Play It Again, Sam…But Don’t Forget to Pay the 9.1-Cent Mechanical Reproduction Royalty

Beame & Mencher LLP

Late last fall, Brian Mencher took the stage in the main performance space at the Living Room, the acoustic-rock incubator that hatched Norah Jones a decade ago, and a brood of well-regarded singer-songwriters since. He wore the uniform of the neighborhood (Ludlow Street) and season (the weekend before Thanksgiving): plaid shirt, vest, moderately distressed jeans, newsboy cap. “I play a nerdy instrument from my high school symphony, so I don’t talk about it,” he joked, running through his early musical c.v., VH1 Storytellers-style.

“What is it?” urged the committed late-afternoon crowd, about 20 strong.

“I call it the baritone, but some people say when it’s got the four valves, it’s the euphonium. Yeah, it looks like a tuba, but it sounds like a trombone.”

Joining Mr. Mencher onstage was David Beame, whose hair was a bit longer and curlier and voice slightly more adenoidal. He too spent over 10 years of his youth studying classical music—“but don’t hold it against me. I don’t even actually appreciate it that much anymore.” Mr. Mencher and Mr. Beame met as students in Florida, partnered up back in New York in 2007, and this fall have hit venues in San Francisco, Nashville and Los Angeles, in addition to their three sessions at the Living Room. According to their website, they also sometimes “tour” solo; David appeared at last year’s South by Southwest festival in Austin, and Brian has been invited to next year’s.

But Mr. Beame and Mr. Mencher aren’t a Brooklyn-based folk duo; they’re a Brooklyn-based law firm.

More specifically, Beame & Mencher LLP is, in Mr. Beame’s words, “a boutique law practice [that] represents creative and entrepreneurial people.” He clarified, with a soupçon of irony, “Usually that’s one and the same—creative and entrepreneurial,” and ran through their areas of practice: “recording agreements, publishing agreements, producing agreements, any kind of licensing agreement. Actors, actresses, films, TV, all distribution-type of agreements. Anything concerning the transactional aspects of entertainment law.” Major-label record deals they’ve negotiated have run to over $5 million.

“And recently we’ve expanded into food artistry,” Mr. Mencher added. “I have a background in cheffery and both of us love cooking”—enough to want to “bring some legal expertise” to the world of TV chefs.

Guitars and amps strewn around the stage went untouched; Beame & Mencher’s instrument would be a 90-minute PowerPoint deck. The professionals were their audience—musicians not yet established but far enough past aspiring to be initiated into the peculiar hazards, occupational and statutory, of their chosen craft. The Songwriters Law Seminar lasts three classes. (Tuition is $40 each, or $100 for the course.) The final session, aimed at songwriters who perform their own material, is called “Verse Three: Singer-Songwriters and Recording Agreements—Implications on Publishing.”

If Beame & Mencher were a boutique liberal arts college instead of a boutique law practice, it might have been “The Work of Mechanical Reproduction in the Age of Spotify.”

Indeed, the affable attorneys quickly turned rock-star dreams into a nightmare of Orwellian contract terms, Kafkaesque paperwork regimes and byzantine legal fictions hammered out with the advent of the player piano and barely updated since. A stream of semi-monopolies and quasi-government agencies spilled out in acronym and camel case: SoundScan and SoundExchange; Limelight and Harry Fox; ASCAP, BMI and SECAP, the three “performance-rights organizations” that together control essentially every music copyright in North America—and whose new members are the main student pool for Beame & Mencher’s seminar. (They’re the mysterious entities said to demand royalties from Girl Scout troops for singing “Happy Birthday.”)

Given the copyright violation wars currently raging in the art world—see under Richard Prince—the seminar had added resonance.

The first principles (and first slides) made sense enough. The average new pop song has two “bundles of rights.” The songwriter, typically in partnership with a music publisher retained to promote his catalog, owns the copyright to the musical work—Mr. Mencher called this song in Platonic form “the sheet music,” even if “you freestyle [it] straight into a ProTools rig” or just jot down lyrics on a scrap of paper. The copyright to the sound recording—the actual phonograph grooves, or ones and zeroes, or sound waves, that become the hit—belongs to the singer, with his record label. (Singer-songwriters, or performer-freestylers, get both copyrights, but were encouraged to think of them as separate beasts.)

Dolly Parton, he explained, owns the copyright to “I Will Always Love You,” the musical composition. Whitney Houston owns the copyright to “I Will Always Love You,” the sound recording on The Bodyguard soundtrack.

It was in discerning Dolly’s rights from Whitney’s that the bewilderment started. As the artist, Whitney has absolute control over the distribution and reproduction of her recording of “I Will Always Love You” for the life of the copyright; no one can sample it or press extra copies without working out a deal with her people. As the songwriter, Dolly’s absolute control is exhausted with the first commercial use—in this case, her own 1974 single “I Will Always Love You.” After that, anyone, including Whitney or a Whitney impersonator, has a statutory right to record Dolly’s composition in exchange for a “mechanical reproduction royalty” on units sold. The current rate, set by Congress, is 9.1 cents per song—which is, theoretically, what Dolly gets whenever you buy The Bodyguard album or the CD single. (Actually Dolly shares proceeds 50/50 with her publisher, less the latter’s expenses.) Dolly (and her publisher) is also entitled to “public performance” royalties every time Whitney’s version of “I Will Always Love You” is played on the radio, performed in a football stadium or sung around a campfire—this is what ASCAP, BMI and SECAP are around to track and extract payment for. To the disconcertion of the Living Room crowd, Whitney, as the singer, does not get public performance (call them radio-play) royalties, which go only to the songwriter. (Except when she does—more later.)

