Re: Licensing of sound recordings

On Thu, Apr 01, 1999, Jennifer Van Kirk <jvankirk[_at_]lrlaw.com> wrote:

>

One possible way to approach is - you can decide what you need to make in order to make a profit and then set your royalty rate with that as your minimum. i.e the realistic sales potential multiplied by the royalty has to approximate your actual costs plus a respectable profit margin (if it 's not intended to make a profit, why are they doing it?).

Alternatively, it is usually possible to get a feel for going rates provided you do not ask for names or identification of the relevant product. There is a very comprehensive book called "The Art of Licensing" by Kohn. Worth checking out. Alternatively, get an experienced attorney to give you a range of rates.

Remember - do not get blinded by percentages. It's the end result that matters. Percentages only mean something because they are a percentage of something; eg most record companies base their royalties on "PPD" (wholesale less taxes and packaging deductions) but at least one major record company works its royalties on "half the PPD" so it has high royalty rates but the end result is the same as everyone else.

Remember too - the rates can vary from country to country. Much depends upon the retail margin given to retailers by the wholesaler.

If you don't trust the licensees (and it's no sin not to) - insist on an advance payment against royalties. At least you will get the initial payment even if they never make another one.

As an alternative, consider doing a deal based on the licensee's actual receipts. You have to be careful to define the allowable deductions but it can simplify matters with the right licensee though verification can be a pain if you have to audit their royalty accounts.

If it's any comfort, it's not an easy thing to determine. I was Corporate Counsel for a major record/publishing company for 6 years and even at the end, always worked from first principles just to be sure.

As a rule of thumb - look at 16 - 20% of PPD. There are so many variables that even a rage liek that is only indicative. So much depends upon the genre, the status of the artist, the degree of promo dollars being put up by the licensee etc etc.

CS

"Galvanising Ideas"

Colin Seeger, Consultant, Management of Intellectual Property. P.O Box 3227, Tamarama, Sydney, Australia 2026 Tel: (61) (02) 9365 1186, Fax (61) (02) 9365 1286 <seeger[_at_]ozemail.com.au> Received on Mon Apr 05 1999 - 21:36:47 GMT