Want to learn more about business and contracts in the recording and music publishing industry? In this presentation originally delivered as part of the Media and Copyright Issues Panel at the 2014 IPIC McGill Copyright Master Class, leading entertainment lawyer Susan Abramovitch provides a helpful overview of the business, including: -Rights of the artist/songwriter -Artist recording agreements – from term and territory to budget and royalties -License agreements -Pressing and distribution agreements -Publishing agreements -Income splits -Income from compositions -360 deals

1. Recording and Music Publishing
Business and Contracts
IPIC McGill Copyright Master Class
Media Copyright Issues Panel
August 8, 2014
Susan H. Abramovitch, Partner
Gowling Lafleur Henderson LLP
Phone: (416) 814-5673
susan.abramovitch@gowlings.com

2. Overview
The Rights Owners in the Music Industry:
I. The Artist/Songwriter
II. The Record Label
III. The Music Publisher
2

3. 3
Overview
I. The Artist /Songwriter as Original Owner
A. Composition vs. Recording
B. The Rights of the Artist/Songwriter

4. 4
Overview
II. The Record Label
A. Record Label
B. Types of Rights Controlled by the Record Label
1. Agreements with Record Companies
C. Understanding an Artist Recording Agreement
1. Term
2. Territory
3. Advance and Recording Budget
4. Royalties
a) Pricing
b) Packaging and Deductions
c) Net Sales and Free Goods
d) Reduction for CDs/New Tech
e) Royalty Rate
5. Accounting
6. Mechanical Royalties
7. Creative and Marketing Controls

5. 5
Overview
III. The Music Publisher
A. Types of Rights Controlled by the Music Publisher
B. Publishing Agreements
1. Ownership of Copyright
2. Term and Reversion Copyright
3. Administration and Creative Control
C. Income Splits
D. “At Source” vs. “Receipts” Deals
E. Income from Compositions
1. Mechanical Royalties
2. Public Performance Royalties
3. Combined Rates for Online Music Services
4. Synchronization
5. Advances
IV. 360 Deals

6. I The Artist/Songwriter
6

7. I A) Composition vs. Recording
All rights start with the artist/songwriter
• Composition vs. recording:
• Songwriter writes composition
• Copyright subsists immediately
• Artist performs/records music
• Copyright subsists immediately
7

8. I B) The Rights of the Artist/Songwriter
• A composition is a musical work
• s.2: “musical work” means any work of music or musical composition, with
or without words, and includes any compilation thereof;
• Copyright in composition includes the rights to:
• Publish if unpublished
• s.3(1): if the work is unpublished, to publish the work or any substantial
part thereof
• Produce or reproduce in any material form
• s.3(1): the sole right to produce or reproduce the work or any
substantial part thereof in any material form whatever
• Record
• 3(1)(d): in the case of a literary, dramatic or musical work, to make any
sound recording, cinematograph film or other contrivance by means of
which the work may be mechanically reproduced or performed
8

9. I B) The Rights of the Artist/Songwriter
• Copyright in composition includes the rights to:
• Perform in public/communicate by telecommunication
• s.3(1): to perform the work or any substantial part thereof in public
• s.3(1)(f): in the case of any literary, dramatic, musical or artistic work,
to communicate the work to the public by telecommunication
• Including making available
• s. 2.4(1.1): …communication of a work or other subject-matter to the public
by telecommunication includes making it available to the public by
telecommunication in a way that allows a member of the public to have
access to it from a place and at a time individually chosen by that member
of the public
• Synchronize with moving picture
• s.3(1)(e): in the case of any literary, dramatic, musical or artistic work, to
reproduce, adapt and publicly present the work as a
cinematographic work
9

10. I B) The Rights of the Artist/Songwriter
• Copyright in performer’s performance includes the
rights to:
• s.15(1)(a)(i), (ii): Perform in public/communicate by
telecommunication
• s.15(1)(a)(iii), (b): Fix in any material form/reproduce
if sound recording
• s.15(1.1)(d): Make available
• Copyright in sound recording includes the rights
to:
• s.18(1)(a): Publish for the first time
• s.18(1)(b) Reproduce in any material form
• s.18(1.1)(a): Make available
10

11. II The Record Label
11

12. II A) Record Labels
• Various types of record labels
• Major Labels:
• Sony, Universal, Warner
• Independent Labels:
• True North, Maple, Roadrunner, Secret
City Records
• Out of the Box Labels:
• Starbucks, Electronic Arts, etc.
12

13. 13
II B) Types of Rights Controlled by the Record Label
Rights of the Record Label Depend on the Type of
Contract the Artist Enters Into
• Three Main Deal Structures:
1. Artist Recording Agreement
2. License Agreement
3. Pressing and Distribution Agreement (“P&D”)