It was pop quiz time. “So, mechanical license: are we talking about a musical work or a sound recording when we talk about a mechanical license?”

Nervous chatter among the students. “Sound recording?” someone guessed.

Buzzer noise from Mr. Mencher.

Someone else from the back: “Sound recording?”

Another buzzer sound, and another answer: “Sound recording?”

“Remember, mechanical license.”

Finally, a voice in the front of the room, with very little conviction: “Musical work … ?”

“That’s right! That’s—one of two choices. So if you’re asking for the mechanical license, you’re actually asking for the license for the sheet music so you can go ahead and make a recording for yourself.”

This was inexplicable, but true: Whitney’s sound recording was, in legal terms, a “mechanical copy” of Dolly’s song. Anyone wanting to record her own cover version could go the U.S. copyright office and receive a license, in return for paying Dolly 9.1 cents per unit produced. In actuality, HFA, or the Harry Fox Agency, handles almost all mechanical-rights requests and payments for American music publishers; apparently, private-sector bureaucracy is superior enough to government bureaucracy to be worth HFA’s 7.7 percent royalty collection fee. But, came further questions: how mechanical is mechanical?

The compulsory license, Mr. Mencher said, “is only for a mechanical reproduction, and that generally looks like an exact replica of the song, although the arrangement could be different. If it’s a jazz song and you want to make it heavy metal, well you have that discretion within a mechanical license.”

Change the lyrics, however, and your version becomes a “derivative work”; the license will have to be negotiated directly with the publisher, who can refuse or name a price well north of 9.1 cents. (This may finally solve the mystery of why Michael Jackson or Britney Spears hits attract so many more speed-punk retreads than Weird Al-style parodies.)

The room remained uneasy about Whitney’s predicament: every interminable spin on 106.7 FM means more money for Dolly, but none for her.

Happily, Congress intervened (in 1995). Now, when “I Will Always Love You” is played on satellite radio or streamed from Pandora—that is, through “digital audio transmission” only, as opposed to terrestrial broadcast—Dolly collects royalties (via ASCAP, BMI or SECAP) and so does Whitney. Yet another organization, SoundExchange, has been set up to collect digital transmission royalties for artists, though how they survey every streaming service and blog and YouTube video is anyone’s guess.

But lest one start noticing a historical or conceptual pattern, digital downloads are regarded about the same as phonograph cylinders: your 99 cent download of “I Will Always Love You” on iTunes pays out 69 cents to Whitney’s record company. (That’s Apple fiat, not law.) The label gives Whitney whatever cut she negotiated in her contract (usually 14 to 18 percent) and pays out 9.1 cents—no more, no less—to Dolly and her publisher for the “mechanical reproduction” of the mp3.

At this point, the slides and instructors turned to the main lesson: negotiating a contract. Mr. Beame ran through the terms—variously draconian—to expect as a songwriter signing a publishing deal. He did the same for the artist singing a record deal. The singer-songwriter should, again, think of herself as two people—because, it turned out, the record companies will try not to.

Enter the ubiquitous “controlled composition clause.” Mr. Beame broke the news lugubriously: “A controlled composition is any song you write, or anyone in your band writes, or any producer that works with your writes.” Such self-created material would mean one person, or band, or business interest getting both Dolly and Whitney’s share of every “I Will Always Love You” unit. Typically, record companies cap their mechanical-reproduction payment on controlled compositions to 75 percent or less of the 9.1-cent statutory rate—essentially, if you play your own material, your singer half is expected to pay, out of sales or advance, some of the remit legally due the songwriter alter-ego. Worse, some labels will cover only 75 percent of the statutory rate, even for third-party songs, and many producers will insist on their 9.1 cents even if they’re close enough to the artist to be considered a “controlled composer.” And in the age of Beyoncé’s hoarding the prestige of honorary “co-writer” credits, some labels go much further.

Mr. Mencher, late of the euphonium, took over proceedings again, and began a wondrous Wagnerian march of scenario modeling and scared-straight arithmetic: “But the label says we’re only paying 75 percent on 10 songs. You want to put 12 songs on the album, good for you, but we’re not going to be responsible for more than 10. So they cap it and say we’re only paying 68.75 cents [on a $10 album] in the bank. We have to pay the four outside songwriters first—they’re 100 percent statutory rate. And that leaves 32.35 cents to [eight songs by the] songwriter that happens to be the artist. Or now, 44.5 percent of statutory rate.”

A hush came over the club, over which it was just possible to hear the cash-register gears of yet unknown terms. What percentage to the manager? What percentage to the lawyers? The session musicians? The entourage? (Indeed, the rush of Beyoncés and Katy Perrys claiming “cowriter” credits may yet be as much about protection and payback as quasi-rockist pride.)

“As sad as this may look,” a man in the crowd asked, “you still want a record-company contract because of the marketing part, right? Right? If you did this on your own, you won’t make this kind of money?”

It was a good question. Earlier Beame & Mencher had injected the seminar with bits of industry news: Universal had just come to an agreement to buy EMI, which if approved, would reduce the “major labels” to three. (Sony and Warner are the others.) That same week, the 19-year-old rapper Mac Miller became the first artist not signed to a major to score a Billboard number-one album since 1995—by way of Facebook, Twitter and free downloadable mix tapes.

The would-be pop stars eventually got up and floated out of the club in a haze. Near the exit, a long-haired Lilith Fair type struck up a conversation with an aspiring rap producer.

“I do jazz and piano. No hip-hop, though I do beatbox on one song.” Play It Again, Sam…But Don’t Forget to Pay the 9.1-Cent Mechanical Reproduction Royalty