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Getting Paid as a Creator: Knowing the Options

HOW DO COPYRIGHT
BUYOUTS AFFECT YOU?

Copyright buyout is an issue affecting creators worldwide. Composers, songwriters, screenwriters, directors and other creators are increasingly being asked to accept the buyout of their rights for a one-time fee instead of receiving royalties for the rest of their life.

In some countries, it is broadcasters and TV stations that set the agenda, in others, it is the video streaming services.

The shift to buyouts has taken off so rapidly that creators are often unaware of how their business and careers can be affected.

In the current pandemic crisis, with audiovisual productions severely cut and creators struggling for income, this is more vital than ever.

Each creator can make their own business decisions - but what is critical is having the right information to decide what works best for you.

Royalties vs Buyouts

When you write a composition, whether for television, film, video games or digital services, there are so many opportunities to make money beyond the original composing or package fee. The most well-established, and arguably the most important, are royalties.

Royalty payments are generated over many decades, wherever and whenever your music is used. This includes airings on broadcast, cable, subscription video on demand platforms, video games, traditional and satellite radio plays, and streaming service performances.

You can also receive royalties from consumer products. These might be interactive toys, greeting cards, holograms, theatre shows, soundtrack album sales, advertising commercials and even online musical instrument lessons.

These royalties give songwriters and composers a steady income. They are collected and distributed by authors’ societies or collective management organisations in each country.

Today, the right of creators to earn royalties is getting challenged more and more. They are being replaced by a new form of payment, called “copyright buyouts”.

Copyright buyouts are often imposed on creators by broadcasters, videogame producers, TV operators and digital platforms, who give them a one-time fee instead of a regular earnings stream.

Sometimes creators are happy with buyouts and the lump sum fee. But for others, the right to a royalty income linked to the success of the programme is fundamental.

The issue is becoming much more apparent in the streaming world. Video streaming platforms are using their powerful leverage in the entertainment industry to try to change the way they work with those who create music for their channels and programmes.

BUYOUTS ARE A BIGGER ISSUE IN THE POST-COVID WORLD

In the face of the global pandemic and deep financial crisis there has been a dearth of new television, films and other media in production. We hear from many of our 14,000+ supporters that there is more pressure than ever to accept deals where they are required to sign “total buyouts” of their music as a condition of employment. In these deals, composers and other music creators relinquish their ability to collect any public performance royalty income for their works globally, in all media and in perpetuity—contrary to a 100-year precedent. This means that the mission of Your Music Your Future has never been more vital, and the need more urgent.

WEIGHING UP THE PROS AND CONS

Are creators better with the steady income of royalties or a single lump sum payment? Every music creator has a different situation, so there is no one-size-fits-all answer to this.

But there is no question that in signing copyright buyout contracts, whether with a streaming platform or broadcaster, creators are giving up the opportunity of a precious and long-term income stream.

When music creators agree to a copyright buyout, they lose the right to earn any future royalties from the work they created.

To give you an idea of what is at stake, here are some scenarios that show the differences in earnings resulting from royalties and lump sum payments. They come from the experts in the United States but there are other case studies around the world.

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Here are a few quotes from the 8th edition of “Music, Money and Success: the Insider’s Guide to Making Money in the Music Business”:

How to handle a buyout negotiation – here is a true life case study

UNDERSTANDING “BUYOUT CLAUSES”
IN CONTRACTS

Buyout clauses are not new, but they have become standard in the contracts offered by broadcasters, streaming video-on-demand services and other major users of music works.

The legal terms vary country by country. Contracts include either buyout clauses or references to “works made for hire” which give the user all rights in the creative work in exchange for a one-time payment.

The agreement provides creators a lump sum pay-out. In return they surrender full control of their work and waive the right to any future income from it.

Understanding “buyout clauses” in contracts

A “buyout” clause refers to the transfer of all rights in a work for its entire life in exchange for a lump sum payment.

These contract terms are usually broad in the way they deal with key issues: the granting of the rights, the location of the contract and the duration.

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"I, the undersigned, declare to be the composer of the original soundtrack of the motion picture entitled “Y” and to have granted and assigned all of the copyright in the master recordings throughout the world in all media, and until 70 (seventy) years after my death, to the company Z (producer of the movie)."
A typical example of a buyout clause

HOW THE LAWS VARY IN DIFFERENT COUNTRIES

The laws around copyright buyout vary in different regions and territories.

