BMG Eliminates Controlled Composition Clauses From Its U.S. Record Contracts

BMG has announced that it is eliminating a standard US record label deduction which serves to reduce the income of songwriters, composers, and lyricists.

Across the US industry, the various discounts and caps which are contained in the so-called Controlled Composition clause cost songwriters an estimated $14 million last year.

The Controlled Composition clause is a provision in recording contracts that grants record labels a 25% reduction (and sometimes more) on mechanical royalties owed to a songwriter in the US for sales of their physical records.

Under the decades-old, traditional recording agreement, any song the recording artist writes (a composition they control) is subjected to a payment at 75% of the minimum statutory mechanical rate at the time of release (currently at $.091, since 2006) per track sold.

The 75% is often further reduced by placing a cap – typically 10-12 songs – on the aggregate mechanical royalty fees that record companies will pay on a particular album regardless of the actual number of songs on the album.

If there are compositions on the album written by additional, outside composers, those have to be paid at the statutory rate, effectively reducing the mechanical royalty to the artist even further.

With immediate effect, BMG will voluntarily refrain from applying the reductions to any new record deals, as well as removing them from its entire catalog over the course of the next year.

BMG states that the move forms part of its ”ongoing program to rebalance the music industry in favor of artists and songwriters by abandoning longstanding practices designed to reduce the incomes of musicians”.

The company has now set up a taskforce headed by COO Ben Katovsky specifically tasked with improving fairness in music contracts.

Its responsibilities include BMG’s recently announced review of historically acquired record contracts for signs of racial bias. Meanwhile, leading songwriter organizations including the NMPA, Ivors Academy, NSAI and SONA have applauded BMG’s move,.