How to set up your band to produce
Not exactly breaking news, but the world of copyright law is complex, and music copyright is no exception, hence why there are lawyers that specialize. I think my attempt to break things down into something succinct proved to be more difficult than explaining relativity. The following comes from many years of learning about music copyrights from all sorts of different sources. If you are a young musician starting a band, download this—it may prove invaluable. I want to point out, though, that I am not an entertainment lawyer by any stretch of the imagination, so you must consider the following at you own discretion.
The songwriter (the person or persons who wrote the underlying melody or lyrics) initially owns a song (the song's copyright). If a song containing both lyrics and a melody is published before the melody or lyrics are copyrighted separately, they become eternally fused. Along with the musicians who performed the recorded parts, the person who processes the sounds of a recording (the recording engineer) initially owns the recording (the recording's copyright).
Physical mediums (original notation, master tapes etc.) can, of course, be owned by anyone, and the owner is under no legal obligation to grant access to the material to any copyright owner.
If a recording engineer or a musician waives his rights, the rights have probably gone to a person or company that has paid them for their services. Record companies will often demand all sound recording rights in order to monopolize a recording. This is indicated by a capital P (phonorecord) with a circle around it printed on whatever medium the recording/s is applied to, followed by the company’s name. But contracts can be made up, of course, allowing anyone to retain or transfer publishing or sound recording copyrights, regardless of the situation.
Publishing rights: Publishing rights for songs can be broken down by percentage. Sound recording copyrights must be divided equally among all parties.
Historically, performance royalties (revenues from radio play, bars, sheet music, etc.) have gone exclusively to the owners of the publishing rights, which typically include the songwriter/s and a publishing house in a 50/50 arrangement.
Revenues from physical sales (mechanical royalties) go to the owner/s of the recordings, typically a record company, which then distributes an artist royalty to the musicians who played on the recording, excepting perhaps any session players who were paid a lump sum for their services or performed their parts as employees of the company (work for hire). Internet downloads are considered physical sales, although a while back, songwriters were granted a small percentage of sales.
As far as collaborations are concerned between songwriters and musicians, there are many situations in which one or more musicians may contribute much to a recording without having contributed anything to the underlying melody of a song. Say there was one person in the band who wrote the lyrics and melody of a song and kept the publishing rights. The song becomes a hit, owing much to the talent, dedication, and creative thinking of the other members of the band. While each member may receive a good payout from the record company in the form of an artist royalty, the subsequent performance royalties earned by the songwriter may stand to make the songwriter quite wealthy. Again and again, this has led to problems. After all, if it wasn’t for the first recorded version created by the band, the song might never have become so popular.
So while it may be impractical for large bands or orchestras, it might be wise to divide the publishing rights between everyone in your tight-knit group to ensure harmony and fairness. If an equal division seems drastic, you can always devise some sort of formula. Some might think it overly generous, but I personally like the formula 10% more of the total copyrights for the main writer/s of a particular song for a 4-person collaboration, 15% for 3-person, and 20% for two. These formulas roughly work out to the lyric/melody writers retaining half-again as much of the publishing rights as the other members of the band (50% more). Of course others, such as the late Jim Morrison, for example, would have thought it too stingy for his band.
Aside from the lost income, there is not much of a downside for the songwriter, really, in sharing the publishing rights, as after a song is recorded and the recording is published, all future licensing of a song is compulsory (meaning a mechanical license to record a new version must be granted to any who request it), anyway.
Sound recording rights: Sometimes, a band will opt to produce some recordings itself. Now, you may have read somewhere on the Internet that a musician who has performed on a recorded part automatically owns a stake in the part that carries forward to include any future mix, or physical record the recording is included on (if they were not paid as an employee and/or did not wave their rights), but I have heard of rulings otherwise here in the good ol’ USA. Therefore, it might be best to assume that only those band members who produced or invested in the project will be legally entitled to any revenue from the sales of any published recordings. For any musicians left out, this might lead to frustration or dampened enthusiasm when they find out that they have no strong legal right to collect royalties. And if at some point the band dissolves or the others fail to promote the recordings, a band member may find his/herself with a bunch of recordings that he/she has no legal right to do anything with.
So anyone in such a situation might want to make sure they are guaranteed, in writing, a portion of the sound recording rights to any future mixes containing their part, plus—and perhaps more importantly—a portion of any proceeds the mixes (or phonorecords containing those mixes) may generate.
Before dividing up the sound recording copyrights, there is one thing to keep in mind, and that is the fact that any individual owning those rights can grant non-exclusive use licenses for that recording (i.e. mechanical licenses to print records, etc,) or do stuff themselves with the recording such as printing records or posting free copies on the Internet. [Note: Reputable vendors often prefer permission from all owners.] Therefore, it might be wise to add a clause in the band’s collaboration agreement that prevents anyone from engaging in business practices considered less favorable than common practice.
Another solution is, of course, for a band to form its own label listing all the members as owners. However, I would still start with something in writing like that mentioned above before transferring my rights. While it would certainly be convenient if they did, I have recently learned that most (maybe all) online vendors and distributors will not divide up royalty payments for sound recordings. Hence, another reason why forming a lable may be the best option.
One last thing to keep in mind: On the other side of the coin of musicians possibly not having a claim to revenues, is the possibility that someone who retains ownership of their recorded part, no matter how insignificant, ends up sharing ownership with the other owners of any published record containing that part (depending on how a judge might interpert the law, I guess). Ex: Bob now owns 1/6 of the sound recording copyrights to all of the songs on a CD because he added that brief mouth harp at the end of track 13 (might have been best to pay Bob up front for his part, in this case, and have him sign a waiver). But this much is certain: When the CD is registered, separate SR forms will need to be submitted to ensure Bob does not unequivocally end up owning SR copyrights to all of the songs on the CD besides the one that he actually performed on. If there are original songs on the record that have different song writers, separate PA forms will then need to be submitted to register publishing rights. As you can see, the cost of registering can add up fast. Same owners of the recordings = same songwriters for every song—one form SR will do it.
So, percentage of sales, payment for your services, partial ownership of the recordings and/or partial ownership of the songs—it comes down to whatever you, as a musician, think is fair based on the situation. Probably needless to say, but I, personally, will never get involved in another recording project unless all those involved sign a collaboration agreement before we even begin. My opinion is, if someone devotes much of their time to a project without getting paid for their services, they deserve to own a stake in the recordings.
Misc: Before presenting your original material to your band mates, it is always a good idea to document it in some way. The easiest way, I think, is jot the song down as either notation or as a recording, seal it in an envelope, and have your local post office stamp the seal (make sure the date shows clearly). Although the creation of a recording does establish copyright, it is still no substitute for registering with the copyright office, but it may come in handy in settling any arguments regarding who wrote what should any arise. And keep in mind that someone adding a couple notes or breaks to someone elses melody, or suggesting a slight change to someone's lyrics, does not automatically make that person a co-writer.