14. II B 1) Agreements with Record Companies
1. Artist Recording Agreement
• Label:
• Responsible for marketing,
promotion, manufacturing,
distribution
• Pays for recording
• Exclusive recording services
rendered to the label by the
artist
• Owns copyright in recording (in
perpetuity)
• Artist:
• Paid advance/royalties
14

15. II B 1) Agreements with Record Companies
2. License Agreement
• Label:
• Responsible for marketing, promotion, manufacturing
and distribution
• Exclusive recording services rendered to the label by the
artist
• All rights in the record exclusively licensed to the label for
the exploitation period
• Artist:
• Produces own record
• Retains ownership of copyright
• Paid advance/royalties
15

16. II B 1) Agreements with Record Companies
3. Pressing and Distribution Agreement
• Label:
• Responsible for distribution
• Granted exclusive distribution rights for a Term
• Retains distribution fee and pays balance of net
proceeds to Artist
• Artist:
• Produces own record
• Retains ownership of copyright
• Responsible for marketing,
promotion, manufacturing
16

17. II C) Understanding an Artist Recording Agreement
Key Components of an Artist Recording
Agreement:
1. Term
2. Territory
3. Advance and Recording Budget
4. Royalties
5. Accounting
6. Mechanical Royalties
7. Creative and Marketing
Controls
17

18. 18
II C 1) Term
• Measured in terms of a number of album cycles

19. • World versus specific territories
• Release commitments
19
II C 2) Territory

20. 20
II C 3) Advance and Recording Budget
• An Advance:
• A lump-sum payment made by the record company to
the recording artist
• Advance + Recording Costs vs. “All-in”
Recording Fund:
• “All in”: includes funds
intended to cover both the
recording costs and the
artist advance

21. 21
II C 4) Royalties
• Expressed in terms of a percentage, or a number
of “points”
• To assess the actual value of a deal, a “penny rate
calculation” must be undertaken
PENNY
RATE
equals SLRP
or PPD
less PACKAGING
DEDUCTION
less FREE
GOODS
times ROYALTY
RATE
► ◄
[The calculation of SLRP – PD – FG is sometimes
called the “Royalty Base Price”]

22. 22
II C 4a) Pricing (SRLP/PPD)
• SRLP: Suggested Retail List Price
• PPD: Published Price to dealers
• In Canada, the PPD published by most record
companies is around $12.00 per CD
• Digital downloads- net receipts basis

23. 23
II C 4b) Packaging Deductions
• CDs - 25% packaging deduction
• Downloads- Rationale for packaging deduction?

24. 24
II C 4c) Net Sales and Free Goods
• Free goods ≠ Free product
• Free goods = Discounts
• Can be a % discount or free records given for resale
• Deduction may appear as:
• Royalties will be paid on X% of records sold (e.g. 85%
of records sold); OR
• Royalties are payable on 100% of records sold;
provided that “records sold” will be defined as records
shipped less free goods and/or discounts

25. 25
II C 4d) Reduction for CDs/New Tech
• CDs - Historically 20% reduction
• “New technology”- Up to 25% reduction
• It is important to negotiate progressive reduction
of the reduction over time

26. 26
II C 4e) Royalty Rate
• CDs
• 12-18% SRLP or 15-30% PPD.
• Digital Downloads
• Danger: same rate as CDs but applied to net receipts
vs. 35-50% of net receipts

27. 27
II C 5) Accounting
• Accounting
1.Semi-annual accounting (within ninety days)
2.Reserves for returns

28. 28
II C 6) Mechanical Royalties
• Royalties paid to the publisher for the right to
embody compositions on records
• Rate is fixed by industry-negotiated agreement
or certified tariff

29. 29
II C 7) Creative and Marketing Controls
• Approval rights over:
• Producer and studio
• Compositions and sequencing
• Videos and singles
• Re-editing, re-mixing and re-mastering
• Synch licensing
• Artwork
• “Non-phonographic uses”

30. 30
III The Music Publisher
Music publishing = Exploitation of musical
compositions (as opposed to recordings)

31. 31
III A) Types of Rights Controlled by Music Publisher
Three principal rights:
• Reproduction (“mechanical”) rights
• Includes any physical reproduction (CD, vinyl etc.) and digital
downloads
• s.3(1): the sole right to produce or reproduce the work or any
substantial part thereof in any material form whatever
• Public performance/Communication by telecommunication right
• Radio, television, live performances, internet streaming
• s.3(1): to perform the work or any substantial part thereof in public
• s.3(1)(f): in the case of any literary, dramatic, musical or artistic work,
to communicate the work to the public by telecommunication
• Including making available - s. 2.4(1.1): …communication of a work or other
subject-matter to the public by telecommunication includes making it available to the public
by telecommunication in a way that allows a member of the public to have access to it from
a place and at a time individually chosen by that member of the public