Europe

In Europe, legislation tends to protect creators more than elsewhere in the world. In several European Union countries, buyout contracts are restricted by legislation that requires fair remuneration for the use of creators’ works. Examples of these types of laws can be found in France, Italy and Spain. Other EU Member States, like Germany or the Netherlands, include stronger measures that provide an overriding and mandatory rule which prohibits/limits the use of copyright buyout contracts altogether

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Asia-Pacific

In Asia-Pacific, few territories have laws that regulate unfair contract terms between creators and users. A detailed analysis by University of Hong Kong Professor Alice Lee, under the guidance of the Asia-Pacific Music Creators Alliance (APMA), looked at the laws in individual countries/territories (like Australia, Hong Kong, Indonesia, Japan, Macau, South Korea, Thailand and Vietnam). The study helped to explain the current laws on copyright buyouts today in those countries and territories and made recommendations on how it can be improved via:

  • regulation of unfair contract terms
  • protection for creators and fair remuneration
  • the right to revoke copyright buyout contracts under justifiable circumstances
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Latin America

In Latin America, there are encouraging models in legislation for creators. A group of countries (including Nicaragua, Chile, Colombia, Ecuador, Panama, Mexico and Uruguay), have established an inalienable right of remuneration in favour of the creators authors, accompanied by a transfer of rights to the producer. CISAC is working on study that will give more insight into the legal situation in the region.

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A buyout clause in the US might typically read:
"…such musical works, together with all such other musical material created under said Agreement shall constitute a "work made for hire" (for the purpose of U.S. copyright law and all other copyright laws throughout the universe) for Producer."

Copyright buyout and Work for Hire in the US

In the United States, copyright buyouts work differently from elsewhere.
According to U.S. law, the buyout may appear in contracts labelled as a “Work Made for Hire,” which legally says that the employer is the author of a work and is automatically entitled to all copyright in the work produced.

In the streaming world, the situation is worse for authors and composers. While the traditional “work made for hire” agreements in the audiovisual industry allowed them right to receive back-end performance royalties through their chosen society (or CMO), the new model of buyout agreements removes this option and deprives them of this traditional flow of payment.


For example, a clause might read:
"If or to the extent for any reason in any country, any or all such musical works and/or other musical material is not recognized to be a "work made for hire" then Composer hereby irrevocably exclusively and absolutely assigns to Producer all of Composer's rights (copyrights, rights under copyright and otherwise, whether now or hereafter known)…."

Applying US law internationally?

Some of the confusion around copyright buyouts stems from the question around which laws apply in which jurisdiction/country.

The “work made for hire” agreement, while originally an element of U.S. copyright law, has also appeared in copyright contracts outside of the US and regardless of whether the parties or the transactions are related to the U.S.:


HOW AUTHORS SOCIETIES CAN HELP

Authors societies are the best place for creators to turn if they want to know more about their options. Authors societies, also known as collective management organisations (CMOs) provide strength in numbers for creators. Their role is to look after creators’ interests, protect their rights and negotiate the best deal with the users of their works.

The key mission of an authors society is to protect the weaker bargaining party in negotiations between creators and users of their works. That is why, in many countries, they are assigned exclusive rights to negotiate on behalf of their members. This also makes the market negotiation between the two sides far more efficient and productive.


HOW CREATORS CAN URGE FOR GREATER LEGAL PROTECTION

The right to continue to earn royalties – or to “equitable remuneration” as it is known in many countries –
is a fundamental issue of fairness for all creators.
And the best way of achieving fairness is to urge for better legislation.
CISAC and Your Music Your Future are committed to fighting for fair rights for creators. Today, campaigns are forming internationally to raise awareness and get governments to understand, and to act.

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Changing legislation

In parts of Europe, current legislation provides a good example of best practice – protecting creators’ right to earn royalties instead of accepting copyright buyouts. In April 2019, the EU adopted the Directive on Copyright in the Digital Single Market which could extend this protection further.

The new directive lays down key principles to strengthen creators’ rights. For example, it confirms the principle of “fair and proportional remuneration” in law and would require platforms to be more transparent and more flexible in paying royalties when dealing with “best sellers”.

More information The EU Directive on Copyright in the Digital Single Market

  • Ensure fair and proportional remuneration for the transfer and/or license of their creative works.
  • Support the use of “Bestseller” clauses which allows for the revision of remuneration terms to authors and performers in the case of commercial success.
  • Encourage transparency and reporting measures by SVOD services regarding transfers and/or license of creative works.
  • Reduce the application of overriding choice-of-law provisions in copyright contracts in instances that they conflict with:

1) Transparency and reporting measures
2) “Bestseller” clauses

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An international campaign

In Asia, a copyright buyout survival guide has been created to provide guidance to creators in the region tailored to different national laws.
Aa detailed study was done in 2019, analysing jurisdictions in 8 countries. The study found areas where legal protection for creators needs to be stronger. It recommended legislative fixes like:

  • regulation of unfair contract terms
  • protection of creators from being deprived of the right to fair payment
  • the right to revoke copyright buyout contracts under certain circumstances

Music creators can get more information about royalties and copyright buyouts from various sources.
They include the following:

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Your national music authors’ society/collective management organisation. See this global directory published by CISAC

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www.yourmusicyourfuture.com is an information campaign run by a community of more than 13,000 composers and creators in the US

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www.cisac.org is the global confederation representing 231 authors societies in 121 countries