Question on royalties from licensing of master recording

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  • Hi all,

    I am new to this forum and hope there is someone here who can answer my question.
    My late Father recorded a lot of songs in his lifetime. Well, one of his songs was used in Kill Bill vol. 2 film.
    My question is, since the master recording on my Father was used in this film and it was licensed from the record company, what are the roylaties due to my Father's estate?
    This recording was done in 1956 and the contract states nothing about paying any type of royalties.
    I do know the record company was paid ten thousand for the master use of the recording but the record company only paid my Mom one thousand of that and nothing else has been paid.
    Thanks to anyone who can help me understand this better.

    Kindest regards,
  • I am not a lawyer. Although I know something about copyright law as it pertains to this situation, I do not consider myself an expert on the topic. However, only a handful of people, maybe less, answer questions on this board, so I'll provide whatever help I can.

    As far as I know, royalties are determined by contract, which would mean that the record company has no responsibility to pay your father or his estate any royalties.

    So why did your mom get a check?

    It's possible, but extremely unlikely in my opinion, that the payment is something other than a royalty. I'm suggesting this merely because I'm not an expert.

    It's possible, but unlikely in my opinion, that another contract exists. Perhaps your father renegotiated at a later date.

    It's possible, and very probable in my opinion, that the record company has a policy for making royalty payments even when those payments are not specified by the contract. Think of it like a bonus check at Christmas: employers are rarely, if ever, required by contract to give these checks, but some employers do.

    Why might the company make a royalty payment when none is required?
    Music comapnies have a long history of using their power and knowledge of the legal system to get musicians to sign contracts that many people consider unfair to the musicians. Some companies may feel morally obligated to pay royalties because current contracts always, I think, contain royalty agreements. Some companies may believe that paying royalties will prevent law suits from musicians who feel that they were duped into signing unfair contracts.

    So, I believe that the company paid your mom more than it was legally obligated to do. Whether or not this payment was fair is beyond my knowledge. Whether or not you can do anything about it is beyond my knowledge. You may want to contact the company and ask them to explain the payment.

    I'll be posting some additional information soon.
  • The following information was taken from The Recording Artist Agreement: Does it Empower or Enslave? by Lynn Morrow. This article appeared in the Winter, 2001 issue of the Vanderbilt Journal of Entertainment Law & Practice. You can get the full article from any library that has LexisNexis or from your local library using Interlibrary Loan.

    Wholesale or Retail

    Artist royalties are based on record sales. The artist's royalty is calculated as a percentage of the selling price. It may be based on the Suggested Retail List Price ("SRLP") or on the wholesale price, depending on how the particular record company operates. Most major record labels today compute artists' royalties on the basis of the SRLP. Prior to computing the artist royalty, certain deductions and reductions will effect the retail or wholesale price, in order to determine the base royalty rate. These include deductions for packaging, free or promotional goods, and other items such as across the board reductions for CDs or other digital reproductions. These are addressed below. Although none of these deductions directly reflect actual costs incurred by the record company, they are traditional elements that remain embedded in royalty computations.
    Royalty Rates

    The smaller the royalty rate the record company pays the artist, the larger the record company's profit. Many factors are considered by the record company in determining a royalty rate for an artist. For a new artist, royalty rates payable on sales of top-line records in the United States range from eleven to thirteen percent of the SRLP. The royalty rate for a more significant artist ranges from sixteen to eighteen percent, increasing to eighteen to twenty-one percent of the SRLP for a "superstar" artist. The wholesale equivalent is roughly twice the otherwise applicable retail rate, subject to certain other adjustments. For example, a twelve percent royalty based on the SRLP is roughly equivalent to a twenty-two percent royalty based on the wholesale rate. These rates are known as "all in" rates, which means that any third-party royalties (e.g., producer royalties) are deducted from the artist's net royalty rate. As a result, if the "all-in" royalty rate is twelve percent, and the producer receives a three percent producer royalty, the net artist royalty rate would be nine percent.