32. 32
III A) Types of Rights Controlled by Music Publisher
Three principal rights (cont.):
• Synchronization
• Putting music in a TV show, movie, video game
• s.3(1)(e): in the case of any literary, dramatic, musical or artistic work,
to reproduce, adapt and publicly present the work as a
cinematographic work;

33. III B) Publishing Agreements
• Publishing Agreements
• Administered directly by songwriter or by music publisher
• Songwriter may want to negotiate approvals over uses
• 3 main publishing agreement structures:
1.“Full” Publishing Agreement
2.Co-Publishing Agreement
3.Administration Agreement
33

34. 34
III B 1) Ownership of Copyright
1. Full Publishing Agreement
• Assignment of 100% of
copyright
2. Co-Publishing Agreement
• Assignment of 50% of copyright
3. Administration Agreement
• No assignment of copyright

35. 35
III B 2) Term and Reversion of Copyright
1. Full Publishing Agreements & 2. Co-Publishing
Agreements:
A. Term
• The period during which the songwriter is required to deliver
compositions to the publisher
• Measured as # of records or # of years
B. Length of time the publisher retains rights in songs
delivered during Term
• Ranges from a few years to life of copyright
• “Reversion” of the copyrights
• Songwriter may regain ownership of copyright and/or
administrative rights at some point over the life of copyright

36. 36
III B 2) Term and Reversion of Copyright
3. Administration Agreements
A. Term
• The period of time over which administration happens
B. No Reversion

37. 37
III B 3) Administration and Creative Control
• Administration of composition involves
• Registration of copyright
• Defense of the copyright in infringing situations
• Licensing exploitation
• Collection and distribution of income derived from the composition
• Typical approval rights
• Synchronization Licenses
• Issuance of Mechanical Licenses for less than the statutory (or
“Stat” rate)
• Changes to the English language lyric, title or the basic melody
• Foreign Translations
• Parodies

38. III C) Income Splits
38
1. Full Publishing Agreement
• Publisher’s Share ≈ 50%
• Songwriter’s Share ≈ 50%
2. Co-Publishing Agreement
• Publisher’s share ≈ 25%
• Songwriter’s share ≈ 75%
• Calculated “at source” or based on the publisher’s “receipts”
3. Administration Agreement
• Publisher’s share ≈ 5 - 20%
• Songwriter’s Share ≈ 80 – 95%

39. III D) “At Source” vs. “Receipts” Deals
39
• “At Source” vs. “Receipts” Deal
• “At Source”: Songwriter’s share calculated upon
gross amount paid at the source by licensee using
composition
• “Receipts”: Publisher remits to songwriter 75% of that
which it receives

40. 40
III E) Income from Compositions
Income from Compositions
• Mechanical Royalties
• Public Performance Royalties
• Synchronization Income
• Print + Other

41. 41
III E 1) Mechanical Royalties
Physical
• CMRRA/CRIA Agreement
• 8.3¢ for song 5 mins. or less + 1.66¢/ extra minute(s) or
fraction thereof
Digital
• CMRRA/SODRAC (CSI) Tariff - Online Music Services (2008-
2010)
• Royalties payable by online music services for the
reproduction of musical compositions
• Permanent downloads (temporary or limited) downloads +
streaming

42. 42
III E 2) Public Performance Royalties
• Radio play
• Television broadcast
• Live performance
• Streaming over the internet (but
not downloads)
• Rates are set by tariff approved
by Copyright Board
• Royalties administered by
SOCAN

43. 43
III E 3) Combined Rates for Online Music Services
Certified Rates for Online Music Services
CSI Rate SOCAN Rate Total Rate
Permanent
Downloads
9.9% N/A 9.9% of
retail price
Limited
Downloads
9.9% N/A 9.9% of
subscriber
fees
On-demand
Streaming
5.18% 7.6% 12.78% of
subscriber
fees
The N/A indicators in red are a result of the Supreme Court’s 2012 ESA v SOCAN decision.

44. 44
III E 4) Synchronization Income
• Negotiated between the parties
• Whatever the market will bear as consideration

45. 45
III E 5) Advances
• Non-returnable pre-payment to the songwriter of
songwriter’s royalties
• Crucial to assess value of deal to ensure not being
paid pipeline

46. 46
IV 360 Deals

47. IV “360” Deals
• “360” Deals
• Becoming more common as risk increases in music industry
• Artist engages a single company for multiple functions: manager,
record company, publisher, merchandising
• Financially can be attractive as 360 deals typically split net
receipts rather than pay record-based royalty rate
• Risky as more egg in one basket
• One-stop shopping
47

48. Thank You
Susan H. Abramovitch, Partner
Gowling Lafleur Henderson LLP
Phone: (416) 814-5673
susan.abramovitch@gowlings.com