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Contracts And Licensing In Music And Film Industry

  1. To understand about different parties involved in music production;
  2. To understand what production of music involves and how it works;
  3. To learn about certain important terms included in a music production agreement and how they are negotiated.

Most people know what a song is, but does anyone really know how a song is made?
Let's understand music production by comparing it to making a film. A film has a director who is often referred to as the captain of the ship and a song also has a director known as a music composer (sometimes known as music director). There is a writer who writes the story of a film and there is a lyricist who writes the lyrics of the song.

There is an actor and an actress who acts in a film; often the "face of the film" and there is a singer or multiple singers who sing the song and are essentially the face of a song. And then, there is a producer - both for films and for songs. These are the crucial parties involved. A song cannot be made in the absence of any of them; just like a film cannot be shot in the absence of an actor, director, producer, and writer. But how do these parties come together? And how does music production actually work?

This research article will help you understand the world of music production, the parties involved and how music production actually works. Music production includes all processes involved in the making of a song - the creation of melody, hiring of sound engineers, arrangement of sound, renting of studios, etc.

It involves multiple parties to reach the end goal, i.e. the finished song. This agreement is normally entered into between an artist and a music producer. An artist can either be - a singer, a music composer, or a lyricist. They are the three main entities behind the creation of a song.

There are varied arrangements which can be decided upon between the parties, for instance:
  1. A lyricist and a composer can enter into an agreement with a music producer who may subsequently enter into an agreement with a singer, to complete the song.
  2. A music composer can tie up with a singer and then approach a music producer.
  3. A music composer can directly approach a music producer, in which case, the producer may hire other artists as required. By way of a music production agreement, a producer normally enters into an agreement with a music composer called a music composer agreement, and an agreement with a lyricist known as a lyricist agreement. Generally, as a practice, a singer's rights are not defined. Hence, the producer may provide a waiver to the singer i.e. a simple bond/letter specifying the terms mutually agreed upon between parties.

By way of a music production agreement, a producer normally enters into an agreement with a music composer called a music composer agreement, and an agreement with a lyricist known as a lyricist agreement. Generally, as a practice, a singer's rights are not defined. Hence, the producer may provide a waiver to the singer i.e. a simple bond/letter specifying the terms mutually agreed upon between parties.

Which parties are involved:
The norm in a music production agreement is that a music producer and an artist enter into an agreement which is mutually beneficial to both parties.

A producer may include a music label (T-series, Zee Music) or recording companies. Usually, in India, it is the music labels which record and produce/create the songs. It is the primary duty of the producer to ensure smooth functioning of the creation of a song. Often, in India, a producer is also a distributor (sometimes even a publisher). Therefore, a producer produces the song and then distributes it to various platforms for the purpose of commercial exploitation of the song. Hence, the intent of the producer is not only to create a wonderful song, but also gain financially from the commercial exploitation of the song.

An artist can be a singer, composer, or lyricist. Further, all three of them may come together, to enter into an agreement with the producer. Now, who exactly is a lyricist or a composer or a singer and what is their role? Let's break it down and understand by way of an example.

Amitabh Bhattacharya, a renowned lyricist, has written lyrics (words) of popular songs such as 'Kabira', 'Gerua', 'Bulleya'. The main job of a lyricist is to pen down words which shall be in sync with the melody of a song or a tune. The filmmaker, music composer, and the lyricist normally discuss the nature of the song and at which point in the film it will be featured. Keeping in mind the intent or mood of the song, the lyricist ensures that the words effectively convey that intent or mood.

Pritam is a famous Indian music composer who has composed music for several popular films earning himself a place as one of the best music composers in the country. But what exactly does a composer do? A music composer is essentially the one bringing the song together. He/she creates the melody of the song, decides which instruments shall be used in the song, instructs the singer to sing in a specific way; basically, they are the 'directors' of a song.

