This article has been written by Aashita Khandelwal, pursuing a Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations from LawSikho.
Table of Contents
Introduction
Music licenses are the primary way artists can acquire royalties by giving everyone a legal license to use their rights on their work. In general, there are six types of licenses that a person can use for various purposes. They are: synchronization license, mechanical license, master license, public performance license, print rights license, and theatrical license.
The use of the original work can range from sheet music reproduction to theatrical productions, jukeboxes and movie productions. The author’s written permission is required for copyrighted material, so anyone wishing to use this work must acquire a music license. If you use a song that someone else is listening to (not your song), you usually need a music license to use it. This license includes both usage and term rights that determine how this song will be used.
Licensing your music can be considered as giving your song on rent to another party. It does not sell music (the copyrights to your songs and recordings), but allows “users” to play music in exchange for royalties. A master license is a basic music license that gives the owner the right to use recorded piece of music in multimedia projects such as movies, television, commercial broadcasts, or other sound and audio projects. A master license is obtained from the owner of the music recording, which is the party that financed the recording. Generally, these rights belong to the record company unless you are an independent artist. Master Licenses are similar to sync licenses, but are a bit more complicated than most licenses because they are not very broad. A master license is usually released with a sync license.
Master-use rights in record deals
Master-use rights often exist in record transactions. Recorded transactions usually contain provisions requiring artists to waive their master rights and receive an upfront payment to publish the project. In fact, master rights in these situations are often deprived because record companies have to have good control of these rights in order to perform their work for the artist. In some cases, after the advance is paid in full through recoupment after royalties begin coming in, the artist begins to use the original source of income from the income streams of master licenses.
Under the traditional business model for a record label, master recordings, derived by the original artist, serves as a long-term asset and typically accounts for the majority of brand revenue. For example, Sony Music Entertainment has original master recordings from Bruce Springsteen, Bob Dylan, Elvis, Johnny Cash, etc. Due to the size and popularity of these artists, SMEs continue to receive royalties from the sale of their master recordings. Likewise, the money earned from these master recordings does not affect the companies from the cost of signing new jobs in the long run hoping to create high-income long-term resources.
It is worth noting that this business model is changing in the modern music industry. Many recording artists continue to own their masters and opt to partner with entertainment companies called “Label services” that provide record branding services (marketing, sales, promotion, etc.), while allowing the artist to retain control of their master copyrights.
The recording contract can be negotiated with the contract owner if the artist wishes/wants to retain their master rights. In some cases, negotiations are scheduled for a period of time to determine the original term of master rights owned by the label.
How to obtain a master-use license
Master-use licenses are obtained from the owner of the sound recording or someone approved to license intellectual properties on their behalf. That said, the first step in the licensing process is to identify the copyright owner of the recording.
Most of the contracts with the record label have a clause wherein the artist is required to delegate their master rights to the record label, which leaves a large number of masters in the possession of record labels. However, some artists have the leverage to negotiate the contract so that their master rights are protected or claimed at the end of the contract term. There are also independent artists that do not use record label services at all and thus do not face the issue of giving up the rights to their sound recordings.
There are several ways to find the owner of a sound recording. The easiest way is to check the liner notes of the recording to see what record label, if applicable. Most record companies have licenses listed on their websites.
Other databases can be published and viewed if the owner has not been decrypted by written credits or liner notes.
Just because you don’t identify the copyright owner doesn’t mean you don’t need a license. There are services you can use to find copyright owners. If not, you can choose another recording to use. Again, not finding the copyright owner is not an effective defense against infringement. Improperly licensed audio recordings can lead to courts for copyright infringement.
Another important point is that all owners of a sound recording must approve of master-use licensing. Master-use licensing agreements usually have terms covering compensation, credit, representations, and warranties.
