Last week BMG took the unprecedented step of eliminating what’s known as the Controlled Composition clause from its artist contracts, a moved that shocked the industry. This means that BMG artists will receive just a little more in their pocketbooks if they still sell any physical product.
The Controlled Composition clause has been a staple in every artist contract dating back to the days of vinyl. As you might expect, it’s another way for record labels to make more money on the back of its artists. Since it’s been a “standard clause” in every contract, it was never option to negotiation however.
The clause is used by record labels to reduce songwriting royalty payments, allowing labels to pay artists that write their own songs only 75% of the mechanical rate (currently 9.1 cents per song). On top of that it limits paying royalties on any more than 10 songs on an album, regardless of how many are included.
That means that if an artists has written 10 songs on an album, he or she should be paid 91 cents for each CD or vinyl sale. The clause limits that to 75% of that amount, or 68.25 cents. Plus, if there are 12 songs on the album, the artist still only gets paid that same 68.25 cent amount.
It gets even worse though. If one of the songs on the album is a cover song, the 9.1 cents mechanical royalty for that song comes out of the artist’s total, leaving just 59.15 cents.
One of the byproducts of the Digital Millennium Copyright Right Act is that the controlled composition clause no longer applies to streaming and downloads, only to physical products like CDs and vinyl.
Since BMG is the first to eliminate the clause, you can expect music lawyers everywhere to demand the same for their clients during new contract negotiations. Whether they get it or not is open to speculation, but a bigger question might be, “What took them so long?”