The Soundtrack Album…by Numbers

When you licence music for a film the right to include it on a soundtrack album isn’t included. This is partly because, like using music in an advertisement or trailer or using the title of a song as the title of your film, it would be considered an additional use and attract an additional payment.

The main reason though is that legal terms for soundtrack albums are entirely different to those of a licence and almost impossible to include in the same agreement. To understand why read on….

1. Is it easy to release a soundtrack album for my film?

If you can find a nice friendly record company with deep pockets to take over the whole endeavour on your behalf and you are content with a small percentage of any profit, the answer is probably yes. Otherwise the answer is no; it’s too complicated, too expensive, too time consuming and it won’t make any money.

2. An Apology

Colleagues have pointed out that the tone of this piece is somewhat negative and it may have been more useful to offer a guide to releasing a record instead of a list of reasons why not to.

In our defence this is a piece for film makers; not for those interested in setting up a record company. The latter is laudable, if rather brave in the current climate, but for someone primarily occupied with making a film we felt it vital to be honest about the potential pitfalls. Making a film is a huge task in itself and adding a record release (together with the steep learning curve required to do it properly) would, we believe, be asking too much.

If you have the skills and desire to make a film then diverting your time and energy elsewhere when there are companies more than capable of taking on the task strikes us as a misuse of valuable resources.

However if you can’t find a nice friendly record company and are utterly determined… don’t say you weren’t warned.

3. My film has a mixture of music some especially composed and some tracks I licensed from records companies. I’d like to use both on my soundtrack record. Does this present particular problems?

Not so much extra problems as twice the work. We’ll call the two types “Score” and “Sourced” and deal with them in two separate sections below. If you want to have a mix of the two then you’ll have to go through both processes.

4. Is there such a big difference between licensing music for a film and for a soundtrack record?

Most films licence music in perpetuity and worldwide for a one-off fee. Various royalties are subsequently paid but these are largely invisible to film makers. Apart from deferred fees the film maker isn’t generally aware of broadcast and theatrical royalties, royalties from physical sales of DVDs or CDs, performer royalties or repeat fees.

The rights that are required to licence music for your film are actually very limited and can usually be covered in a two or three page document. Taking on a record release and all that entails isn’t as simple as it appears on the surface. You are asking for many more rights and will be entering into a long term obligation to pay royalties.

Theoretically you could request a buyout for all rights but, short of a miracle, even if you could get everyone to agree it would cost far more than you would ever make back in sales.

5. Licensing Sourced Music

An album comprised of previously released tracks is a much simpler affair contractually but can be expensive. It also involves ongoing and potentially long term accounting obligations of a specialist nature which should not be undertaken lightly.

For example, if you have a twelve track album of reasonably well known tunes and you finish up paying the best part of a grand for each track and then add legal costs, by the time you’ve paid for artwork, mastering, the actual manufacturing plus the royalties due to the publishers you easily hit £15,000 and probably get closer to £20,000 in costs for an album before you’ve sold a single copy.

If you’re using relatively unknown artists or obscure tracks you can bring the costs right down but sales will be lower and unless it’s a vanity release you still need to pay to licence the tracks, manufacture and promote the record. (If you are on a tight budget don’t forget each part of the process can attract VAT and if you are not registered yourself, you can’t claim it back.)

Strangely, if an artist already has a record deal and you are dealing directly with their label the process is much simpler. All the terms for paying the artist pre-exist between their artist and their label so all that is needed is the terms on which you pay the label.

The specific terms of the licence of a track to you can be detailed in one page. This page is commonly known as a Heads (short for Heads of Agreement) and is supposedly the precursor to a full length agreement. In most cases this long form version is rarely completed since the Heads covers all the salient points and single track license deals have been around so long the pattern is firmly set.

The vast majority of single track licence deals are for compilation albums and these have become the model for similar albums such as soundtracks comprised of sourced music. There are several differences between licensing for an album release to licensing for a film.

