Tech Tip:CD Mechanical Royalties for 2005
By Jeffrey and Todd Brabec
The compulsory mechanical CD royalty rate for 2005 is 8.5¢ per composition (sometimes called the "minimum statutory" rate) or 1.65¢ per minute for songs more than 5 minutes (the latter timing royalty being sometimes referred to as the "long song" rate).
This statutory mechanical rate represents the songwriter/music publishing royalties payable for songs contained on all physical audio recordings which are made and distributed from January 1, 2005 through December 31, 2005 regardless of the date of the mechanical license or the date that the particular recording was initially released.
This royalty rate applies unless the music publisher and songwriter have agreed to a lesser rate in the mechanical license or controlled composition clause of the recording artist agreement.
The agreement between the music publishers, songwriters and record companies which established the 2005 rates also established what the mechanical royalty would be for the two-year period from 2006 through 2007.
The statutory mechanical rates for 2005 through 2007 are:
|YEAR||RATE||PER MINUTE RATE|
To illustrate, if an album is first released in the United States in 2005 and a composition on that album is licensed at the minimum statutory rate, the publisher and writer of the composition would receive a combined 8.5¢ for each album sold during the year 2005.
These monies would be paid by the record company to the music publisher, which would then pay the songwriter his or her share of the royalties per the terms of the songwriter agreement (e.g., 50%, 75%, etc.).
If the album continues to sell through the years 2006 and 2007, the mechanical payments for the composition will be increased to 9.1¢ for each album manufactured and distributed in 2006 and 2007.
The following chart tracks the sales of one composition on an album licensed at a statutory rate over a three-year period.
In our example, the album is released in early 2005 and sells 500,000 copies in the United States between 2005 and 2007.
|YEAR||RATE||TOTAL MECHANICAL ROYALTIES|
The above example applies when the songwriter or music publisher has issued what is known as a "floating" statutory rate license which makes sure that the mechanical rate for the song on the album goes up as the per song statutory rate increases.
The example does not apply when the songwriter and publisher have agreed to a reduced mechanical royalty which is usually a fixed per song penny rate which never changes (e.g., 7¢).
This usually occurs when the songwriter is a recording artist and has to agree to the demands of the record company in the recording artist agreement that the mechanical rate has to be reduced and "fixed" at a certain date (e.g., usually the date that the album is either recorded, delivered, or released) with no change in the future despite U.S. Copyright Office approved increases in the per song statutory mechanical royalty rate.
This type of mechanical royalty rate reduction also occurs when the songwriter is a record producer and writes compositions for the album being produced.
© 2005 Jeff Brabec, Todd Brabec
This article is based on information contained in the new, revised paperback edition of the book "Music, Money, And Success: The Insider's Guide To Making Money In The Music Industry" written by Jeffrey Brabec and Todd Brabec (Published by Schirmer Trade Books/Music Sales). musicandmoney.com