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Understanding Licensing and Royalties

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Introduction

UA2 Understanding Licensing and Royalties Let's say you are reading Rolling Stone magazine, and you find an article about an ad campaign that Phillips has launched. The ads feature the Beatles hit "Getting Better" with a voiceover from the lead singer of the band Gomez. In the article you read this: "But according to the licensing expert, the company no doubt "paid a fortune" for the Beatles hit: an estimated $1 million. The source suspects Gomez made no more than $100,000." This ad campaign is using the Beatles song as the theme music. It is also using the voice of the lead singer of the band named Gomez laid on top of the Beatles original. The speculation is that Philips paid $1 million to use the song, and that Philips paid the band Gomez $100,000. This is the world of music licensing -- a world where the rights to use music are bought and sold every day. This world is most obvious to us in a case like the one described in this example. A popular song that everyone knows gets embedded in a TV commercial or a popular movie. It turns out, however, that music licensing is something that happens constantly, all around us. When you listen to music on the radio, that music is licensed. When you hear music in a restaurant, that music is licensed too. In this essay, you will have the chance to learn about all the different forms that music licensing can take. ...read more.

Middle

However, the songwriter can, in essence, establish whatever royalty rate they like. It is up to the artist to agree to that rate or not. As well as this, the songwriter might insist that the royalty is paid up front - i.e. if the artist wants to make 300 CDs and sell them for �10 each then the mechanical royalty can be calculated and the songwriter can invoice the artist before the CDs are manufactured. The benefit to the songwriter is - they won't have the potential credit problems of ensuring royalties are paid?once sales are made. Let's look at a test case. Say an artist - Steve - wants to record two of their own songs and two songs by other songwriter friends of his. Steve would request permission from them to record their individual songs and establish a royalty rate. One friend - Joe - might want the "industry rate" of 5.6% of RRP. But Joe's close friend Dave is happy with 2.5% of RRP. Steve then records the four songs and presses 300 CDs. Over a series of live shows he sells 260 of them for an average of �10 each (he is not GST registered). The royalties are then paid out as follows: As there are four songs on the CD; each song receives a quarter share of the?appropriate royalty base.? Joe receives 1/4 x 5.6% x 260 x �10 = �36.40 per song? ...read more.

Conclusion

It is now more common for contracts to include a catch-all phrase such as "...any and all media now known or hereafter invented when addressing to scope of the synch license" This phrase, or similar language, is used by attorneys and production companies to keep up with and anticipate technological developments. Thus, uses in such newer technologies as laser optical disc, compact disc video, or live audio and video streaming, can be accounted for even if not specifically anticipated when negotiating the original synch license. PRS was mentioned earlier in this essay in regards to royalties and copyright. But what is PRS and what do they actually do? Formed as the MCPS-PRS Alliance in 1997 with the PRS for Music brand adopted in 2009, the organization brings together two royalty collection societies; MCPS and PRS. They exist to collect and pay royalties to their members when their music is exploited in one of a number of ways - when it is recorded onto any format and distributed to the public, performed or played in public, broadcast or made publicly available online. Similarly to MCPS-PRS is the Phonographic Performance Ltd. Through its licensing, PPL allows hundreds of UK radio and television stations, other broadcasters and internet radio stations to legally use sound recordings and music videos in their transmissions. Similarly PPL's public performance licences allow thousands of clubs, shops, pubs, restaurants, bars and other music users across the UK to play sound recordings and music videos in public. Sam Harrison 1 ...read more.

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