According to copyright law, anyone can re-record a song an artist has written as soon as that song is made public. The stipulation is that the individual re-recording the song must pay a “statutory rate” to the composer for every copy of the song that is released. This statutory rate, currently hovering around eight cents, is adjusted every few years by the Copyright Arbitration Royalty Panel (CARP), an organization comprised of administrators and executives of many of the major labels. This organization, by the way, replaced the body established by Congress under the copyright law, Copyright Royalty Tribunal.

When an artist re-records a tune, that artist applies for a “mechanical license” through arrangement with The Harry Fox Agency (HFA). A mechanical license derives its name from the traditional way that the grooves of vinyl records were physically cut with a cutting stylus. Even though the overwhelming majority of records cut today use a laser beam on a glass CD master, the term is still used. HFA has established itself as the intermediary between those wanting to use music and the publishers who own the music. If approved for the mechanical license, the artist pays a fee to HFA, who then, after deducting a service charge, turns the money over to the publishers. The publisher takes its share then divides the remaining money among all the songwriters on the tune.

This process, however, only applies to songs which have been made public before. What happens, you might be asking, to tunes which are 100% original and have not been recorded or performed before? This is where the “controlled composition” clause comes in.

For an original piece of music, a songwriter could, in theory, charge whatever he sees fit to charge for the tune. Instead of the paltry eight cents that the statutory rate calls for, the artist could conceivably charge $15.00 [per copy released] for use of his song.

When an artist or songwriter signs a recording or publishing contract, the record label and publishing company have a clause inserted in the contract that says the artist or songwriter agrees to charge a set fee for any composition created, owned or controlled by the artist or songwriter. This clause also applies to songs co-written by the artist or songwriter.

The really interesting part to this clause, however, is the stipulation that the artist/songwriter must agree to take only a portion of what the current statutory rate is. This portion in recent years has been negotiated to be 75% of the .08 cents statutory rate. Furthermore, if an artist wishes to use a song that is not covered by the agreement—such as in a re-make—the artist must agree that the company will pay HFA the same 75% of .08 cents, and the artist will make up the difference.

Furthermore, an artist is only allowed to record a set amount of compositions on their CD, after which they no longer will be paid for the songs. This means that if the record label says that the number of controlled composition on a CD is 10, any other song included on the CD after the 10th is not paid for, and if the song is a cover tune, the artist is responsible for paying HFA for the right to use it.

Record companies defend their use of the controlled composition clause by stating that it encourages the artist/writer to utilize their best work and not just put any song on a project simply to collect royalties. Record companies say this would prevent, for example, an artist using endless musical “interludes” on their CD, and also would stop an artist from releasing multiple takes such as club remixes or instrumentals of the same song and trying to get paid for them.

This “controlled composition” clause is an item which a good entertainment lawyer could negotiate out of their client’s contract. In the beginning stages of a career though, this may be an uphill battle. Many artists opt to avoid the whole mess and record, publish, and distribute their own records through labels they have founded. This is the incredible power of today’s artists since it allows them the freedom to control their careers and direction better.