Licensing & Terminating Rights
How Is Work Licensed?
When a third party wants to use either a copyright work, or a performance, consent is usually required. This consent takes the form of a licence, granted from the owner to the potential user, in exchange for payment.
There are exceptions to this principle of payment which various countries’ laws have developed as public policy. Such exceptions include uses such as those for news reporting or private study, or private domestic usage (which does not mean it is free to upload a video to YouTube with someone else’s music on it). In the UK and Europe there is a fixed list of what these exceptions are. In the USA a doctrine known as “fair use” applies, which means there are certain conditions that need to be satisfied before a user can rely on fair use to use a work for free.
Because copyright is not a solid block, but a bundle of rights, it can be carved up in a multitude of ways. So while the different uses such as copying, or public performance, can be licensed to separate people, it is also possible to “slice” up a copyright by country, territory, period of time, and different usages.
For example a film can be licensed to an airline, a theatre chain, different TV stations in different countries, to a video distributor, or an online streaming service. Each of these different uses can be licensed simultaneously to different parties and in different countries and for fixed periods of time. This explains why different TV channels might be showing different series of the same television show at the same time – the licences have been for fixed periods and then, once they expired, the show was re-licensed to a different channel.
A right to use a copyright, or a performance, can be exclusive or non-exclusive. It is this non-exclusivity that enables licensing in many forms (as in the TV series example above).
A songwriter or composer will sign a contract with a music publisher for one, or all of, their works. The grant will be subject to the composer’s agreement with their local CMO (collective management organisations). Ownership of the slice of the copyright called “communication to the public” is granted by the author to the CMO – globally and exclusively (except for US authors and their US CMOs). This means the publishers DO NOT own this slice at all. The music publishers cannot issue licences for this right (however much they might wish they could) and are left only with a revenue share by contract. This grant of rights will be exclusive – ie the writer no longer controls the copyright, giving the publisher the sole ability to exploit the remaining rights in the works. A publisher that owns a songwriter or composer’s catalogue on an exclusive basis, will grant non-exclusive licences to music users as this makes it possible to maximise earnings. If the songwriter or composer retains control of their work then that writer might grant certain usage rights to an individual film maker or advertising agency on a non-exclusive basis. This will leave the songwriter/owner free to grant licences for other usage to other parties.
WHO GETS PAID?
The owner of a work is paid, but where that owner has acquired rights from the author or performer, they may have an ongoing obligation by contract to share the payment with the talent. But where a CMO is involved, direct payments are made to the talent by bypassing the owner of the other elements of the copyright.
Authors and performers will usually been given an upfront fee for their initial contributions but, after that, each sector of music and film talent is paid in different ways, and payment models differ from country to country.
In individual music contracts, royalty rates will be established by reference to each kind of licence granted by the publisher or record label. EVERY performer and songwriter should be aware of contractual wording that fundamentally affects their incomes every day. Contracts contain three little words “directly and identifiably” which mean that the talent will only be paid if a music publisher or label can match the money exactly to the song or track. If not, the company keeps the cash. This works as a powerful disincentive for publishers and labels to maintain accurate and up-to-date data about the copyrights in their catalogues.
In film contracts, a writer or director is required to assign all their rights upfront, for a single fee, even before the film is made. They have no way of knowing how successful the work will be. In some, but not all, circumstances and countries, the talent may be granted a share of revenue from the exploitation of the finished work – in theory. Whether they ever see this revenue is a different matter! See Shocking Facts to illustrate the terrible financial position that film creators are in.
This right to share in income from exploitation can be set up by a country’s statute, arise from an international Treaty or be the result of negotiations by unions or trade groups working on behalf of the talent. In the UK, Europe, Latin America and parts of Africa & Asia Pacific, ongoing entitlements to revenues operate through collective management organisations (CMOs). The CMOs handle exploitation revenues, paid to them by various user groups, analyse usage and pay it to the talent whose works have been used.
In the USA, writers, directors and actors have agreed a system of residuals with the various user groups such as the film studios, the television channels, video trade associations etc. The residuals take the form of an agreed percentage of revenues, they are paid by the users, administered by the talent unions and paid direct to the talent. These residual levels are re-negotiated from time to time by the various US talent unions. (There is an example of a residuals chart for directors prepared by the Directors Guild of America (DGA) in the Library.)
Film contracts will require a perpetual grant to maximise earning opportunities. But music contracts granting authors’ or performers’ works to a third party can be limited in time. In early contracts, their personal relationship may end but the rights remain – that is, a creator can do a deal elsewhere for a new work but their earlier copyrights remain controlled by the first company. In some territories, laws protect the talent by expressly limiting the length of time they can sign way their rights. Unusually, since the mid-1970s in the USA, after 35 years an author has an absolute right to terminate a rights grant operating in the USA and take back control of their works. This ability is just starting to bite in the entertainment industries and is an area for all talent to watch.