doc