LICENSED TO ILL
Jun 1, 2002 12:00 PM, By Markkus Rovito
DJ-mix CDs don't just happen overnight. Unlike mix tapes, CD compilations are not a matter of a DJ getting loose, recording the set and releasing the results. Although DJs often have the freedom to choose the tracks on the mix, behind the scenes, the record label issuing the CD has to license every track for which it does not already hold the rights. Each licensing deal requires a price negotiation, a promise that all samples have been cleared and a contract. Licensing snafus can lead to legal entanglements, last-minute changes in the studio and disruptions in the production schedule. Whether you're just beginning to make tracks, already releasing material or thinking about starting a label, the more you know about the business of licensing, the better off you'll be.
ANATOMY OF A MIX
For Harry “Choo Choo” Romero's Subliminal Sessions Two (Subliminal) double-CD released in February, Steve Huome — who handles international affairs and licensing for Subliminal — began licensing the tracks in early December. Subliminal only had the rights to about half of the 28 cuts slated for inclusion on the album. Huome had to wrap up the licensing deals for the remaining tracks in about 10 days so that Romero could record the mix and the label could begin promoting it within the crucial six-to-eight-week window before the release date. “There's a lot of paperwork that goes into every single deal,” says Huome. Often, tracks will require two or more negotiations each, because Subliminal may have to get the rights for different countries separately.
Creating the final tracklist for a mix CD is a balancing act among a DJ's artistic freedom, financial constraints and timing. Although Romero had complete freedom to choose the tracks he wanted for Subliminal Sessions Two, he says he always had to consider the logistics of licensing the tracks he wanted to compile. “I'll get advance copies of records from DJs I have a relationship with,” says Romero, “but you got to consider the release dates for those tracks.” For example, he wanted to use “Freak” by Josh Wink, but it wasn't coming out early enough to include. Romero also had his sights on the a cappella of Pink's “I'm Coming Up” but could not obtain it. “With major labels, they don't want to hear it,” Romero says. “If you're only going to be selling about 40,000 CDs, it's not going to happen.”
Another reason some tracks are unattainable is costly licensing fees. But, occasionally, exceptions are made, and the money is spent. “You don't want to be turning tracks down just because it's an expense thing,” says Romero. “The aim of the game is to get your licenses, advances and royalties down as low as you can without losing the quality of the record.” Every compilation CD has a budget to follow based on what the label thinks it can sell. If the label is anticipating selling 30,000 copies, for example, Huome says it would want to keep the royalties to an average of 10 cents per track per album, or a total of $1.50 to $1.80 per album, and the artist advances should be about $750 to $1,000 per track. “If one company wants to charge a high royalty,” says Huome, “you try to balance that with one of the smaller labels that's got a cool track no one's picked up on yet.”
When a label wants to license a track, it sends a Heads of Agreement form to the original label. That form outlines the proposed terms of the deal, including the advance, the royalty and the territory of the license, such as North America or the United Kingdom. At this point, the original label either agrees to the terms or opts to negotiate, according to Nick McGeachin, manager for trance DJ D:Fuse. McGeachin licensed all of the tracks on D:Fuse's mix double-CD People (V2 Records) released in February. “The label that accepts the offer in the Heads of Agreement also accepts that they are responsible for all third-party samples,” McGeachin says. That protects the licensing label from liability should any questions arise about the legal use of samples. Also, the Heads of Agreement that McGeachin used to license tracks for People did not guarantee inclusion on the finished mix. It stated, “You acknowledge that final track selection is at the DJ's discretion, and signature hereof does not guarantee track inclusion in final compilation.” The reason for that is simple: Labels often try to attain agreements for a few more tracks than the DJ will actually use. That also allows the DJ a degree of flexibility in the final programming of the mix.
NIGHTMARES ON WAX
Even with the most careful preparation, problems with licensing do crop up. During the making of People, McGeachin dealt with several troubling anomalies. One involved a label that made a verbal agreement with McGeachin to license a song, but before finalizing the agreement, that label turned around and licensed the track to Sony America. “When I went to Sony,” McGeachin says, “they asked for an outrageous amount of money. So, here you're stepping on the artist's toes because of financial restrictions. The fact is, that label in the UK should have realized it was about to be licensed to Sony for North American rights. That can't have happened overnight.”
Uncleared samples can also cause all kinds of headaches. Before V2 Records put out People, it sent the record to Clearance 13'-8" (a “trainspotting agency,” says McGeachin) to scan the music for potentially uncleared samples. Hope Carr was the person listening, and out of a list of questionable samples, two of them actually caused problems. One turned out to be a vocal sample from the Sopranos, though the track's author claimed it was from an old sci-fi movie. “If I would have had to go to Warner Brothers,” says McGeachin, “they either would have said no or they would have known the situation we were in and shafted us.” Instead, D:Fuse replaced the sample by recording his own voice saying the same words. He sent this recording to Oakland-based producer Moda, who meticulously removed the offending sample in Digidesign Pro Tools. McGeachin says that is absolutely legal: “It's like quoting poetry at that point.” But D:Fuse did receive written permission from the track's author.
