Recently I hosted a workshop for California Lawyers for the Arts. The topic was “Downloads & Streams: Laws, Licenses & Controversies.”
During the talk, there were a lot of great questions by the attendees. One of these questions had to do with ring tone licenses.
As the revenue stream from ring tones has become a revenue river (Jupiter Research is estimating $6.6 billion in 2006) – I thought an article about ring tone licensing would be rather timely.
As with most music articles on MELON, I need to start with the “two-headed” music copyright.
MUSIC (C) BASICS:
A copyright is the exclusive right of the author of an original, fixed work to....
- distribute
- reproduce (copy)
- display
- alter
- perform
....the work. The author gives permission for others to use these rights through a “license.”
A song consists of 2 copyrights – the underlying composition (aka “music & lyrics”) (owners = songwriters & publishers) and the sound recording (aka “master”) of that composition (owners = artists & labels).
The authors of the composition copyright (songwriters/publishers) and master copyright (artist/label) each have the exclusive rights stated above.
RING TONE LICENSES:
For ring tones, we’re talking about the “performance” and “copying” of a song. Those are the 2 exclusive rights implicated here.
To talk about ring tone licenses, we must thus talk about one license for the composition and another license for the master.
Another important distinction to make is the type of ring tone. One type is the “polyphonic” ring tone, which is essentially a MIDI version of the song played as a ring tone.
The other type is the “master” ring tone, which is the actual sound recording itself played as a ring tone.
The Polyphonic Ring Tone only involves the composition copyright because the master is not involved.
The Master Ring Tone involves both the composition and master copyrights because the master is involved.
In this article, I will go through the licenses needed for a Master Ring Tone. Keep in mind that a Polyphonic Ring Tone will be exactly the same, except no licenses for the master are necessary.
For the performance of the composition, here’s how it plays out:
Cell phone carriers and ring tone companies generally go to the Performing Rights Organizations (ASCAP, BMI, SESAC in the U.S.) and obtain a blanket performance license for ring tones. Otherwise they go to the Songwriters and Publishers directly.
For the copy of the composition, here’s how it plays out: (note this area has been controversial)
Typically, there is a “compulsory” (aka “mechanical”) license for the copying of a composition.
This means (with caveats) that the Songwriter/Publisher has to give permission and the Licensee has to pay a set amount (currently .09 cents for songs under 5 minutes).
You may have heard of mechanical license with regard to recording “cover” songs.
For ring tones, the market has developed a little differently.
From the outset, savvy Publishers argued that the ring tone is not a straight-up copy of the composition, but rather it is an “alteration” of the composition – thus invoking a separate exclusive right & taking the ring tone out of the sphere of the compulsory license.
If the compulsory license didn’t apply to ring tones, publishers could feel free to charge whatever the market would bear. And that is what they’ve done.
Carriers and publishers initially worked out a deal where publishers were getting 10-15% of the retail ring tone price, either with a guarantee that the ring tone won’t sell below a certain price, that the ring tone will sell within a certain price range or that there would be a minimum royalty would be paid to publishers.
Most commonly, the structure is 10% or $0.10 of the retail price, with a floor of $0.10. Thus, if a ring tone sold for $2.50, Publishers were getting $0.25.
Record labels were not pleased with this. With Publishers taking such a huge bite out of the revenue, less was left for the Labels.
Labels argued that ring tones were not “altered” compositions, but rather copies of compositions – thus trying to bring the ring tone back within the sphere of the (less expensive) compulsory license rate.
In late 2006, the Copyright Royalty Board ruled that Master Ring Tones are indeed subject to the compulsory rate.
This means that those wishing to offer master ringtones can go to the Harry Fox Agency for a ringtone license issued at the compulsory rate.
For the performance of the master, here’s how it plays out.
Cell carriers or ring tone companies generally get a license directly from the Artist or Label. Sound Exchange (who handles the licenses for digital performances of masters) is not currently in the ring tone license game.
For the copy of the master, here’s how it plays out:
Cell carriers or ring tone companies generally get a license directly from the Artist or Label. Often these companies try to negotiate the agreement so that the Artist/Label is paying the Publisher's share out of their own share.
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