Work-for-hire / Buyouts

/ Direct Licenses?

Confused by the terms work-for-hire, buyout, or direct license? Have you ever encountered these terms in your music agreement? While there are certainly differences, they all essentially mean that:

For a one-time upfront fee, you would irrevocably transfer all right, title and interest in your music to your client / employer for the entire term of copyright throughout the world.

The consequences of these sorts of agreements include:

  • Relinquishing your Copyright - In forfeiting ownership of the musical work you would no longer receive any further remuneration (such as re-use fees and additional licencing fees) for the exploitation of your work on any production worldwide across any media.  You have no say in how your music is used and, depending on the contract wording, you may no longer receive any royalties whatsoever for the public performance of your work, royalties which are the bedrock of a sustainable career in screen composition.

 

 

  • Lack of awareness - Many composers, particularly emerging composers, are unaware of potential revenue streams beyond a first use and so lose out on significant future earnings.

 

  • Devaluation – These sorts of agreements seriously devalue the entire music market. They erode the commercial value of both composed music and of production library music, and seriously impact the music sector’s capacity to invest in and nurture the songwriters and composers of the future. In short, they completely undermine the art and craft of screen composition.

 

Copyright assignments, whether via work-for-hire agreements, buyouts or so-called direct license agreements are not standard industry practice in Australia, and have no historical precedent here.  This fact is priced into our relatively modest upfront fees. Unless upfront fees are significantly revised upwards to compensate composers for the loss of these rights the AGSC strongly discourages the use of these sorts of agreements in Australia.

Fortunately, if you are an APRA member you have already assigned all rights in any current or future works to APRA which enables them to collect performance royalties on your behalf. Because of this you CANNOT relinquish your Writer's share of public performance royalties for a screen production, and signing a contract, whether that be a “buyout”, “direct license”, “work-for-hire” or “direct source license” stating that you relinquish your Writer's share would be in breach of your APRA membership. (Click here for a more detailed discussion of royalties including definitions of the ‘Writer’s Share’ and so-called ‘Publisher’s Share’ of performance royalties.)

However, we recognise that we all now operate in a global industry so we will do our best to explain work-for-hire, buyouts and direct licenses and their relevance (or otherwise!) to Australian screen composers, particularly for those negotiating international commissions, so that you may conduct your business more aware of these sorts of agreements.

 

Work-for-hire

Work-for-hire (or a work-made-for-hire) is a statutorily defined term in the United States and certain other copyright jurisdictions, meaning that if a work is "made for hire" it is the employer, not the employee, who is considered the legal author of that work.  It is not a transfer of rights per se but rather an assumption that the work is authored, from creation, by the employer and not the actual creator of that work.  This is commonplace in many larger companies and institutions which own all intellectual property created by their employees who, in return, are guaranteed a steady wage, superannuation, sick leave, and holiday and leave loadings etc.  However, freelance composers have none of these things!

Unless the upfront fee is truly significant, work-for-hire agreements put freelancers at a huge disadvantage, irrevocably transferring all right, title and interest in the music to the client / employer for the entire term of copyright throughout the world. This means that the employer would be the sole owner of copyright in both the Music and Master recording as well as having the right to exploit the Music and Master across any and all media and territories worldwide without paying the composer an additional fee for re-use. (For a definition of Music and Master recording click here). This means the music can be placed in a library, reused in other unrelated productions or on-sold to third parties.  Furthermore, the employer is likely to own the publishing which means the composer receives up to 50% less public performance royalties.  However, work-for-hire agreements usually have a clause stipulating that the author of the musical works would still receive the Writer’s share of royalties, but for the avoidance of doubt this needs to be explicitly stated in the contract.

(It’s important to note that the expression work-made-for-hire does not appear in the Australian Copyright Act and for this reason we recommend composers be extremely wary of any Australian contract using such terms.  That said, an Australian contract can still be drafted in such a way that, in practical terms, would almost be the same as a work-for-hire agreement. This is done via an assignment in the entire copyright in your music.  The main difference between work-for-hire and a copyright assignment would be that a copyright assignment is made after the work is created, but a work-made-for-hire agreement (as it is defined under United States copyright law) is regarded from inception as the property of the employer. While this may seem a semantic difference it’s important to remember that under U.S. and Australian law an assignment in copyright now expires 70 years after the death of the author of the work (see here).  However, under U.S. law, copyright protection under a work-made-for-hire agreement lasts for 95 years from the date of publication or 120 years from the date of creation, whichever expires first.)

