Tech Tip:Digital Jukeboxes
by Jeffrey and Todd Brabec
As opposed to jukeboxes which play actual physical CDs, this system uses digital recordings which are transmitted digitally from a central database or server to the individual jukeboxes around the country.
Grant of Rights. The music publisher gives the digital jukebox company the non-exclusive right to copy the compositions on the company's database and to digitally transmit them to the jukeboxes for performance or for storage on the hard drive of the digital jukebox so that they can be played when selected. Sometimes the compositions are pre-loaded in the digital jukebox with future compositions being downloaded via the Internet.
Royalties. The music publishing royalties that are payable are based on the number of times that a composition is actually played on each jukebox. One established formula provides for a payment of one-half (1/2) cent ($0.005) each time the song is played. This royalty, however, is not a performance royalty since these rights are normally reserved for licensing through the performance rights organizations.
There will also be a one-time payment of the U.S. statutory mechanical rate (without regard to playing time) when the initial recording of a composition is put on the server (sometimes known as a "fixation" fee).
Royalties and fixation fees will be shared by all the publishers of the composition according to their respective control and ownership shares with the songwriters then being paid according to the terms of their individual songwriter agreements.
There is usually a most favored nations provision in all of these agreements which guarantee that all music publishers and songwriters will receive the same royalty and get the benefit of the highest royalty paid. Some agreements give a most favored nations clause as to all important terms and not only to the royalty rates and fixation fees.
Performance Rights. These rights are normally reserved for licensing through ASCAP, BMI, and SESAC in the United States, and are not covered by the digital jukebox agreement (other than to say that the digital jukebox company will secure performance rights licenses from the applicable performance society).
Term and Territory. The term is many times from one to three years with the territory being limited to the United States (including its territories and possessions).
Excluded Rights. All audio-visual or synchronization rights are excluded from the license. Karaoke, print, merchandising, artist likeness, and derivative rights, as well as the right to use any composition to promote products or services (including being part of a game or contest), are also not permitted. Additionally, there will be a guarantee that the selection of a song by a customer will not trigger any advertising (either audio-visual or audio-only) unless the music publisher has agreed to such in advance.
Accountings. Payments are made within 45 days after the end of each calendar quarter. Audit rights are also provided.
Promotional Uses. Certain performances may not be paid on if they are part of a product demonstration where no fee is being charged (for example, in a business to business setting with a potential new client) or if the jukebox performance is part of a limited record company promotion and agreed to by the publisher.
Credit. To the extent commercially reasonable, written credit indicating the names of the songwriters and publishers will be displayed if the song is performed.
© 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