    Royalty rates, like advances and recording budgets, are typically subject to escalation or increase. First, an increase to the base royalty rate may be from album to album. In theory, if a record company exercises its option to record another album with the artist, the artist must be achieving some level of success and should be rewarded by a higher royalty rate on the new album to be recorded under the new contract period. Second, the royalty rate increase may be determined by sales, with the royalty rate being increased as the sales of an album rise above certain agreed-upon levels. Typical in a new artist agreement would be one-half to one percent increase for sales of full price units in the United States (and sometimes Canada) over 500,000 units and an additional one-half to one percent increase for sales in excess of 1,000,000 units. An artist with some clout can insist on increases at 250,000 units, 500,000 units, and upward. These types of increases provide an unproven artist, who [*46] is forced to accept a low royalty rate, an opportunity to increase that rate based on that album's proven success.
    Packaging Deductions

    In determining the base artist royalty rate, most record companies deduct fifteen to twenty-five percent of the SRLP for "packaging" or "container" cost. This has become the term used for the physical enclosure which contains the sound recording, which is typically the jacket, CD jewel box and booklet, and tape cartridges. In reality, these items cost the record company a fraction of the amount that it actually deducts. Nevertheless, the packaging deduction or container charge is deeply entrenched in recording artist agreements. Today, the average deduction of most record companies is fifteen percent for vinyl records, twenty percent for cassette tapes, and twenty-five percent for CDs. n31 Curiously, record companies typically charge a twenty-five percent container charge for sales of albums by electronic transmission, even though there is no actual container. n32 Such a reduction could result in a royalty rate discounted over $ 4.00 per unit.
    Percentage of Sales

    It is important to determine what percentage of sales will be used to compute the royalty. In the days of 78s, record companies computed royalties on ninety percent of sales, claiming that they needed the remaining ten percent to cover breakage of vinyl records. Even though this rationale is no longer valid, it does not deter the record companies from insisting on eighty-five or ninety percent of sales as a basis of royalty computation. This is particularly true for CDs which record companies commonly compute on the basis of eighty or eighty-five percent of sales. Record club royalties are almost always calculated on the basis of eighty-five percent of sales.
    Free Goods

    Record companies use the distribution of free albums as a sales and promotional tool in an effort to sell its product. The artist receives no royalties on these free goods. Companies will not agree to eliminate these free goods, but will agree to limit the number they give away. For example, if asked, most companies will agree to a free goods clause whereby they will limit free records to twenty percent of records purchased and thirty percent of singles purchased. In calculating the artist royalty, some record companies discount the purchase price of a record up to fifteen or twenty percent in the name of "free goods."
    Budget Records and Mid-Line Records

    Artists' royalty rates are subject to reduction on sales of albums at less than the top-line price, such as mid-line or budget-line sales. Budget records sell for a low price usually when the commercial life of the album is far declined. A mid-line record is typically sold at a price half-way between the full SRLP and the budget price to entice the consumer to buy the album. Because the artist royalty rate is normally reduced by either twenty-five or thirty-three and two-thirds percent for sales in the United States of a mid-line record and fifty percent for the sale of a budget record, an artist will attempt to negotiate into its record deal certain restrictions on the record company's right to release mid-line or budget-line records.
    Other Royalty Reductions for Non-Normal Retail Sales

    Royalty rates are subject to reduction for sales outside the United States, which causes the rate to fall to between eighty-five and fifty percent of the rate on United States album sales. These rates are commonly eighty-five percent in Canada, seventy-five percent in a handful of "major" territories in which American product sells particularly well, and fifty percent in the "rest of the world."

    New technology also poses unique problems for record companies. History has revealed that when new technology is first introduced, its implementation is expensive until the point where mass production becomes feasible. As a result, record companies have developed a policy whereby they provide the artist with a royalty that mirrors that of a CD or a cassette, with a new royalty rate to be negotiated after a three-year period. Below is sample language of how one major record company addresses the issue of new technology in a recording agreement:
    With respect to Records in any form, configuration, format or technology not herein described, which is now known but not widely distributed or which hereafter becomes known, including but not limited to digital audio playback formats other than compact disc (e.g., digital compact cassette and minidisc) and computer software formats (e.g., CD-ROM, CD+, DVD, enhanced compact discs and CD-I) ("New Technology Configurations"), the royalty rate shall be 75 percent of the otherwise applicable royalty rate set forth in this agreement. It is specifically acknowledged that Company's actual out-of-pocket costs incurred directly in connection with the development and production (but not the manufacturing) [*47] of Records hereunder in any New Technology Configuration shall constitute Recording Costs. Notwithstanding the first sentence of this paragraph: (1) at such time, if any, as Records in any New Technology Configuration on a prospective basis shall be 85 percent of the otherwise applicable royalty rate set forth in this agreement; and (2) at such time, if any, as Records in any New Technology Configuration constitute at least 75 percent of retail sales of all primarily audio records sold by record companies in the United States, the royalty rate payable with respect to Records in such New Technology Configuration on a prospective basis shall be 100 percent of the otherwise applicable royalty rate set forth in this agreement.