The main things to expect are:

Do:


expect to pay an advance per track

expect to have to account for royalties at least every six months

Don’t:

expect a licence in perpetuity; usually they’re for around five but never more than ten years

expect to be able to release singles or even single tracks as downloads

expect labels to be falling over themselves to get on your soundtrack album. The promotion value if there is any, is being in the film, not on the album

These licenses can be complicated by other factors. A record company in the country where the film originates is usually in a position to grant a worldwide licence for inclusion in the film. This is because it isn’t competing with anyone else for sales in the case of a film. However if a track was previously licensed to different record labels, for example for release in the USA or Asia, your local label may not be able to grant worldwide rights for inclusion on a soundtrack album release. The upshot is that you may have to deal with more than one label to secure additional territories.

The licensors may also demand what is sometimes incorrectly known as MFN (most favoured nation – Wikipedia covers the subject well). In essence this means the licensors require that their track is licensed on the same terms as the best terms granted to any other track. That is; the largest advance, the top royalty rate and the shortest licence period. This means that if you have a key track by a major artist that you simply must include, and other tracks are demanding they get the same, it’s going to get very expensive.

Independent labels are usually the easiest to deal with and providing they feel they are being treated fairly will be cooperative. Therefore do not approach them first. The most difficult tracks to licence will set the benchmark for the rest and these generally belong to the majors. First they ask how many tracks are on the album and how many albums you expect to sell and at what price; then base their advance on that number. You can’t get around it by giving a low estimated sales figure. They tend to have minimum advance level and some won’t even consider a licence at all if they think the sales target is too low.

6. Licensing Score

At the other end of the spectrum if it’s all score and there was a buyout under the PACT / MU agreement then you can go right ahead subject to following the procedure in section 7.

If the score wasn’t bought out then there are a number of scenarios.

Starting from the bottom; you’re a wholly independent film maker and some or all of the music was written as a favour.

The word written is used deliberately. Even if the music was performed by the same person or group you may have to get their permission as writers to release it on record. (Please see the note about first mechanical licences in section 9). Even if the writer’s option to control this licence is not in place it’s a basic courtesy to ask the permission of the writer of an unreleased work.

In addition to this permission from the writer, if you wish to release a record you must own or licence the master rights i.e. the rights created when the performers of the music made the recording.

The most simple and straightforward way to ensure you own the master rights is to pay for them. This means paying for the studio and all the materials used plus paying the producer, engineer and of course the musicians, preferably at MU rates so as avoid any possible future disputes, and getting the correct forms signed at the time of recording.

If you’re an independent filmmaker with a slim budget the chances are your rights to use the music will be strictly limited. Even if the score was written especially for the film, unless it was a paid commission the writer may have only granted you the right to use the music with your film. The exact rights should be contained in the synchronisation licence.

Similarly unless the performer was paid the full rate at the time of recording it’s unlikely they would feel sufficiently recompensed to give you the right to do anything other than use the music in the film. Without the PACT agreement or similar, audio-only record rights would normally be expressly reserved.

Outside the PACT agreement the artist concerned would also expect to see a record contract laying out the entire terms and conditions.

7. Suddenly you’re a Record Company

Being a record company involves agreeing complex terms and conditions with the artist and undertaking certain obligations to the writers of the music (outlined in section 9). A standard record agreement will run to at least a dozen pages and those with major companies have been known to reach a hundred. These cannot be incorporated into or added onto the master rights licence for the film as they are entirely different types of agreement.

A licence for film allows you to use a specified duration of a particular piece of music in timed relation to a specified visual. Two licenses are required; one from the master rights holder and the second, a synchronisation licence, from the publisher (or if there isn’t one, a direct licence with the writer). It then goes on to state what you can do with the two together for the fee you have paid. For example, use it in the film but not in trailers or show a picture of the record sleeve but not use the song title as the film title.

(A quick aside; whenever you use any copyrighted material which can be argued is pertinent to the scene – whether it’s a record cover or a sauce bottle, a page from a newspaper or a shop sign – you may need to clear the use. If in doubt ask an expert.)

