The Big Picture of Mechanical Licensing Agreements:
You’re an independent artist and you love Madonna! You love her so much that you’ve decided to record (or “cover”) an album of her biggest hits. Your versions of her songs sound great and your manager suggests that you sell this Madonna cover album on iTunes. However, one slight problem! Before you can sell your album, you’re told by your entertainment lawyer that you must first get a “mechanical license” from the copyright owners, that is, the original writers of the song. So what the hell is a mechanical license you say?!!
What is a mechanical license?
Well, let’s start from the beginning. Typically, a license is a permission granted by an owner (“the Licensor”), for example, the individual songwriters of the Madonna songs, to a third party (“the Licensee”) like you. So, a mechanical license is a license that grants you, as the Licensee, the permission to reproduce copies of the lyrics or instrumental music of a recorded song, which in this case are the Madonna songs. A mechanical license does not grant permission to reproduce a sound recording (master) of the song which in your case does not apply because you hired a band to re-record the music.
What is a compulsory mechanical license?
By simply recording the original Madonna songs, the original songwriters have provided you with what’s known as a “compulsory” mechanical license. Under copyright law, the original songwriters are “compelled” to issue you a mechanical license to re-record the songs as long as you pay them what’s known as a “mechanical royalty”. In other words, you don’t have to get permission from the original songwriters to record a cover of the song and anyone can obtain a compulsory mechanical license. Obviously, if you write your own songs and want to distribute them, you don’t need a mechanical license.
So, how do you get a mechanical license?
To obtain a mechanical license, you’ll need to sign a mechanical licensing agreement with the songwriters (or publishers) and likely pay a mechanical royalty unless you receive a free (or “gratis”) mechanical license. The mechanical royalty rate paid is either negotiated with the copyright owner directly or set by the Copyright Royalty Board. The current statutory mechanical royalty rate is 9.1 cents per song per unit for recordings of compositions up to five (5:00) minutes in length. In other words, for each Madonna cover record on your album, you have to pay the original songwriters a mechanical royalty rate of 9.1 cents or 0.91 cents if the album contains 10 songs. For songs over five (5:00) minutes in length, the rate is based upon 1.75 cents per minute or fraction of a minute. For “controlled compositions,” i.e., songs that are written and recorded by a new recording artist signed to an exclusive recording agreement with a record label, the controlled composition clause in the recording agreement usually limits the amount of mechanical royalties the record label is required to pay to the songwriters to ¾ or seventy-five (75%) percent of the statutory mechanical royalty rate (i.e., 0.91 cents) or 6.825 cents. Complicated math to say the least, but those pennies add up and could put significant money in a recording artist’s pockets! Important terms of a mechanical license agreement that your entertainment lawyer will advise you of include: declaration of ownership of the copyrighted song by the Licensor; description of the rights granted to the Licensee, the royalty amount to be paid, and the Term of the mechanical license agreement.
Where/who do you get a mechanical license from?
Instead of having to go to each individual writer and their publishers to get a mechanical license, there are companies that will issue mechanical licenses on behalf of their member writers and publishers. One such company is the Harry Fox Agency (HFA). HFA is the “foremost mechanical licensing, collection and distribution agency for music publishers in the United States.” Established in 1927, HFA issues mechanical licenses, then collects and distributes music copyright royalties on behalf of copyright owners. It licenses the largest percentage of the mechanical and digital uses of music in the United States. The HFA licenses cover physical or digital reproduction, including reproduction of CDs, ringtones, and Internet downloads. Should you plan on pressing CDs as well as selling the album digitally on iTunes and other online retailers, HFA should be the first place you go to get that mechanical license. The HFA mechanical licenses are a written variation of the compulsory license. The form is fairly straightforward and requires the Licensee to submit information about the licensed song, anticipated number of uses and the music publisher. You can check out the HFA mechanical license form here. Other more recently formed commercial licensing agencies include RightsFlow and EasySongLicensing.com. If for some reason, these companies can’t issue mechanical licenses, you may also obtain a mechanical license directly from the copyright owner. So, hopefully your questions about mechanical license agreements have been answered and make sure to send me a copy of that Madonna cover album when is done ‘cause I’m a big Madonna fan!