People often get confused with the various income streams present in the music industry and in addition, how those income streams interact with copyright ownership.
A person who owns all or a portion of a copyright will also share in the income from a composition, master recording, etc. However, people that do not own copyright can also share in income from intellectual property based on a contract granting rights for something called “income participation.”
Here is the difference:
One of the basic principles of copyright law is that creators of a work should be able to control how their work is used and financially benefit from it. This means that when you write a song, you get to control who uses the song and how it can be used, and also collect the money the song earns (unless you have co-writers or have granted that right to someone else).
One (or several) people may own the copyright to a work, but in an income participation situation, there are other people who also receive a portion of the income the song generates without having ownership rights. The reason for this is that the person with the ownership has all the control and may not want to give up that control, but still wants to compensate others that contributed to the work.
I’ve worked with songwriters that wanted to compensate their co-writers but did not want to let those writers have any control over how the song is used. Therefore, I have drafted income participation agreements where, for example, the main writer kept full copyright ownership so he could have complete control of the song, but he agreed to share certain percentages of the income the song earned with the co-writers. The co-writers were happy because they got their shares of the song’s income and the main writer was happy because he still had complete control over how the song could be used.
This is an important distinction to make because artists and writers often talk about the splits they want to give to others, but fail to designate or understand whether they want the split to actually involve sharing copyright ownership or only involve sharing income. This situation especially comes into play when co-writers may be hired hands, producers, non-band members, or other one-time collaborators. Therefore, it is important to know what type of split you want to give and how the split you are offering affects your ownership, control, and potential profit from your creative endeavors.
If you do want to split copyright ownership and a corresponding share of income with co-writers, then a Songwriter Split Agreement is the way to go and should be completed for every song in which you collaborate with others to avoid disputes later. If you only want a collaborator to share in a song’s income while you retain full ownership and control, then you should have a music lawyer draft an Income Participation Agreement.
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