Traditionally music has been sold and distributed in hardcopy formats such as vinyl, tapes and CDs. However today, these formats are completely obsolete. The development of the internet together with modern devices such as mp3 players and smart phones has vastly changed the way music is consumed. Music is now streamed, sold and distributed almost entirely online in softcopy format e.g. mp3, WAV, AIFF and Flac.
One of the most popular ways to sell music online is by using an Online Sales Service (‘OSS’) such as iTunes, Bandcamp or ReverbNation. They make it seem so easy – simply sign up, upload your tracks and away you go! But, my dear fellow musos please take caution! It is important to understand the terms and conditions of the particular OSS you choose to use as you will be entering into a legally binding contract with them.
Before even considering the numerous ways to distribute your music online, it is important that you have a good understanding of how copyright applies to music.
Copyright in Music
Music is one of the most complex art forms when it comes to determining copyright ownership. An original recorded song attracts three separate types of copyright:
- copyright in the music
- copyright in the lyrics; and
- copyright in the sound recording
Not only can these three separate copyrights be owned by different people, but the exclusive rights associated with copyright ownership can also be separated and licensed to many different people. For example an owner of copyright in the music has the exclusive right to:
- reproduce or copy the music (in any material form, including electronically);
- publish the music;
- perform the music in public;
- communicate the music to the public;
- enter into commercial rental arrangements; and
- adapt the music.
These exclusive rights similarly apply to the copyrights in the lyrics and the sound recording.
While it is usually one person who owns the copyright in the lyrics (as lyrics are often written by one person), the copyright in the musical work and the sound recording may be owned by multiple parties.
Ownership of copyright in ‘Musical Works’
Firstly there may be several authors of a musical work. For example where two or more people have contributed to the creation of the musical work (that is the melody, harmony, rhythm and other sounds that form the basis of the musical score) they may be considered joint owners of the copyright in the musical work. Determining whether one’s contribution is substantial enough and original enough to classify them as a joint author of the musical work is far more complex than one may think. Many judges have different interpretations of what is considered an ‘original’ and ‘substantial’ contribution to the creation of a musical work. To avoid authorship being construed by the courts, it is important to have a written agreement which specifies who the authors of the music are and what percentage of the copyright in the musical work they own. If there is no agreement specifying this then the default position is that the authors of the musical work have equal shares in the copyright, regardless of the actual contribution each author contributed to the creation of the music.
Secondly, the separate copyright in the sound recording is generally owned by the person who owns the master tape at the time the recording is made or the person, persons or company who financially invested in the recording (i.e. whoever pays for it). However, since 1 January 2005, the Copyright Act 1968 (Cth) (‘Copyright Act’) defines the owner of the copyright in the sound recording as one who is the ‘maker’ of the sound recording.
The ‘maker’ of the sound recording is generally:
a) the person or persons who own the recording medium or make the recording; and
b) the musicians who perform the live music on the recording.
This is of course subject to a number of exceptions.
Exceptions to copyright in musical work, lyrics and sound recording
There are several exceptions to copyright, however three of the most common exceptions are:
- commissioned works; and
For more information on copyright and the exceptions please view our Copyright Information Sheet.
A person infringes copyright if they exercise one of the exclusive rights of a copyright owner without permission. When considering uploading your recorded music to an OSS, you must be certain that you are the copyright owner of the music, the lyrics and the sound recording or alternatively that you have permission from the respective copyright owners to upload the material.
Often the sole copyright owner of a musical work will think they can do with the music as they please without considering who owns the copyright in the sound recording or whether their music or sound recording is subject to one of the exceptions noted above. When signing up to an OSS you are declaring that you are the sole copyright owner or that you have the relevant permission from the copyright owners in the music, lyrics and sound recording. It is a breach of copyright for the OSS to sell music without the permission of the owner of the copyright in that recording. This is why it is imperative that you understand what constitutes copyright ownership.
