25 The Music Royalty System Today

Introduction to music royalties

A copyright is a form of property right conferred by federal statute. Because it is a property right, it can be sold, assigned, or licensed just as most any other property right. When a copyright holder licenses another person to use their copyright for a limited time or purpose, the copyright holder typically collects rents for that license, just as the owner of an apartment would collect rent from a tenant. In the case of music copyright licenses, the rents charged by the copyright holder (or required by statute) are typically referred to as royalties. 

The system by which monetary royalties are distributed to the holders of music copyrights is extraordinarily complex. To understand how this system works (and how it often does not work), we must keep in mind two important conceptual distinctions as we work through this material. (Warning: Failing to understand these important distinctions will absolutely prevent you from performing well with tests and other assessments related to this material, so you should re-read this chapter as many times as necessary until these distinctions become clear.)

Musical Works vs. Sound Recordings. 

The most important distinction that you absolutely must understand concerns the difference between a copyrighted musical work and a copyrighted sound recording (referred to as a “phonorecord” in the Copyright Act). When first enacted in 1790, the federal copyright law did not refer to musical works at all, as it was designed to protect only printed material such as books, newspapers, etc. Of course, notated music can also be printed, so the law was amended in 1831 to extend copyright protection to printed musical works. It was not until 1971 that federal copyright protection was extended to sound recordings.

So, there are now two separate creative expressions protected under U.S. copyright law, the musical work and the recording of that musical work. Let’s take as an example the song “Take It Easy” by The Eagles, released as a recording in 1972. Jackson Browne and Glenn Frey wrote the song, so they share half of the copyright of the musical work, the other half being owned by the song’s publisher, Warner/Chappell Music. However, the band’s record company, Asylum Records (David Geffen’s record company) owns the copyright of the recording of “Take It Easy”. When a consumer purchases (or streams) a copy of the recording, two royalties will be paid from the proceeds of the sale, one to the owner of the musical work copyright and one to the owner of the sound recording copyright (often referred to as the “master right”). These are two separate royalties, with amounts calculated differently, and payable to two separate copyright owners. 

To continue this example, in 1973 Jackson Brown, who was not a member of the The Eagles, released his own recording of “Take It Easy,” also on Asylum records. This new recording resulted in a separate copyrighted sound recording, but the underlying musical work copyright did not change and is still owned by Browne, Frey, and Warner/Chappell. In this case, both sound recording copyrights were owned by Asylum records, but they were different copyrights. Every new recording of a song creates a new sound recording copyright, but there will only be one copyright of the musical work (song) itself. As we will see below, not only are the royalties associated with musical works and sound recordings different, but the law pertaining to infringement of those copyrights has also developed along separate lines because the protectable legal elements of a musical work are different from those of a recording of that work.

Mechanical Rights vs. Performance Rights. 

Once you have grasped the distinction between the musical work copyright and the sound recording copyright, you then need to understand the two layers of protection and accompanying royalties afforded to the musical work copyright: mechanical rights vs. performance rights. We will deal with the performance right first, as it is easiest to understand. When musical works were added to the list of copyright protected works in 1831, that protection extended only to the printed notation. Individual performances of those works did not require a license or payment of any royalty to the owner of the musical work copyright. However, the 1909 Copyright Act extended the exclusive copyright in a musical work to any public performance of the musical work for profit. Of course, most songwriters want their songs to be performed publicly, so we will see below how “performance rights organizations” created blanket licenses and a royalty payment system to allow for the very broad public music performance environment we enjoy today.

It typically surprises many students how broadly the copyright law interprets the concept of a public performance of music, well beyond the understanding of that concept in 1909. The U.S. Copyright law defines a performance as follows: “to recite, render, play, dance, or act [the copyrighted work], either directly or by means of any device or process. Under this expansive definition, playing a record in a restaurant constitutes a performance of the musical work, as does playing a record on the radio, or playing it by streaming over the internet. Those are all considered public performances of a musical work. Keep in mind that we are still discussing the musical work copyright and not the sound recording copyright. The sound recording is not what gets performed in these cases, it is the underlying musical work, or song.

Contrary to the performance right, the mechanical right involves the exclusive right to mechanically reproduce and distribute copies of a musical work. The vague term “mechanical reproduction” was used because legislators in 1909, when the mechanical right was introduced, wisely understood that the technology of music reproduction would change over time. In 1909, the most common form of mechanical reproduction was the perforated rolls used in player pianos. Of course, this would soon be eclipsed by wax cylinders and then flat discs (“records”). The copyright law now refers to the making and distribution of a “phonorecord” when discussing the mechanical right, with the term “phonorecord” being used to mean the fixation of a musical work on any distributable medium, including digital files.

Now that we have drawn these important distinctions (musical work vs. sound recording, and mechanical right vs. performance right), we are ready to dive deeper into the details of how these rights are both protected and licensed today.