    Moreover, in this particular recording agreement, the royalty calculations outlined above are also used with respect to records sold directly to consumers by this record company in the United States (or by licensees outside the United States) via electronic or radio transmission. These include telephone, satellite, cable, direct transmission over wire and through the air, downloading and streaming, and any other similar methods.
  • You may also want to look at these articles which you can also get through Interlibrary Loan or from a library with LexisNexis (any law library, probably any university library, some college and large public libraries, maybe others).

    Loyola of Los Angeles Entertainment Law Review 2003
    23 Loy. L.A. Ent. L. Rev. 395

    Smells Like Slavery: Unconscionability in Recording Industry Contracts by Phillip W. Hall Jr.
    Hastings Communications and Entertainment Law Journal (Comm/Ent) Fall, 2002
    25 Hastings Comm. & Ent. L.J. 189
  • [quote="wanda"]
    My late Father recorded a lot of songs in his lifetime. Well, one of his songs was used in Kill Bill vol. 2 film.
    My question is, since the master recording on my Father was used in this film and it was licensed from the record company, what are the roylaties due to my Father's estate?
    This recording was done in 1956 and the contract states nothing about paying any type of royalties.
    I do know the record company was paid ten thousand for the master use of the recording but the record company only paid my Mom one thousand of that and nothing else has been paid.


    I am not a lawyer and I don't play one on TV. I do have a good bit of knowledge on the subject though.

    In general, when a sound recording is licenced for a movie, the license amount is split 50/50 (or so) between the label and the recording artist. You would get paid your share if all of the recording costs/advances have been recouped by the label...

    Now, if your Uncle also WROTE the song (as you state 'one of HIS songs'), and if he did not sign off on the SONGWRITING copyright to the label - in other words Dad's Estate still owns the song copyright by way of having registered it himself, and having secured any renewals and such that might have prevented it from falling into the pubic domain now, you would then have a seperate issue to deal with between you and the licensing movie company, giving you more leverage since they will have had to additionally secure permission to use the SONG from the Publisher (song copyright owner if it was ever originally released to the public) on record -- perhaps your dad if he never assigned rights to the song copyright.

    Of course since your agreement of so long ago does not mention ANY royalties, the label is not obligated to pay anything at all, save for the fact that agreements must have a value in consideration pass between BOTH parties, so that the agreement must say that they paid him SOMETHING for his services.

    That they paid you something at all is a major moral/ethical labor of the record company/sound recording copyright owner, and is actually probably more than if the "royalty" had been calculated based on a "record" royalty. Assuming that the agreement also states that the company owns, lock stock and barrel, the sound recording in perpetuity (and the song copyright, for that matter), then you should thank them for the bonus.

    If the license fee was for a lot more money, or if there are additional usages involved , only then might it be possibly worthwhile to take the agreement to court - lawyer fees considered. For instance, if the song were then released on a soundtrack album for KB2 --- and you should be on the lookout for this, especially if combined with a current high-selling popular artist's song and the CD sells lots of units --- then you might consider trying to negotiate something with the SR copyright owner based on an unfair contract, threatening to try it in court if they are jerks (which they probably are not), and then getting an attorney (who thinks you will have a good case). Other than this, this is all I can speculate on.

    Good luck, and congratulations on getting a movie placement.

  • I believe I recently saw a couple of recent court cases on this issue, while researching something else. As I recall, these court cases said that in this kind of situation, the artist is entitled to 50% of the master use income, based on currently prevailing industry standards, even when the contract is silent on the issue. I know that with at least some of the major labels, I have not had much difficulty in getting them to pay over 1/2 of the master use income, though in some instances they have initially taken the (absurd) position that the artist is unrecouped and that therefore they have no obligation to pay anything to the artist until they are recouped.

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