The music industry is constantly looking for new and talented artists, and despite it being a saturated market, stars are discovered everyday. But, it is important to be aware of music law terms such as music labels, copyrights, and music royalties to make a smoother transition into the convoluted world of showbiz. Let’s break down five topics that aspiring musicians and songwriters should know before entering the industry.

Record Labels and Publishing Companies

One of the major ways to enter the music industry is to sign with a record label: a company that manufactures, markets, distributes and promotes music recordings and music videos.

There are both smaller independent or “indie” record labels and larger international companies known as major record deals. Currently, there are three large record labels collectively known as the “Big Three”:

1. Universal Music Group (UMG): Includes Interscope Records, Capital Music Group, Republic Records, and Def Jam Recordings and holds 54.4% or US/CA market share;
2. Sony Music: Includes Columbia Records, Epic Records, and RCA Records and holds 23.4% of US/CA market share; and
3. Warner Music Group: Includes Elektra Records, Warner Records, Atlantic Records, Parlophone Records, and Reprise Records, and holds 12.1% of US/CA market share.

Record labels companies are primarily responsible for a specific recording of a song or performance (see music masters below). In contrast, publishing companies typically control written music and compositions on behalf of songwriters and are given copyright ownership license. In exchange for signing with a record label, music artists are given royalties.

Four Types of Music Royalties

The main source of income for most artists are royalties, a legally binding payment generated by the licensing of recordings or sounds. Royalties are a music law category that are very important for artists to understand. Royalties include:

• Mechanical Royalties: The songwriter collects payment every time their song is reproduced via physical or digital streaming or download;
• Synchronization Royalties: The copyright owner (usually the songwriter and their publisher) is paid every time their song is played on television, film and advertisements by license holders;
• Performance Royalties: These royalties are collected whenever the songs are played publicly, such as on radio/TV stations, live venues, and restaurants; and
• Print Rights and Royalties: Songwriters and publishers receive royalties based on sales of printed sheet music.

Print sheet music is an example of a copyright in the music business.

Copyrights are an Integral part of Music Law

Copyright are original works of authorship, meaning that once an artist records the music, it is automatically copyrighted. Copyrights are imperative to delegating the ownership of any type of piece of music, and thus also determines to whom royalties are given to. Music, uniquely, has two types: i) composition (think melody and lyrics), and ii) sound recordings (typically in the form of master recordings as seen below). Composers, lyricists, and songwriters author the composition while performers, producers, and sound engineers are responsible for the sound recordings. 

Copyright owners are given the rights to reproduce the copyrighted work, create derivatives or variations of the song, distribute the work to the public, perform the song publicly, and display it publicly. Additionally, by having a public record of their work, artists are able to ensure the prevention of copyright infringement and plagiarism. 

Copyrights also include Music Masters.

Music Masters are the Center Piece of Music Law

Masters, or master recordings, are the original recordings of a song or performance. Having ownership of masters as an artist allows for not only creative control of their music but also the ability to maximize profit opportunities. The owner can license the recording to third parties, such as commercials, TV shows, films and sampling in other songs. 

Although owning masters is often viewed as ideal, some artists choose to forfeit or share the legal rights to the recording, generally due to the need for financial support. However, there usually are provisions in place that do not allow the label to implement certain creative decisions without the artist’s approval depending on the deal. 

In many cases, new artists have signed away their master recordings without fully realizing the exact consequences. For example, Taylor Swift notably underwent a series of disputes with her previous manager Scooter Braun regarding his acquisition of her recordings. Therefore, the decision of how to handle the rights of masters should be taken into careful consideration with consultation of lawyers, specifically entertainment attorneys, and one’s management team. Performing Rights Organizations also play a complementary role with music masters.

Performing Rights Organizations

Performing Rights Organizations (PRO) serve as intermediaries between the copyright holders, such as songwriters and publishers, and parties interested in using those copyrighted materials publicly. They play a huge role in music law. Essentially, PROs provide a significant portion of musicians’ incomes by collecting royalties on their behalf anytime their songs are broadcasted via radio stations, streaming, TV shows, commercials, or played at live venues. 

PROs are actually a subdivision of Collective Management Organizations (CMOs), a licensing entity that manages and monitors the rights of copyright owners. While CMOs cover both mechanical rights and performing rights, PROs only deal with the latter. If you are seeking assistance in mechanical royalties as well, you can also join a Mechanical Rights Organization (MRO). 

Royalty types aside, PROs, MROs and CMOs otherwise operate similarly: they both issue licenses, monitor and enforce those licenses, and collect and distribute royalties. 

Here are a couple of the largest PROs:

• ASCAP (American Society of Composers, Authors and Publishers): Established in 1914 as the first U.S. PRO, ASCAP is the second largest leading organization with over 850,000 songwriters, composers and music publishers. Fee: One-time, non refundable $50 application fee.

• BMI (Broadcast Music Inc.): Representing over 1.2 million artists and publishers, BMI is currently the largest PRO on the market. Fee: free for songwriters and composers, $250 for publishers. 

• SESAC (Society of European Stage Authors and Composers): Although substantially smaller than BMI and ASCAP with a membership of 30,000, SESAC functions as both a PRO and, since its 2015 acquisition of Henry Fox Agency, an MRO. SESAC is also unique as a for-profit organization and for its lack of open membership — artists and publishers are required to be invited in order to join. Fee: none.

The music business is an incredible industry and more money is being made than ever before. It is important to understand music law terms and how artists can boost their career.

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