Music & Money
Controlled Composition Clauses
It should be mentioned that the per-song statutory mechanical royalty can be reduced under certain circumstances (for example, if the writer is the recording artist or if the record is sold as a midline, record-club, TV-only, special-products compilation, or budget album), in which case the royalty figures may be less than those mentioned above. However, such reduced rates are voluntary and occur only if the publisher agrees or if the songwriter is a recording artist and has to accept such lower royalties in the record company contract.
Here’s where things get complicated, so bear with us, and read carefully. Many agreements-the majority, in fact-contain language which provides that if the recording artist or producer has written or co-written a song, has ownership or control of a song, or has any interest in any composition on the album or single, the mechanical royalty rate payable by the record company for that composition is reduced. Such compositions are referred to as controlled compositions. Most contracts attempt to establish a 75% rate (specifically, 6¢, which is three-quarters of the 8¢ full statutory rate) for all controlled compositions. The figures are computed at the mechanical rate in effect at either (a) the time the recording is produced, (b) the date of the recording contract with the artist, (c) the date that a particular album commenced recording (or should have commenced recording per the contract), or (d) the date the recording is originally released (regardless of whether the same recording is released again at a later date in another album).
In other cases, the record company will establish a maximum aggregate mechanical penny royalty limit for an album (for example, 10 songs x 6¢ = 60¢ per album). In a sense, a cap on royalties. Under these clauses, the artist or producer guarantees that he/she will secure reduced mechanical rates on all songs on the album so that the maximum penny rate (e.g., 60¢) payable by the record company to music publishers and songwriters for all songs is not exceeded. If this maximum aggregate album-royalty rate is surpassed-for example, if the writer/artist wants to put 12 songs rather than 10 on the album- the difference is normally deducted from the artist’s or producer’s record, songwriter, and publishing royalties, or, the per-song royalty rates for the writer/artist or writer/producer will be reduced proportionately.
Now, let’s take a look at how this arithmetic affects a specific situation: Let’s say that the writer/ performer has a 10-song x 6¢ maximum royalty rate on his/her album (in other words, 60¢ total) and, instead of writing all 10 songs, writes only eight and records two songs from outside writers who demand the 8¢ statutory 2002-2003 rate per song. In this case, the mechanical royalties would look like this:
60¢
album-royalty maximum payable by record company
- 16¢
two outside songs at 8 ¢ each
44¢
/ 8
the number of artist-written songs
5.5¢
per-song royalty to artist/writer and publisher
As you can see, the writer/artist’s mechanical royalty has been reduced to 5.5¢ per song from 6¢ per song due to the inclusion of two outside-written songs on the album. By the same token, as the writer/artist records more outside-written songs, the artist’s per-song royalties for his/her own works will be further reduced. Sometimes, in fact, when a writer/artist has recorded a substantial number of songs by other writers, he/she has been put in a position of receiving no royalties for his/her own songs, since the aggregate album-royalty maximum has been paid out to outside songwriters and publishers. Ouch! But it can get even worse. There have actually been instances in which the writer/artist’s mechanical royalties have been in the minus column for every album sold because of the operation of these controlled-composition clauses. Additionally, the era of multiple remixes has given rise to a clause which provides that the writer/artist will only receive a mechanical royalty for one use of his/her song regardless of the number of versions contained on the single or album.