When you release a piece of music into the world, while superficially you are putting out a CD and selling it to the public, you are in fact exercising many underlying rights and unless you make sure you have all these rights you may be shooting yourself in the foot. Without getting in too deeply; you need the right to manufacture, distribute and sell and be able to permit others the right so to so. You need the right to authorise broadcast on the various media, you need the right to use the artist’s name, likeness and biography, you need the right to use the artwork and titles to advertise and publicise, you need to hold the rights to live or alternate performances of the music by the artist… it goes on and on.

While the general deal terms of a record contract can be summarised in a page, as you can see from the last paragraph, these are not sufficient in themselves. One page agreements do exist and to the naïve can seem a neat and easily understandable solution to a knotty problem. However, inevitably one page agreements leave a lot out. While everything is going swimmingly this might not be a problem but the moment there is any contention and you have to rely on the wording of the agreement then the worms start writhing in the can.

The essence of contracts is an exchange of fair value. If you pay a pile of money but don’t sell many copies the artist may be unhappy but is nevertheless rewarded for granting you the rights. If you are paying little or nothing then the artist may reasonably expect publicity, wide availability of the record and ample sales. If none of these are forthcoming they may ask for the right to their recordings back so the can license them elsewhere.

Simple agreements rely on the precedents set in commercial law. Without putting a single foot in that minefield, unless you know your way around record contracts and how they work in practice, you are asking for trouble if you rely on an agreement that is only a page or so long. If you do know your way around you wouldn’t contemplate a single page agreement in the first place.

When negotiating such agreements it is vital to take advice from persons experienced in the nature of these agreements and it is highly advisable to ensure that the artist gets advice too. (Be aware – unless you are offering a reasonable amount of money to the artist, you may be asked to take care of their legal costs as well as your own. This means paying for two sets of negotiators).

8. “CD’s only cost a few pence to make so why do they cost a tenner in the shops”

Even if you can keep the costs right down by pulling favours and doing deals, there’s a point where you have to bite the bullet and decide how many albums to manufacture.

It’s not as straightforward as you might think since most manufacturers have minimum runs and, while you can buy smaller quantities from internet based services, if you are planning to sell to the public you really need the peace of mind and guarantee of quality offered by one of the more established companies. (Key Production http://www.keyproduction.co.uk is second to none).

Checking their price list (June 2012) 500 CDs in a jewel case and with a four page booklet – these are the most basic packaging options for retail sale costs £530. However in a stark illustration of the economies of scale 1,000 would cost £545. That may sound like a bargain but it’s fatal to think in terms of unit cost compared to sale price. If you order a thousand but only sell a hundred that comes out at £5.45 and not 54.5p each.

Before you balance that against retail prices there’s another dose of reality. The price to the retailer of a CD selling at £10 is £5.50. (The retailer has to cover VAT as well as make a profit). Deduct from that the distributor’s share (25%), a mechanical royalty of 50p, around £1 to the artist(s) and a few odds and ends like delivery costs and you are left with £2.50; a loss of £3 per CD sold.

At the other end of the scale, after you’ve set aside a couple of hundred copies for press and promotion etc. providing you sell the rest you’d have around £1,600 to pay for manufacturing and any other costs incurred. If you’re lucky that’ll leave enough for a bottle of decent wine and a take away to enjoy with the deep sense of fulfilment you’ll undoubtedly feel.

(If you’re a vinyl fan the sums are even less attractive. A minimum run of 300 12”s in colour sleeves will set you back at least £1,000 so by the time you’ve added in the various other costs they would be retailing at well over £15 apiece).

Finally, to burst any remaining bubble of hope, there’s so much competition for every pound in the pocket these days records sales have crashed in the last few years. Selling a thousand CDs would be amazing and 300 vinyl little short of miraculous.

9. Don’t downloads avoid a lot of the hassle?

The saving grace in the modern age is the digital download. Manufacturing costs are avoided although you will still probably have to pay for mastering and artwork and while the film provides some publicity for the release you still have to let the public know the record is out there so there are some promotion costs as well.

Unless you are set up to manage download income then it is best to use an aggregator which will take a cut in exchange for administration and promoting the album to download stores. Their cut will be greater the more you ask them to do. While their share for taking care of all the accounting may seem high, the time and trouble this takes is considerable and well worth passing on to someone with the systems already in place.