Another track included an uncleared vocal sample from an obscure 1979 disco track that turned out to be owned by Polygram. The track's label said it had no idea, and the track's artist swore he lifted the vocal from a white label and had no idea what it was. It took another studio session by Moda to fix that problem. Even though he had a Heads of Agreement from the label, McGeachin says, “We were left with no other option than to remove the track and reprogram the mix.”
Subliminal recently ran into a situation in which it found one of its tracks, which had not been licensed, on a compilation. The twist was that the track's artist had licensed it to another label before Subliminal, and that label in turn licensed it to a third label. “So it's this whole mess,” says Huome, “and you're talking about, literally, $1,000 at stake. Is it really worth getting all bent out of shape over? So we're going to try to have these people give us a remix for free. There are all kinds of strange, crazy deals like this taking place. It's always better to do a deal rather than going all legal on people, but major labels especially tend to be looking to nail each other with a legal suit. Every label has a lawyer these days.”
Ned Hearn, a San Jose, Calif.-based entertainment lawyer who represents independent and major labels as well as individual musicians, says that probably 95 to 99 percent of those types of copyright infringement claims get settled out of court because the cost of litigation would be out of proportion to the money at stake. “If it is a clear infringement and you're the plaintiff, you've basically got the leverage,” he says.
Another potential legal dispute arises when a compilation comes out and someone claims a sample on a track has not been cleared. “The person who put the compilation together is relying on the owner that they didn't infringe on anyone else's rights,” says Hearn. “The person who put out the compilation could be named as a defendant, but the ultimate liability would be on the original artist who did not clear the sample.”
Therefore, the onus is on producers to know their legal responsibilities before they begin licensing or selling their tracks. Hearn recommends that anytime musicians are asked to make a commitment by signing a document and they're not certain about what they're signing, they should consult with a lawyer. Also, if artists have little or no label or management support and they want to better understand the economics and business details of the industry, an entertainment lawyer could help.
PIMPIN' OUT
The other side of licensing is sending out tracks for other labels to use. Subliminal puts out about 50 tracks per year, and it has 150 top DJs it sends records to and a mailing list of about 50 labels to notify that the tracks are available. Subliminal recording artists, such as Romero, always have final say as to whether their tracks get licensed out. Romero says nine times out of 10, he'll license out his tracks. “But if it's a wack DJ making a wack compilation, it's not gonna fly,” he says. “It's got to be a recognized DJ and a recognized label; otherwise, what's the point?”
Huome expanded on that, saying, “We don't really want to be on these really cheesy, commercial, idiotic records, because we have to maintain our credibility.” Subliminal gets its fair share of license requests but has to turn down some of the lowball offers. “I had one from South Africa for $200,” says Huome. “Now, that might be a lot of money there — we totally understand that — but we have to pay half of that to our artist. And we also have to pay a legal cost because every deal eventually goes through our lawyer. So, in the end, you've actually paid to do the license. We also want to deal with labels that are straight. If a label's known for giving the runaround, we don't have time to run around with them.”
Cases also exist in which Subliminal isn't allowed to license out records. It recently had the rights for a major-label artist's 12-inch, but the major label wouldn't let Subliminal put it on any compilations. “We told them ‘Look, you must be crazy,’” Huome says. “‘Your record's looking like a flop because it's not showing up on Carl Cox's album, Oakenfold's album and the major DJ albums.’ So the majors still haven't really got what a dance compilation is. They think it's going to sell 100,000 because their record's on it. You know, that's not the case.”
IT'S WHO YOU KNOW
Nick McGeachin wears several hats in the dance-music industry. He manages D:Fuse and Moda, does artist relations for Allen & Heath and fits in some production work. He also helps run CD Pool American, a subscription service for DJs. He puts unreleased tracks on a CD sampler every four to six weeks and then shops those tracks to labels he has contacts with in the United Kingdom for potential licensing. “It's really hit or miss,” McGeachin says about licensing. “There's a lot of stuff I know is good, but the market is saturated.” One recent success story he's had was the Scanners track “Prayer,” owned by Glasgow label Limbo. It ended up on D:Fuse's People compilation, and D:Fuse did a remix that V2 Records/MTA and Limbo released with the original track on vinyl. The record made its debut on the Billboard dance charts at No. 46 and made its way to Carl Cox's top 10.
McGeachin handles progressive house and trance only, which is where his expertise lies. Should a track be licensed, his cut is 15 percent of the up-front fee and 15 percent of the royalties. “That's pretty much the industry standard,” he says. You can send your MP3s to McGeachin (nickmac@attglobal.net), but he recommends sending only tracks of high production quality. “I can virtually guarantee I'll have a listen,” he says. “I'll scan through it, and if I like it, I'll take a closer look.”
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