Music Royalties and Entertainment Law: A Guide for Artists

Introduction to Entertainment Law

Entertainment law is a diverse field that integrates contracts and intellectual property law (Iandorio, 2004). Every book, movie script, theatrical performance, sound recording, television show, and similar creative work becomes intertwined with these legal issues.

The "business" aspect of the entertainment business does not always come easily to the creative minds that are its artists (Iandorio, 2004). Many artists discover that they have been deprived of certain rights, income, control, or access. This happened to the now-defunct band The Verve, for example, who watched 100% of the royalties from their million-selling single "Bittersweet Symphony" turned over to the Rolling Stones. Keith Richards and Mick Jagger — not The Verve — were nominated for a Grammy that year, after it was revealed that "Bittersweet Symphony" had violated a Rolling Stones licensing arrangement.

Crippling legal problems are not exclusively the province of up-and-coming acts, however (Iandorio, 2004). During the late George Harrison's lifetime, he had to defend a notorious copyright infringement suit in which it was claimed he had "subconsciously misappropriated" the melody from a 1950s song. More recently, a California jury awarded $5.4 million against Michael Bolton and Sony, his record company — the largest damages award ever made in connection with a music plagiarism case. The news archives are filled with stories of entertainers whose managers made a great deal of money while the entertainers themselves were left with bills. For this reason, entertainment lawyers are an important part of the entertainment industry.

With the merging of technologies between the entertainment and computer industries, legal specialties have merged as well (Kaufman, 1996). Lawyers who want to practice in areas involving new technology increasingly need to understand various aspects of entertainment law, copyright and intellectual property law, computer law, and communications law. Ultimately, much of what makes up entertainment law consists of negotiations and deal-making rather than case law.

Consider the following example. In Hustlers, Inc. v. Thomasson, 307 F.Supp.2d 1375 (N.D. Ga. 2004), the court charged that a music publisher known as Hustlers, Inc. breached its publishing agreement with singer-songwriter Hughie Thomasson by withholding Thomasson's royalties, which entitled Thomasson to withdraw from his contract with Hustlers, Inc. (Silverman, 2005). Both parties claimed that the other had violated their publishing agreement. Thomasson argued that Hustlers, Inc. breached the agreement by not forwarding royalties owed to him under the contract's terms. Hustlers, Inc. countered that Thomasson had breached his publishing agreement by redirecting royalty payments to another publishing company. Hustlers, Inc. further argued that it had withheld royalties only to recover damages it suffered as a result of Thomasson's alleged prior breach. However, the court noted that while Hustlers, Inc. may be entitled to equitable recoupment, that does not alter the fact that failure to pay royalties constitutes a breach of the publishing agreement, which authorized Thomasson to withdraw or terminate the agreement.

This paper explores the legal and business issues affecting musicians, with a focus on royalties, and aims to provide a guide for those representing artists and publishers.

Types of Royalties

Royalties are collected depending on the nature and source of the revenues generated. There are four potential types of royalties in the music recording and music publishing industry (Silverman, 2005):

1. Mechanical Royalties: Domestic mechanical royalties are collected by domestic record companies for records sold. Foreign mechanical royalties are collected from foreign Performance Rights Organizations (PROs) by sub-publishers for records sold in their region.

2. Performance Royalties: Domestic performance royalties are collected by one of three main Performance Rights Organizations: (1) ASCAP; (2) BMI; and (3) SESAC. These PROs issue blanket licenses to music users for publicly performing their songs in the operation of their businesses and broadcasts. To ensure prompt and timely payment of performance income from a PRO, each songwriter and music publisher must first join as a member and properly register their songs and current contact information. Performer royalties are separate from royalties due to songwriters and composers, although they are also collected and distributed by organizations. Record companies pay performer royalties to the artist or band that performed the songs released by the company, and the percentage is stated in the recording contract. If the songwriter is also the performer, they will receive the applicable percentage of performance royalties in addition to writing royalties. These royalties are often negotiable but typically range from 10% to 15%.

3. Synchronization Fees: Synchronization fees are collected by the songwriter and music publisher when granting a synchronization license to users or broadcasters of the songs, who then create a derivative audiovisual work in the form of movies, TV programs, commercials, and similar productions.

4. Print Music Income: Print music income is collected by the songwriter and music publisher when granting a print music license to music printers, who then print sheet music or folios.