Thanks to a simplified application process, producers are having an easier time recouping their share of webcasting and satellite transmission royalties of their recordings.

LOS ANGELES--Thanks to a simplified application process, producers are having an easier time recouping their share of webcasting and satellite transmission royalties of their recordings.

Since July 2002, the U.S. Copyright Office has designated royalty rates due featured artists, nonfeatured artists (session players and vocalists) and copyright owners for statutory licenses of sound recordings in these emerging music areas. Those rates were reaffirmed by the Copyright Office in October, 2003.

SoundExchange collects and distributes royalties from nonsubscription webcasting music services such as AOL and Yahoo and satellite operations like XM Radio and Sirius Radio. The statutory royalty rate per song is split 50% to the copyright owners (a.k.a. the label), 45% to the featured artist and 5% to non-featured artists.

Producers are lumped within the featured artist portion. But there was nothing in the rate specifications defining how much they could expect to collect.

That confusion led many producers who negotiate a royalty for services to not pursue webcasting or satellite royalty money at all.

"I saw no means for producers to get paid," says Leslie Lewis, director of the producers and engineers wing of the Recording Academy.

Chris Castle, an attorney with Akin Gump Strauss Hauer Feld, says it "was a problem that producers were not spelled out [in the official rate break-down]. [Traditionally] producers are entitled to royalties per their producer's contract."

So, the two contacted SoundExchange executive director John Simson to figure out how best to cut in producers to the webcasting and satellite royalty pot.

SoundExchange expects to corral $13 million from these webcasters and satellite transmitters in 2004.

This is modest in terms of royalty amounts currently garnered from recordings placed in traditional media outlets, says Simson. But by 2007 and 2008, he says, the amount should balloon to $50 million.

"I think this is a dramatic growth area for business. We should see an increase of the satellite TV subscriber pool and XM and Sirius growth," says Simson, which should ultimately boost royalty collection.

Castle then drafted a formal "letter of direction" asking artists to write down what portion of their 45% webcasting/satellite rate they are promising to their producers.

Next, both producer and artist sign the contract and send it to SoundExchange for their royalty disbursement records.

Starting in January, SoundExchange has displayed the form on its website at soundexchange.com/letter_of_direction.htm.

Since SoundExchange is now officially recognizing record producers as participants in the payment of these royalties, Leslie, Castle and Simson recommend artists and producers to complete the "letter of direction" as standard practice when negotiating recording deals.

"Without the letter of direction on file, [SoundExchange] won't know to pay you otherwise. It'll be an open question of whether you'll be able to recover any of that money," says Castle.

The letter seems to be doing its job. "We're sending out money and sending out checks," Simson says. "We're starting to see more and more attorneys and producers having letters of direction signed and turned into us. More people are getting the message."

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