And who doesn't know Arijit Singh? The renowned singer. The king of singing romantic songs in modern times. A singer belts out songs in their beautiful voice and makes the song what it is. When personalities such as these come together, a masterpiece like 'Channa Mereya' is created. More often than not, it is necessary to have a mutual arrangement with all three and be on the same page, to ensure the creation of wonderful songs.

A music producer and their expertise is crucial to the creation of a song. Therefore, artists normally engage with the producer when creating a new song. Often, artists may seek a music producer who may also serve as a distributor. This not only helps in avoiding multiplicity of agreements, but also ensures that the producer is with the artist every step of the way, and shall take all steps necessary to make the song/music reach the widest possible audience.

What you should know about a Music Production Agreement?
To understand how a music production agreement works, you must first be aware of certain important terms which are to be incorporated in such an agreement.

Why you should discuss term and territory:
When you enter into a music production agreement, it is important to define the basics such as term and territory. This allows both parties to know their restrictions and also ensures that neither party does anything which goes beyond what is mentioned in the agreement. If you won't define it, the other party can simply exploit all rights worldwide without any restrictions. Often verbal understandings don't work out. Always mention all terms explicitly in a written agreement.

A creative process has no time limit. Therefore, it may be difficult to agree upon a definite term of the agreement by way of a specific time period (Eg. 6 months or 1 year). However, the artist and the producer may enter into an agreement for a specific song or an album, and may mutually agree that the agreement shall not expire until the completion of a song, to the satisfaction of both parties. When it comes to rights granted under this agreement, it can be for a definite period or in perpetuity.

This clause can be drafted as:
The term of this agreement shall commence as of the date hereof and shall continue until the completion of producer's services or completion of the song, whichever may be completed at a later date, to the satisfaction of both parties.

Another important consideration is the territory which must be defined in the agreement. Normally, if the producer is also a distributor, the geographical area wherein the masters will be exploited by the producer must be specified. If however, they are coming on board, simply as a producer, the territory is normally limited to India. If the producer is engaging with other parties or with the distributor, the producer must negotiate the territory accordingly, with the prior consent of the artist.

Mention why you want to enter into such an agreement:
When you are a representative of either party, it is pertinent to understand that the initial stage of negotiation commences by discussing the scope of work, i.e. the terms of engagement. This clause essentially describes the reason for entering into an agreement. As an artist, or their representative, it is important to discuss and clearly state the duties and responsibilities of the producer. It must be clarified in which capacity the producer is being engaged. Is it their role to arrange songs?

Or create beats and melodies? Or are they meant to only undertake the technical aspects of their profession and stay out of the creative process? Once that is clarified, negotiating other terms such as rights, compensation, obligations, etc. becomes easier.

A standard clause may be drafted as follows
"The artist engages the producer to produce masters of the artist's sound recordings embodied in the files transferred to producer on [DATE]. The titles of each track to be produced by the producer are as follows: A, B and C.

The producer shall use best efforts to produce the masters, and such production efforts shall occur at times convenient for the producer and the artist. Upon completion of the masters, the producer will deliver to the artist two (2) master CDs."

Please note: Masters, as mentioned hereinabove, means any original, fully edited, fully mixed down, audio and video master recordings.

Discuss your rights
An artist has to be vigilant while negotiating with the producer. Rights must be specified to avoid any uncertainties and confusion. As a representative of an artist, you must ensure that it is clearly mentioned in the agreement, that all residual rights shall belong to the artist, in perpetuity. But what are residual rights? Any right which is not mentioned in the agreement or which is not given to the producer is a residual right i.e. remaining right.

Often, it is extremely difficult to jot down each and every right and then specify to whom shall such right belong to. In such scenarios, it is easier to state that any right not mentioned in the agreement shall automatically belong to the artist. This is also helpful in case of any right which is not in existence at the time of entering into an agreement. Such rights will also be covered under the blanket of 'residual rights' and shall belong to the artist unless discussed otherwise. Therefore, it is essential to add a residual rights clause. If it is not expressly stated, chances are, it may lead to confusion and disputes.

