Legal Question in Entertainment Law in New York
Mechanical Licensing
We have a small indie record co and use very basic contracts for co-op deals with bands. They pay to record the music, we pay to manufacture & distribute and pay them royalties of 50% of all sales. 2 years into a 5 year contract a band licensed all songs on a cd we already distribute & now we are being socked with $1300 in licensing fees. This was not covered in the original contract, just the band royalties as 50% of all sales. We told them it should come out of their royalties and they disagree. Since this was not detailed in the original contract I feel that we must revisit the contract and all agree to additions addressing the licensing fees or void the contract altogether. They have not outright threatned us yet but have made it clear that they do not consider our current contract to have any bearing on this. The payment would go to the Harry Fox Agency who will keep a chunk and send some along to the band. The cd doesn't sell and we can't afford to dump another grand on it. Should we just pay up and, if so, how do we recover this from royalties without prior language in the contract to cover it? We contend that the contract is all-inclusive & the agreement did not include additional monies to license the songs.
2 Answers from Attorneys
Re: Mechanical Licensing
An attorney will need to review your contract(s) with the band to determine whether the licensing could be reasonably considered to be covered by them already. Feel free to contact me directly on this. My firm focuses on Internet and entertainment law.
Re: Mechanical Licensing
Unfortunately, it sounds as if you're on the hook. As a record company, you are making copies of the band's works which are copyright-protected. Unless your agreement provides otherwise, it is likely your responsibility to pay the mechanical royalties for manufacturing copies. Ordinarily, this is negotiated up front and the record company requires the writer-artist to license the compositions at a reduced rate. That's the custom. Royalties you pay are generally recoupable. My guess is you didn't have an attorney create your "very basic contract." Don't make the same mistake twice. Perhaps you can negotiate a reduced rate through an experienced music attorney.
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