Licensing Your Tracks

Mechanical Royalty Rate: This is the royalty the record company is required to pay your publisher (or you if you do not have a publisher). The royalties are usually routed through your local mechanical collection society. You might also consider licensing the publishing directly rather than route it through a mechanical society so that you can get your money earlier. In Europe this rate is based on a percentage of the PPD. This rate is generally accepted and rarely changed. That percentage gets split between all the tracks on the CD. In the U.S. the mechanical rate is basically 8 cents per track per CD but all U.S. labels will seek to pay only 75% of this. It's just the way the business has developed. If you have a hit track you can ask for 100% of the "full statutory rate" and you'll probably get it if they really want your track to give their compilation some commercial viability. Otherwise, you'll probably have to live with 75% of the rate.

Number of Tracks: Self-explanatory but if the license is with a company outside of North America make sure this is set out.

Format: Will usually specify CD and/or vinyl. Limit the format to those actually stated. Beware of digital downloads. The record company better give you a very good reason if they want those rights.

Packaging Deductions: This is usually stated as a percentage of the price of the CD (either PPD or SRLP) that is deducted to cover the cost of manufacturing. Some European labels make no deductions from the PPD but the royalty rate may be lower. Expect to see of packaging deduction of 25% for CDs.

The Advance: You'll be offered an advance against future royalties. This amount will be based on the previous success of the track or on your reputation as a producer. For a regular track (i.e. one that's not a smash club hit) the advance should start at least $500.00 US. If the HOA indicates the number of records in expected sales you should ask for an advance of at least 75% of the royalties that would be derived from those expected sales. If your track is a smash hit already or your reputation as a producer is well established there's no "average" rate. Ask for what you want and negotiate until you are happy with the amount.