The artist normally wishes to engage with the producer for their expertise and to record a song in the most efficient manner. For that, it is advisable that the artist should exclusively enter into an agreement with a reputed producer. Having on board multiple producers may lead to conflicts and the song might turn out to be mediocre. Everyone has their own way of working and often, different views and ideas may bring about a clash, unnecessarily delaying the process of recording the song.

Another important negotiation subject in this agreement is the right of ownership of copyright. It is the composer and lyricist who are the creators of the song. Therefore, the song is their intellectual property. The rule says that one who creates, shall be the owner. However, the artist and the producer may negotiate and mutually decide who shall be regarded as the owner of the copyright of a song. The producer may demand ownership rights, since he is the one investing money to create the song/album. In such instances, leverage is the "way out" for an artist. A renowned artist certainly has more leverage to negotiate and continue to own the song.

This clause can be drafted as follows

"All masters produced hereunder, from the inception of the recording thereof, and all phonorecords and other reproductions made therefrom, together with the performances embodied therein and all copyrights therein and thereto, and all renewals and extensions thereof, shall be entirely artist's property, free of any claims whatsoever by producer or any other person or persons engaged in the production of the masters."

It is the newly emerging artists who might have to give up their ownership rights to continue making music. Therefore, one must carefully assess the situation before agreeing upon giving up their ownership.

It must also be understood that if an artist is the creator but not the owner, they will still have certain moral rights (specified in Section 38B and Section 57 of the Copyright Act) and will always be regarded as the author of the song, even if the artist is not the owner. These rights include the right to be recognized as the author or performer of the song; the right to claim damages in case of distortion or mutilation of work created by them. Moral rights, as referenced above, are crucial for creators.

It is important to note that even if the artist assigns the ownership of the copyright to the producer, they have no right to assign royalties or waive off the right to receive royalties in favour of the assignee (in this case, the producer) (Section 18 of the Copyright Act, 1957). However, it can assign such rights in favour of its legal heirs or a copyright society established under the Copyright Act (if he/she is a member of that copyright society).

This is the era of remixes and recreation of songs. Especially in Bollywood films, recreation of old songs is one of the most popular marketing strategies especially before the release of films. It is important to understand that there are certain rights attached to such recreation of songs. Therefore, it is essential for an artist and the producer to negotiate, to whom shall rights to remix, recreation, remastering, editing, alteration, modification belong to.

Normally, a producer must ask for such rights; it shall help in opening up multiple avenues for commercial exploitation of a song. If the producer is the owner, the norm is that such rights automatically belong to the producer (unless negotiated otherwise). Today, if you check the Spotify app, there is something known as 'remastered version'. If a song has been remastered, it is usually indicated right next to the song.

State the obligations and duties:
When you negotiate or draft an agreement, you must outline the obligations to be performed by both parties.

Both parties must decide upon the place of recording. It is also important to decide who shall have the authority of final approval of the masters. As an artist, it is important to stick to having the final approval, creative liberty is crucial to recording a good song. Other terms such as schedule for recording, frequency of rehearsals, delivery of masters, promotion rights, etc. must be discussed. Re-recording of songs costs more money. Hence, who shall pay such costs must be deliberated.

One must seek to achieve a middle ground. Therefore, the party whose fault led to re-recording shall bear the costs of the same. An artist may also seek to have creative control over the entire process. They may also seek a representation from the producer to guarantee a release of the song along with its release date.

A standard clause may be read as follows
"Recording sessions for the masters shall be conducted by the producer under this agreement at such times and places as shall be mutually agreed upon by artist and producer. All individuals rendering services in connection with the recording of masters shall be subject to the artist's approval. The artist shall have the right and opportunity to have the artist's representatives attend each such recording session.

Each master shall embody the performance by the artist of a single musical composition designated by the artist, and shall be subject to producer's approval as technically satisfactory for the manufacture, broadcast and sale of phonorecords. In the event of any re-recording, the producer shall re-record any musical composition or other selection until a master technically satisfactory to both parties is obtained. Any additional production costs will be paid by the party at default.

