Music Business Law: Mechanical Licensing and Royalties in Music
By Justin M. Jacobson, Esq.
There are a variety of relevant and appropriate licenses required when releasing a song within the music industry. This article explores one of the most commonly acquired licenses, the mechanical license. This type of license (the right or permission to do something) is necessary when initially releasing an original musical work as well as when an individual commercially releases a “cover” of an existing song.
What is a Mechanical License In Music? What Is A Mechanical Royalty?
A mechanical license and the corresponding mechanical royalty that it imposes are explored below.A mechanical license grants to the licensee (the person acquiring the license) the rights to reproduce and distribute a copyrighted musical composition in an audio format. Utilizing a song in a video requires a separate license (a synchronization license) possibly in addition to a mechanical one. This means that a mechanical license is required whenever a recorded composition is released on a vinyl record, on a CD, used as a ringtone, sold as a permanent digital download (“DPD”) (e.g., iTunes download), or played in an interactive music stream, such as on Spotify or Apple Music. In exchange for the permission to do so, the licensee pays a fee to the copyright owner(s) of musical composition. In most cases, the rights holders are the composition’s songwriter(s), producer(s) and potentially their respective music publishing companies. In fact, a mechanical license is required whenever an individual or a company, even a recording label, distributes the copyrighted musical composition in any or all of these formats.
Who Issues Mechanical Licenses? Who Collect Mechanical Royalties?
Once a mechanical license has been issued and the track has been publicly released for the first time, a compulsory mechanical license is available to any individual or company who wants to record and distribute the work under 17 U.S.C. § 115 of the Copyright Act. This means that a musician wishing to cover an existing track is permitted to obtain a mechanical license by paying the established “statutory royalty rate” to an authorized licensor and making periodic accounting income statements. In fact, the payment rate that a party must remit for a mechanical license is set and regulated by the Copyright Royalty Board (CRB).
In the United States, two well-known mechanical licensing entities include the Harry Fox Agency and Music Reports. These agencies collect the mechanical royalties owed from some digital service providers on behalf of its associates; and, then, these companies pay these royalties to music publishers who register with them. The music publishing companies then pays the songwriters and composers of the work. For example, Music Reports work with Spotify, Amazon Music, iTunes, Tidal, Netflix, Hulu, Paramout+, and Pandora. In addition, an individual desiring to obtain a mechanical license through the Harry Fox Agency may try utilizing their automated license request and payment system, Songfile. More recently, the Music Modernization Act was passed in an attempt to modify and “modernize” the existing licensing system. Specifically, this Act intends to create a universal automated licensing system that provides “blanket licenses” for any “streaming service” as well as creates a “mechanical licensing collective” entity called the Mechanical Licensing Collective (MLC) to issue mechanical licenses. While this legislation is not effective until January 1, 2021, it is important to be aware in the prospective change in mechanical licensing and the new procedures exist.
In conclusion, a mechanical license is required, and a royalty is owed whenever a third-party, including a recording label or covering artist, uses a musical composition on a CD, in a vinyl pressing, on an on-demand music streaming platform or as a MP3 download. While this is an extremely broad overview of the topic, it is essential that an individual is aware of their legal obligations prior to using another individual’s existing work.
This article is not intended as legal advice, as an attorney specializing in the field should be consulted.
© 2022 Justin Jacobson Law, P.C.