In terms of legal doctrine, the music industry is relatively new. In many ways, music is still the Wild West compared to other areas of the law, such as real estate (which has centuries of a head start). Music also has to contend with ever-changing distribution platforms, whether it was vinyl records in the 1960s and 1970s, CDs in the 1980s and 1990s, downloads in the 2000s, or streaming in the 2010s. Each platform that comes along requires new rules that sometimes develop on-the-fly.
For everyone interested in music, there are five different contributors whose roles should be known: the composer, the songwriter, the publisher, the performing artist, and the label. Sometimes these can be the same person, and other times different individuals hold each job. In the realm of music licensing, all of these players need to be compensated.
The composer is the person who writes the instrumental (non-verbal) portion of a music score. The songwriter assembles words (almost like a poet) that go along with the instrumental music. The publisher obtains the rights of music works from songwriters and composers in order to monetize it all. The performing artist is the one who shows up at concerts to sing the song, and records the work onto a particular medium or platform. Finally, the label is the entity that owns the sound recordings made by the artist.
Songwriters and composers own the copyright to their portion of the work. However, the copyright generally gets assigned to the publisher in exchange for the revenue generating services the publisher provides. The copyright to the sound recording belongs to the performing artist, who in turn can assign the right to the label.
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When music gets licensed, remember that the name of the game is “slicing and dicing rights”. There is no rule book that says a particular licensing deal must go down in a certain way. Instead, private parties fighting for their piece of the pie developed norms over many years. But the entities that hold the rights to music aim to maximize their revenue by avoiding (as much as possible) granting blanket “all-use” licenses.
For example, if a film project wants to add a musical score, the music rights-holders may license the use of the music for theatrical performances, but not for DVD or Netflix streaming. The rights-holder will demand extra money for release on DVDs, and additional extra money for release on Netflix. On the other side, the film producers will want a blanket license, so that they don’t have to keep going back to negotiate new deals each time the movie gets released on a new platform. This is the ongoing tension in the music industry.
ASCAP and BMI
Two agencies that have been around for decades are generally responsible for ensuring that music rights-holders get paid for public performances. ASCAP and BMI handle licensing of music to various businesses, including radio stations and restaurants, and any other location that wants to publicly perform pre-recorded music. ASCAP and BMI collect royalties for each public performance and remits payments to the various rights-holders.
Many businesses operate under the assumption that once they buy a CD, the music can be publicly performed at their establishments. After all, these businesses paid money to purchase the CD. Ordinarily, this line of reasoning would make complete sense. But remember the name of the music game – “slicing and dicing rights”. When a CD is purchased, the music is licensed to the owner of that CD for private use only. So the CD owner can play the music at home as much as they want. But the music is not licensed for public use. That requires a separate payment. Why? Slicing and dicing of rights, that’s why.
Mechanical, Master Use, Synchronization
Many different types of specific licenses exist in the music industry. Three big ones are the mechanical, master use and synchronization license. A mechanical license allows an artist to record a particular composition and distribute copies of the new recorded work. A master use license allows a filmmaker to take a copy of that recorded work and use it in a movie after paying the label. A synchronization license allows those same filmmakers to obtain the underlying composition rights of the recorded work and use it in the film after paying the publisher.