Common Terms and Conditions in OSS Agreements
When you sign up to an OSS you are giving it permission to use some or all of the rights of the copyright owner of the music, lyrics and sound recording. This permission may be given by way of assignment or licence. It is important to note that an assignment transfers all your rights in the work forever, whereas a licence is only for a certain period of time (unless of course it states “in perpetuity” which means forever!). For an assignment to be valid, it must be in writing and signed by the person giving up the copyright. However an assignment is still considered to be in writing where the terms of the agreement are accessed via a hyperlink or the terms are in a window that you need to scroll through in order to read and accept. Therefore it is very important that you read the terms and conditions of the OSS you are intending to use to see if you are granting a licence or assigning your entire copyright. You don’t want to give away more than you need to!
Most OSS terms and conditions will cover the following points which are explained in detail below.
Assignment or licence and type of licence
- An ‘assignment’ means you give up all copyrights in the music, lyrics and sound recording forever.
- A ‘licence in perpetuity’ is forever and is virtually the same as an assignment.
- An exclusive Licence grants the OSS the right to exercise one, some, or all of the exclusive rights of the copyright owner to the exclusion of anyone else such as another OSS or yourself and any other copyright owners in the music, lyrics and recording.
- A ‘non-exclusive licence’ grant the OSS the right to exercise one, some or all of the exclusive rights of the copyright owner. However this does not limit the copyright owner from exercising those same rights themselves or authorising others to do so. This is the preferred form of licence for an OSS as it is less restrictive on your rights as copyright owner.
Duration of the licence
- As mentioned above, an assignment is foreverwhereas a licence can be for any agreed period of time. However a common concern is that some OSS’s have a licence duration of “in perpetuity” which also means forever. Licensing does not need to last forever and it is not good if it does. If the licence does last forever, and the copyright owner is not happy with the OSS’s performance, the copyright owner may have limited options in changing to another OSS.
- Some OSS’s have set durations, such as 18 months, while others allow the licence to continue until terminated by you. Some of these require you to pay a cancellation fee to terminate the licence.
Whether the uploader has the right to licence the music
- As discussed above, all OSS’s have a clause confirming that the uploader is the copyright owner or has the right to upload the music
- If a person, who is not the copyright owner or does not have the permission of the copyright owner to enter into a contract on the copyright owners’ behalf, uploads music to an OSS and then the OSS sells the music, both the uploader and the OSS are in breach of copyright.
Which country’s laws apply
- Different countries have different laws and it is important that you know which laws apply to the contract that you are entering.
- If either you or the OSS breach any of the terms in the contract, the laws of the country stipulated in the contract will apply.
- Most OSS’s are based outside Australia!
How to cancel the contract
- For most OSS’s you will need to give notice in order to cancel the contract, for other OSS’s you may need to pay a cancellation/exit fee.
Cost of the OSS
- There are two main methods of paying an OSS for their service:
- Pay a subscription/annual fee and/or a flat fee per song or per EP/LP uploaded.
- Pay nothing up front, but the OSS will take a percentage of any sales they make on your behalf.
- If you sign up to an OSS that uses the first method, you will generally be paid 100% of the sale price. Whereas if you sign up to an OSS that uses the second method, you will get the remaining percentage of the sale price.
- OSS’s usually provide a reporting service that allows you to track your sales.
Obligations on the OSS to promote the music
- Generally an OSS does NOT promise to promote your music or guarantee any sales. They merely promise to make your music available for sale.
Signing up to an OSS should be done with the same level of caution as signing any contract. Just because it is an online agreement does not make it any less legally valid. Make sure you are the copyright owner of the music, lyrics and sound recording or that you have permission from all these copyright owners before you consider uploading your music to an OSS. If you would like Arts Law to review the terms and conditions of any OSS that you are considering signing up to, please lodge a Legal Query Form to access our Document Review Service (DRS). For more information keep an eye out for the upcoming Information Sheet on Online Music Distribution.*
Isabella Street is the Legal Administration Officer at the Arts Law Centre of Australia.
*This article is based on a reserach project undertaken by Scott Gruar, a student at the Queensland University of Technology as part of an Arts Law Centre of Australia internship.