Clauses in a master recording license agreement
Grant of rights
Subject to the terms of the Agreement, Licensor grants Licensee the following non-exclusive rights in the Territory for the duration of the Agreement with respect to the musical composition/ master recording. It will differ on the agreement basis but some of the common rights are as follows:
- simultaneous recording of music and lyrics in connection with programming and production; copies of this record; import recordings or copies to any country within the territory. You may use the composition/recording as a separate sound or background sound at any time in the software for unlimited purposes.
- To publicly perform, either for profit or non-profit, the Composition(s)/ Recording(s)
- Licensee reserves the right to make a video copy of the production and distribute one copy of these video programs to the public and for “home use” in the licensed area. “Videogram” includes all known or later invented audio and video devices, including video discs, video tapes, DVDs and similar audiovisual devices.
- Usage of Composition / recording in radio, television and other commercial or commercial programs.
Limitations on Rights
All rights in any Composition(s)/Recording(s) of any type not expressly granted to Licensee pursuant to the Agreement are reserved by Licensor.
Term/Territory
This clause will specify the commencement date of the agreement and the time duration until which it continues. It will also specify the region governed by this Agreement.
Compensation
Subject to the Agreement and related rights, Licensee will have to pay a certain amount to the licensor as a synchronization fee and master use right. Licensor is solely responsible for paying all third party fees.
Cue Sheet
Licensee must provide a complete and accurate music cue sheet for the episode to the Licensor.
Public Performance
Such proposals require prior approval of the performing rights from the appropriate society by the Licensee.
Representations and Warranties
Licensor represents and warrants that it has the full right, power and authority to enter into the Agreement and that it is not currently and will not be for the duration of the Agreement, subject to any obligation or disability which will or might prevent or interfere with Licensor fully keeping and performing all of the agreements, covenants, and conditions to be kept or performed hereunder. Licensee is indemnified for all loss, liability, damage, cost, and expense, including reasonable attorneys’ fees, and is exempt from license-based liability and liability for any infringement of the nature of the parent company, subsidiaries and affiliates incurred by any representations, warranties or agreements entered into by Licensee under the Agreement.
The licensor also guarantees that the master recordings are based on appropriate agreements with the artists who have the performances contained herein. In the event of any breach of this warranty in whole or in part, Licensor will indemnify Licensee for any damages previously paid to Licensor pursuant to this Agreement, or indemnify Licensee for any losses incurred by such Licensor. In no event will Licensor’s full liability exceed the amount of consideration under the Agreement.
Assignment
The license is binding and shall inure to the benefit of the respective successors and assigns of the parties hereto, and if Licensee assigns this license or any of its rights, then it will be responsible for carrying out its obligations under the Agreement.
Miscellaneous
A contract is a contract between the parties and the same document is signed by both the parties. No waiver by either party or any failure by the other party to keep or perform any covenant or condition of the Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant or condition. All information should be provided in writing to the parties. The agreement should be governed by laws of the State and be wholly performed within such State.
Conclusion
The artists and their teams should look out for the following red flags in recording contracts:
- A long rights period (i.e., the period in which the record company owns the recordings)
- Options over future recordings (meaning a record company can automatically get rights over future recordings in return for paying a cash advance)
- An “exclusive recording agreement” (every recording created during the term of the agreement is owned by the record company)
Ownership of master recordings gives you creative control and freedom to stream music on any channel you want. If at some point the artist likes to sign a label, owning your master recordings is like having an upper hand. If the artist owns the rights, he is in the best position to negotiate with the record company on best possible terms and controls.
Conversely, there was a clear lack of control over the music and the masters of each show. This idea of signing away the rights, independence, creative control and financial freedom are completely unattainable. What really matters to an artist is someone who understands the music company contract. The legal representative is required to read some explanations and explains exactly what is presented. If you’ve been offered a high five-year deposit for multiple recorded albums or tracks, you’ll need to see what happens at the end of the contract term. Do the rights revert to them or do they stay with the label? This is probably one of the most important things to look upon.
Thus, it will totally depend on the artist and the recording company as to what offer is on the table.
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