Even then you will still have to account to the artist (or even more problematically artists) and if the deal is worldwide, cope with handling multiple currencies. If this wasn’t enough, while mechanical royalties are included in the download price and paid by the download companies to the collection society in the UK (and some other countries), in yet others such as the USA you must account for them yourself.

10. What’s publishing got to do with it?

There is no need for the record company, (or film company), to have an interest in the publishing of a work in order to release it on record. The obligation to pay publishing royalties remains whether you are the publisher or not.

There are two principle types of royalty where records are concerned. Performance royalties are paid whenever a piece of music is played in public such as on the radio in a cinema or in a shop. The other kind is known as a mechanical royalty which is due on any physical copy (which these days that includes downloads) of the record.

In the UK and some other countries the administration of these two royalty streams are handled by a single company known as a society (PRS for Music in the UK’s case), in others, for example the USA, they are handled by a number of competing societies which the publishers and writers join as they choose.

Before you release a record in the UK you must apply for a statutory licence with the MCPS (this stands for the Mechanical Copyright Protection Society which is the section of PRS for Music that deals with the licences required before you release a record). This licence is obligatory whatever your knowledge or belief about the authorship of the music may be. The purpose is to establish that the work is genuinely new and if it is subject to any of the MCPS’s terms and condition.

The application could return a variety of results most of which will mean you are sent an invoice for mechanical royalties. The mechanical royalty in the UK is currently set at rate of 8.5% of the dealer price of the record or download. However there are some cases, for example NS (Non Society), where the writer is not currently a member of the MCPS which won’t result in an invoice.

Just because neither the writer nor their publisher is collecting the mechanical royalty at the point when you release the album does not mean they will not do so in the future. When the titles are eventually registered an invoice will be generated and you should put aside a contingency for this event. Note there is no time limit for this and you could still get an invoice many years after the release.

If the musician is a member of the MCPS or has a publisher then there will probably be something called a first mechanical licence option in place. The idea behind this is so the writer can register a piece of music (and thus establish ownership) before it is released on record so they can save it for their own or a specific artist’s use at a later date.

Even if it’s a brand new recording of a previously existing piece of music, providing it has been previously released and subject to acquiring the licence from the MCPS and paying the mechanical royalty, you are free to put it out. There is a proviso – you have not changed the music in a material way such as mashing it together with another track, including samples or changing any of the lyrics. If you have altered the song so that the ownership of the publishing could be challenged then that creates problems too complex to be dealt with here.

11. Caveat

The above is a general guide and skirts the real complexity of releasing a record. We have not touched on the nuts and bolts of record contracts, the merits of AP1 or AP2 agreements, parallel imports, distribution deals, double taxation considerations, controlled compositions and a hundred other matters a proper record company will deal with every day.

Our best advice was summarised in Point 1; if you want a soundtrack properly released get a record company to do it. It’s not a matter of difficulty but of expertise. You wouldn’t appoint a brain surgeon as DP or let a rocket scientist edit your film so why would you want anyone other than a record company to release your record?

12. Can we help?

While we no longer have record companies of our own (so cannot offer to release records ourselves) we have decades of experience on that side of the business and can advise on all aspects of releasing records from the practical to the legal.

Please note that any services with regard to releasing a film soundtrack on record involve different members of our team and are completely separate from any other services offered by ThinkSync Music. However our advice is free…

…if you have a specific question please ask.

Further Reading

Lee & Thompson, a top media law firm in the UK have a truly excellent downloadable guide to the music business. Please note it is 147 pages long and not holiday reading. (http://www.leeandthompson.com/wp-content/uploads/Website-Handbook-250412.pdf)

Although it is from the US point of view “All You Need to Know About the Music Business” by Donald S. Passman is hard to beat for clarity, breadth and solid information.

Music: The Business – the Essential Guide to the Law and the Deals by Anne Harrison has, as it says in its title, a strong legal slant but is definitive within its scope.

There are of course many others, some of which will be excellent, but not having read them all, we must refrain from passing comment.

Peter Lawton / Claire Munro

© ThinkSync Music 2012