Producer shall deliver to the artist a two-track stereo tape suitable for duplication and manufacture of phonorecords for each master. All original session tapes, rough mixes, and any derivatives or reproductions thereof shall also be delivered to the artist, or, at artist's election, maintained at a recording studio or other location designated by artist, in artist's name and subject to artist's control."

Mention both parties' representations and warranties:
  • Artist's representations and warranties;

Herein below are certain standard representations and warranties by an artist:
  1. An artist must warrant that he/she has a clear title to the rights in the song and a warranty that there is no infringement of any third party intellectual property;
  2. The artist validly operates under the laws of the country;
  3. That the artist's rights in the song are unencumbered (i.e. they have not been assigned to another party and have not been used as security to obtain loans);
  4. The artist is exclusively assigning the rights to the producer he/she is entering into the agreement with;
  5. The artist will indemnify the producer in case of any liabilities, losses, damages, claims and expenses arising from third party claims relating to a breach of artist's covenants, obligations, representations and/or warranties set forth in the agreement;
  6. The artist shall be available, at such times, as mutually agreed upon between parties for the recording of the song.

The Producer's representations and warrant
These generally state that:
  1. Producer has the legal right to enter into an agreement;
  2. No violation of third party rights will occur by entering into an agreement;
  3. Producer shall pay royalties for the exploitation of a song/music as per laws, if applicable;
  4. Producer shall not make/produce remixes/remakes without the artist's permission;
  5. Producer will indemnify the artist in case of any liabilities, losses, damages, claims, and expenses arising from third party claims relating to a breach of producer's covenants, obligations, representations, and/or warranties set forth in the agreement.

What about compensation and royalties
You must add a compensation clause which will clearly mention the details of compensation and how royalties shall be payable. This clause will specify the remuneration that the producer will receive from the artist for availing their services. It can be by way of a lump sum amount paid to the producer by the artist at the time of signing of the agreement, or upon the fulfilment of the services being provided by the producer. Such a clause can be drafted as follows -

"In consideration of the producer's services, the artist shall pay to the producer a fixed price of INR ________ for each master, which includes recording time and engineering time. Until such time as payment is rendered by the artist, the recordings of the masters shall remain the property of the producer."

Another method through which compensation can be given is through minimum guarantee deals. A minimum guarantee deal refers to a deal wherein each party will be getting a minimum guaranteed share of the revenue generated (through buying or streaming of music by consumers).

On the other hand, if the producer is approaching an artist to create a song for his/her label; the remuneration shall be payable to the artist in such manner as decided between parties.

In the event, the producer is also serving as a distributor, he may enter into separate agreements with platforms (YouTube, Spotify, Gaana), to make the music on their platforms, for commercial exploitation. In such instances, it must be clarified how the revenue generated, shall be divided between the artist and producer.

As stated in "Grant of rights" clause, the artist may assign the ownership of copyright to the producer, however, they cannot waive off their right to receive royalties, in favour of the producer. This clause must, therefore, specify in which manner shall royalties be payable to the artist. As a representative, you must seek clarity on how royalties will be split amongst the composer, the lyricist and the singer.

To understand how royalties are payable, one must first understand the difference between sound recording and underlying works. A sound recording means recording of sounds from which such sounds may be produced regardless of the medium on which such recording is made or the method by which the sounds are produced. On the other hand, underlying works means the music or melody and the lyrics. The Copyright Act, 1957 (along with its amendments, modifications) states that even if the song is owned by the producer; the artist will still have certain moral rights as well as the right to receive royalties (mentioned above). This right to receive royalties shall not be assigned to anyone else except to the artist's legal heir or the copyright society.

There are two societies which are relevant in the case of music. Indian Performing Rights Society ("IPRS") deals with works for and on behalf of the lyricists, the composers of music and the publishers of music. On the other hand Phonographic Performance Limited ("PPL") administers public performance and broadcasting rights.