The AGSC recognises that for some projects in some markets like the United States, work-for-hire or similar agreements may be unavoidable. If this is the case make sure you are being adequately remunerated for the loss of your rights with a significantly increased upfront fee to offset your loss of future earnings. Such agreements are not standard industry practise in Australia where the use of the music is almost always restricted to the production for which it was commissioned.  Our upfront fees reflect this.  The AGSC is also concerned that emerging composers who may not have the experience or industry clout to re-negotiate their fee or contracts are particularly disadvantaged in these cases, and urges its members to contact us for advice in this regard.

Remember that work-for-hire is often a grey area in copyright law, and copyright laws vary from country to country. For this reason alone, it is critical that you seek advice from a qualified and experienced entertainment industry lawyer before signing anything!

 

Buyouts

A buyout is similar to a work-for-hire agreement in so far as a ‘buyer’ pays a one-time lump sum fee to purchase the copyright in the music from the composer.  This means that the buyer (or its sub-licensees) can use the music without restriction for any purpose and without further remuneration to the composer.  It is, in many respects, another term meaning a complete assignment in copyright in the Music and the Master. A buyout therefore can function like a work-for-hire agreement, but unlike work-for-hire can also apply to pre-existing music. (Remember that music written under a work-for-hire agreement is said to be authored by the employer from creation. A buyout can purchase identical rights after the work is created.)

 

However, unlike most work-for-hire agreements, a buyout means the composer would not be entitled to any public performance royalties or any other royalty EVER. (This includes print music, mechanicals, grand rights, synchronisation royalties etc).  This includes the Writer’s share of royalties which the AGSC believes is sacrosanct!

 

However, there is some good news…

As mentioned above, as an APRA member, you have already assigned all rights in any current or future works to APRA enabling them to collect performance royalties on your behalf. Because of this you cannot relinquish your Writer's share of royalties, and signing a contract stating otherwise would be in breach of your APRA membership. This protects Australian screen composers, and means that buyouts, or unusual work-for-hire contracts which have been deliberately structured to claim Writer’s share, are NOT Australian practice.

Beware however, as we have had reports of Australian composers being asked to sign American contracts in a bid to get around this protection. Please contact us and APRA and see a qualified lawyer with experience in entertainment law if this applies to you!

So finally, what’s a direct license deal?

 

Some broadcasters and streaming services such as Discovery and Netflix are introducing what they are calling ‘direct license’ or ‘direct source license’ deals. These deals are essentially buyouts, meaning that for a once-off fee they would own all right, title and interest in your music for the entire term of copyright throughout the world, and you would not be entitled to any subsequent royalty payments whatsoever.  However, it seems that some of these ‘direct license’ deals might go further…

Recent much publicised reports (see here and here) allege that Netflix and Discovery are seeking to bypass the royalty system in the United States by directly negotiating with composers, circumventing performing rights organisations like ASCAP, BMI and SESAC entirely.  This means that these companies would no longer have to pay blanket license fees to PROs which would normally be distributed to composers as public performance royalties.  In attempting to bypass the entire royalty-based system which has been in place for almost 100 years, these types of agreements are legally and commercially devaluing copyright, a crucial cornerstone of the world’s entertainment industries. They are also having a serious, regressive effect on the value of music by cutting off legal rights and royalty models for the use of writers’ work.

Like buyouts, direct license deals are not possible for APRA members but the AGSC supports our colleagues in the United States, and organisations such as Your Music, Your Future who are heading up the fight against such regressive policies.

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Users of this site should also be aware that the information provided may be in the form of summaries and generalisations derived from other sources and may omit detail that could be significant to a particular scenario or context.  Users of this site should seek independent verification of any information on this site that they are seeking to rely on. The Guild can only provide general information and not advise you on specific points of your music contracts or on the law more broadly. Any questions relating to a contractual agreement beyond general ones should be directed to a qualified lawyer. For specific advice, the AGSC strongly recommends that: members seek information from the relevant Government authority, lawyer, tax professional or other industry professional. 

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