Producers, Sound Engineers, and Mixers May Be Entitled to Digital Performance Royalties Too!

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Do you ever feel slighted by the music industry or like you’re unable to collect royalties if you’re not the main artist on a track? Until recently, that was the case for many creators, but the Music Modernization Act (the “MMA”) changed that for producers, sound engineers, and mixers (collectively, the “Creators”).

Title III of the MMA, the Allocation for Music Producers Act (the “AMP Act”) provides a legal process to collect digital performance royalties for sound recordings (also referred to as “masters”).1 In general, digital performance royalties are monies collected from streaming services that don’t allow listeners to pick their next song, such as Pandora and SiriusXM. In the United States, SoundExchange collects and distributes these royalties.

The most common way Creators are able to collect royalties under the AMP Act is by filing a letter of direction (“LOD”) with SoundExchange. An LOD is a document that directs SoundExchange to distribute digital performance royalties from a featured artist (the performer(s) on a track) to a designated Creator.2 The LOD royalty percentage is normally determined by dividing the Creator’s agreed upon master royalty percentage by the artist’s record royalty percentage. Generally, a Creator will receive a 1-5% master royalty, and the artist’s royalty is specified in their record label contract. For example, imagine you are a producer entitled to a 3% master royalty, and the artist is entitled to 15%. Using the above formula, the producer’s percentage on the LOD will be 20%. In addition, the featured artist is only entitled to 45% of any digital performance royalties.3 The percentage that the Creator is entitled to will be paid from such share. That means if a song earns $10,000 in digital performance royalties, the featured artist is entitled to $4,500, and with the 20% LOD percentage from the above example, the producer would be entitled to $900.

The application for an LOD requires a completed LOD form signed by the featured artist, along with a completed repertoire chart that lists the track name(s), percentage(s) of artist royalties to be distributed to the Creator, and other optional information, such as the release date and International Standard Recording Code.4 Register your LOD with SoundExchange with the help of Music Law Pro’s experienced music attorneys here.

The AMP Act also created an avenue to collect royalties specifically for sound recordings created prior to November 1, 1995.5 On November 1, 1995, the Digital Performance in Sound Recordings Act was passed, granting sound recording copyright owners the right to exclusively perform their recordings via digital audio transmissions.6 The AMP Act used that same date to allow Creators to receive a default royalty as a matter of law. Creators may be eligible to receive 2% of all receipts collected from digital licensing transmissions (the “Default Allocation”) if they meet certain criteria. This means that if a master generates $10,000 in digital performance royalties, the Creator might be legally entitled to $200.

Creators must meet certain criteria in order to be eligible for the Default Allocation. First, the featured artist must be registered with SoundExchange. If the featured artist is not registered with SoundExchange and refuses to register, or if the artist is unable to register, then the Creator is not eligible for the Default Allocation. Second, the Creator must prepare a LOD and make “reasonable efforts” to get the featured artist’s signature. SoundExchange requires that the Creator try to contact the featured artist for a period of at least 120 days. If the artist signs the LOD, then the Creator will receive royalties in accordance with the LOD rather than the Default Allocation. If the artist is found but refuses to sign the LOD, then the Creator will be unable to collect the Default Allocation. However, if the artist cannot be found or does not respond after 120 days, then the Creator is still eligible for the 2% Default Allocation. Third, the Creator must have a contract with the artist or the artist’s label that allows the Creator to collect royalties for the masters listed on the LOD. If the Creator doesn’t have such a contract, they cannot collect the Default Allocation. If the Creator does have a contract that indicates they can collect master royalties, then the Creator may file an application for the Default Allocation with SoundExchange.7

The Default Allocation application requires a signed and notarized “AMP Act Certification” acknowledging that all of the above requirements have been met. In addition, the Creator must submit a copy of the contract authorizing royalty participation in the listed sound recordings, as well as a copy of the unsigned LOD.8  SoundExchange will then review the application and attempt to contact the artist for another 120 day period. Generally, if the artist doesn’t respond or object, and the Creator’s application materials are complete, SoundExchange will then allow collection of the 2% Default Allocation.9

The AMP Act revamped copyright law and provided protection for Creators that never existed before.  For the first time, producers, sound engineers, and mixers have a legal process that allows them to collect digital performance royalties through a SoundExchange LOD or the 2% Default Allocation.  Know your rights and let music industry experts like Music Law Pro guide you through the process of collecting the royalties you are owed.  Contact us today.

By: Alexandra Mayo, Law Clerk

Sources:

  1.  See 17 U.S.C. §114(g)(5) (“A nonprofit collective designated by the Copyright Royalty Judges to distribute receipts from the licensing of transmissions…shall adopt and reasonably implement a policy that provides, in circumstances determined by the collective to be appropriate, for acceptance of instructions from a payee…to distribute, to a producer, mixer, or sound engineer who was part of the creative process that created a sound recording, a portion of the payments to which the payee would otherwise be entitled from the licensing of transmissions of the sound recording”).

  2.  See Guide to Featured Artist Letters of Direction (LOD), SOUNDEXCHANGE, https://www.soundexchange.com/wp-content/uploads/2016/09/SoundExchange-Guide-to-Letters-of-Direction-LOD.pdf (last visited Jan. 19, 2021). 

  3.  See 17 U.S.C. §114(g)(2)(D) (“45 percent of the receipts shall be paid, on a per sound recording basis, to the recording artist or artists featured on such sound recording (or the persons conveying rights in the artists’ performance in the sound recordings)”).

  4.  See Guide to Featured Artist Letters of Direction (LOD), supra note 2.

  5.  See 17 U.S.C. §114(g)(6) (“A nonprofit collective designated by the Copyright Royalty Judges to distribute receipts from the licensing of transmissions…shall adopt and reasonably implement a policy that provides, in circumstances determined by the collective to be appropriate, for the deduction of 2 percent of all the receipts that are collected from the licensing of transmissions of a sound recording fixed before November 1, 1995, but which is withdrawn from the amount otherwise payable under paragraph (2)(D) to the recording artist or artists featured on the sound recordings”).

  6.  Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, § 106, 109 Stat. 336, 336 (1995) (codified as amended at 17 U.S.C. §§ 114-15), https://www.govinfo.gov/content/pkg/STATUTE-109/pdf/STATUTE-109-Pg336.pdf#page=1 (last visited Jan. 19, 2021). 

  7.  See Allocation for Music Producers (“AMP”) Act Instructions for Pre-November 1, 1995 Sound Recordings, SOUNDEXCHANGE, https://www.soundexchange.com/wp-content/uploads/2016/09/Letter-of-Direction-Packet-11.15.19.zip (last visited Jan. 19, 2021).

  8.  See Allocation for Music Producers (“AMP”) Act Certification of Attempt to Obtain Letter of Direction, SOUNDEXCHANGE, https://www.soundexchange.com/wp-content/uploads/2016/09/Letter-of-Direction-Packet-11.15.19.zip (last visited Jan. 19, 2021).

  9.  See Allocation for Music Producers (“AMP”) Act Instructions for Pre-November 1, 1995 Sound Recordings, supra note 6.

DISCLAIMER: In addition to the disclaimer, for clarity: This information is for informational purposes only and should not be taken as legal advice for any individual case or situation; and please do not consider this information to be a substitute for obtaining legal advice from a qualified attorney licensed in the jurisdiction(s) relevant to your matter.  

Alexandra Mayo