Structure of Agreements
This document covers:
- What are the parts of a sound recording that can be owned?
- Typical structure of a collaboration
- Guidelines for approaching a collaboration
There are three parts of ownership in a licensed song:
- Writing. Ownership of the musical content. This typically includes composing the melody and lyrics. It can also cover the development of chords, bass lines or countermelodies, song structure, arrangement, accompaniment or orchestration. Anything that contributes to the musical content of the song.
- Master. The owner of the sound recording. This typically includes anything related to creating the actual recording. Such as providing the studio and hardware on which the recording is made, performing the work of a recording engineer, mixing engineer or mastering engineer. Often, this work is done on a work-for-hire basis, in which case the master is owned by whoever paid for it.
- Placement. Exploiting the master. This is not a form of legal property, such as the writing or master rights. However, it is typical that a cut of revenue goes to whoever made the contact and/or did the follow-up to get the song placed.
Canonical Agreement Structure
According to the above formula, there is equity in any song for writing, master and placement.
The typical formula for how to split equity among these claims is 40/40/20:
- 40% to the writer(s)
- 40% to the master owner(s)
- 20% to whoever placed the song
Often, each of these will be subdivided among co-writers.
When co-writing, it is essential to agree on a formula ahead of time. Whether it is this suggested formula, or something else, get it in writing before you start.
Either pay everyone who contributed up front for their work, and then you own the song outright. Or, everyone puts in sweat equity, and becomes a co-writer, and has equity in the song according to an agreed-upon formula.
The in-between becomes difficult to manage.
The advice I’ve been given is that collaborations are usually best as even splits. It generally leads to a more cooperative environment, and less haggling over the value of contributions, which can be challenging to quantify.
Anyone who contributes to a song provides value and should be compensated.
From a business perspective, if you participate in creating a song then you should either be paid outright, or be granted equity in the song.
If you are intending to own a song completely (amongst yourself and co-writers), it is therefore essential to pay all musicians and engineers employed in producing the song and have them sign work-for-hire agreements.
This means paying them, of course. Also, you will want to have them sign a work-for-hire contract that specifies:
- The work they did on the song
- The date they performed the work
- The amount they were paid
- A release of claim on ownership of the song
On Licensing Deals
Generally, in terms of placements, you get either cash up front or royalties on the back end.
Very few opportunities pay both since, in general, there’s always a library working to promote the track. So, they usually take a cut one way or another.
Some other details. Royalties come in two flavors, called writer and publisher. So, there is usually 200% being discussed, since each side counts as 100%.
Generally speaking, as described above, the writer’s share is owned by composers, lyricists and anybody else involved in the creative production process that made the song be what it is. (Or, to whomever they sold those rights to.) Of course, it is up to these individuals to decide the terms, ideally done beforehand like we’re doing now.
The actual recording–as distinct from the song, which is abstract intellectual property–is usually owned by whoever pays for/produces the recording.
The recording, or master, is what you usually sell or license to libraries, and they act as publishers to get it placed.
At Flaming Hakama, my studio musician rate is $XX/hour. That is both what I offer to musicians when I hire them, as well as what I ask for when I’m the instrumentalist working for hire.
My work-for-hire studio rate at Flaming Hakama as a recording, mixing or mastering engineer is $XX/hour.
For collaborations on music, where I perform all the engineering, I would split the writer’s share, and keep full ownership of the master.
For more general collaborations where both the writing and production are shared responsibilities, I would split ownership of both the writing and master.