IPRS and PPL were copyright societies registered under Section 33 of the Copyright Act, 1957. In 2012, the Copyright Act was amended and certain changes were incorporated. One of the provisions of the amendment was that any copyright society already registered as a copyright society under the Copyright Act, 1957, must re-register itself within a period of one year from the date of commencement of the Copyright (Amendment) Act, 2012.

Both IPRS and PPL applied for re-registration but ultimately withdrew their application for re-registration. IPRS and PPL publicly stated that they were not registered copyright societies. They were also not recognized as copyright societies and both IPRS and PPL functioned as Private Limited companies, registered under the Companies Act. The two entities, IPRS and PPL, claimed to function as agents of their members and thus, grant licenses in the name of the agent. However, due to several controversies, IPRS finally re-registered itself as a copyright society in 2017. PPL is still awaiting re-registration as a copyright society.

How is the agreement terminated.
Termination of an agreement enables either party to be relieved of their obligations as stated under the agreement. Parties may choose to terminate an agreement on such terms as discussed mutually. Either party will have the right to terminate the agreement, if the other party has breached any obligations, terms, etc., by giving written notice to the breaching party to rectify their breach.

If at the end of the notice period, the breach is not rectified, the agreement may stand terminated. It is important to discuss the duration of the notice period. Sometimes, rectification may take longer, such as in case of correcting the masters or re-recording a song. Therefore, you must assess and take that into consideration, before agreeing upon the duration of the notice period. Another method of termination is, "termination without a cause".

It means that either party can terminate the agreement without any cause or reason (such as breach, non-payment etc.), simply by way of a written notice. If you are an artist or representing one, it is important to understand that if the producer chooses to terminate the agreement, for no reason, before its expiration, it can turn out to be unfavorable. If the producer chooses to terminate in the middle of recording a song, it can be a huge hassle along with additional financial implications of re-recording and hiring another music producer. Therefore, you must take that into consideration and negotiate accordingly.

Business Model of Music Apps:
Let's briefly understand the revenue model of music apps and how payments are made to the producer and the artist.

Basis of the case study:
Spotify (Music App) has approached Sony Music (producer/publisher/record label/owner) for the purpose of engaging with Sony Music via a bulk deal. A bulk deal essentially means when an entire catalog of music is licensed together in bulk. They have entered into an agreement for 5 years wherein Sony Music has licensed 100+ plus songs to be played on Spotify on a non-exclusive basis.

Payment to Sony Music:
The revenue model of Spotify is dual - via advertisements and via subscription. Any consumer can download the Spotify app for free. In such cases, Spotify earns money from revenue generated through advertisements. On the other hand, if a consumer subscribes to the app, it must pay a fixed subscription fee (monthly or yearly).

Now, Spotify and Sony Music will decide in which ratio shall the profits be distributed. For example, Spotify shall be entitled to 60% of profits and Sony Music shall be entitled to 40% of profits. They can also enter into a minimum guarantee deal (explained above). However, the easiest way to negotiate is per stream. The norm in the industry is that for each stream, the music label/owner (in this case, Sony Music) shall be entitled to 7 to 10 paisa. Parties may choose whichever model is beneficial to them and payments shall be made accordingly.

If the author (composer and lyricist) is a registered member of IPRS and so is Sony Music; Spotify shall approach IPRS; show them the catalog of songs they have licensed and pay royalties to the society. The society shall then distribute royalties to the artist and the label as the case may be. If Sony Music is not a member, Spotify must pay royalties to Sony Music directly.

It is always preferable to be a registered member of a copyright society. It makes the process simpler and royalties to the author and label are guaranteed. It is beneficial for music apps as well. They can simply approach the society instead of tracking down each author and pay royalties individually.

FYI, Spotify also has a feature which allows you to view song credits. To know how to view it - You may open your app, click on the song whose credits you wish to see, click on the three dots available on the right hand corner of the app - scroll down and you will find an option called 'song credits'.

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