What do you keep and give up when you sell a music catalog?

Catalog buyers approach songwriters, artists and producers with offers framed as a multiple of annual income. The number gets the attention; the documents decide what the number buys. Our page on IP licensing and assignments explains why a sale is different from a license. This page maps a music catalog onto the federal rules that decide what moves in a sale and what does not.

How a catalog sale works, step by step

1. Inventory the works. List each composition and each recording, with co-writers, splits and any registration numbers. A song and its recording are two separate copyrights, as our page on registering a song explains.
2. Inventory existing deals. Publishing, administration, recording, distribution and sync licenses already granted limit what you can sell, and the buyer will want copies.
3. Decide what is for sale. All rights, a percentage interest, only the publisher's side of income, only the masters, or only a stream of royalties. Copyright is divisible, so each exclusive right can be transferred and owned separately (17 U.S.C. 201(d)).
4. Diligence. The buyer checks chain of title, registrations, recorded documents and income statements.
5. Sign the assignment. A transfer of copyright ownership is not valid unless it is in writing and signed by the owner (17 U.S.C. 204(a)).
6. Record and give notices. The buyer records the assignment with the Copyright Office and gives letters of direction to the companies that pay royalties.

Which income moves with which copyright?

Music income follows the rights that earn it. The composition (the musical work and lyrics) earns from reproduction and distribution, including the mechanical license for recordings of the song under 17 U.S.C. 115, from public performance under section 106(4), and from synchronization licenses. The sound recording earns from its own reproduction and distribution and from digital audio transmissions under section 106(6). Whoever owns a right after the sale is the one entitled to license it and to the owner's share of what it earns.

The last two rows matter to artists. Under the statutory license, the designated collective pays 45 percent of receipts "to the recording artist or artists featured on such sound recording (or the persons conveying rights in the artists' performance)." Selling the master copyright moves the owner's 50 percent, but the featured artist's share is paid as a performer's share, so whether a buyer gets it depends on whether the artist separately conveys it. Our page on how artists get paid when recordings stream on internet radio explains that split. Our page on producer royalties and letters of direction covers how a share can be redirected.

What can you keep?

• Rights you do not transfer. Because copyright is divisible, a seller can keep, for example, sync rights for a home territory, the right to perform the songs live, or a portfolio use. Anything kept must be carved out expressly.
• A share of income. Some sales transfer the copyright in exchange for continuing royalties. The House Report printed with section 501 describes an author who parted with legal title in exchange for percentage royalties as a "beneficial owner" who can sue infringers, as our page on whether a licensee can sue an infringer explains.
• Credit and approvals. Name and likeness use, credit lines and approval over certain uses are contract terms, and the buyer will not give them unless asked.
• Termination rights. If you are the author, the sale itself is a grant you can later terminate (below).

How do termination rights affect a catalog sale?

A transfer or license of copyright executed by an author on or after January 1, 1978, other than for a work made for hire or by will, can be terminated during a five-year window that opens 35 years after the grant (17 U.S.C. 203). The right exists "notwithstanding any agreement to the contrary" (203(a)(5)), so a buyer cannot contract around it.

That cuts two ways. If you signed a publishing or recording deal decades ago, termination may already let you recover U.S. rights, which changes what you own and what a buyer would pay. And if you, as author, sell your own copyrights today, the sale is itself a grant you or your heirs can terminate in the window starting 35 years from signing, subject to the earlier test for grants covering publication. Buyers price both. Our page on getting rights back 35 years after you signed them away has the timeline, the notice rules and the recording requirement.

Two limits apply. Termination returns only rights under U.S. law (203(b)(5)), and recordings or other derivative works made under the grant before termination can keep being used under its terms (203(b)(1)).

What if the songs were written before 1978?

Older catalogs run on a different clock. For a grant made before January 1, 1978 of a copyright secured before that date, section 304(c) allows termination during a five-year window beginning 56 years after copyright was originally secured, or January 1, 1978 if later (17 U.S.C. 304(c)). The second-chance window under section 304(d) has closed: the Copyright Office says the last day to serve a notice under it was October 26, 2017. A buyer of a vintage catalog will want to know whether any author or heir has served or recorded a notice, because a recorded notice can mean the U.S. rights are about to change hands regardless of the sale.

What will a buyer ask for in diligence?

Expect requests for every agreement that touches the works (co-writer and split agreements, producer agreements, publishing and administration deals, label and distribution contracts, sync licenses), registration certificates, recorded documents, and royalty statements by source. Buyers also look for anything that limits a future sale or license, such as consent rights held by a co-owner or a former label. Gaps do not always end a deal, but they can lower the price or delay closing, so a seller gains by finding them first.

What changes the answer

• Co-ownership. Co-writers are co-owners of a joint work (201(a)). The House Report printed with section 201 says each co-owner can generally use or license the work subject to accounting, but a buyer of the whole copyright needs every owner's signed transfer. Our post on music copyright ownership disputes shows how split questions surface late.
• Earlier grants. If you already assigned the publisher's share, you can sell only what you kept.
• What the document grants. A sale of "100 percent of the writer's royalties" may transfer income without transferring the copyright. Read the grant clause, not the term sheet.
• Remaining copyright term. Value depends on how long each work stays protected; our page on how long a song's copyright lasts covers the terms.
• The buyer's or seller's solvency. Deals paid over time, or that leave licenses running between the parties, should consider what happens if either side fails; our page on IP licenses in bankruptcy explains section 365.
• Unclaimed money. Royalties held because a work was never matched to its owner affect the purchase price; our page on the MLC and unclaimed royalties explains how those are handled.

A worked example

Common mistakes

• Selling "the catalog" without a schedule. List every work, split and registration number.
• Ignoring the two copyrights. A buyer of songs does not get masters, and the reverse, unless both are listed.
• Signing away rights you wanted to keep. Carve-outs must be written into the grant.
• Forgetting co-writers. A sale of a co-written song needs every owner's signature for a full transfer.
• Assuming termination is gone. No clause waives it.
• Leaving the paper unrecorded. The buyer should record the assignment within one month, as our page on recording a copyright assignment explains, and a seller should expect it.

What to do this week

1. Build a schedule of every composition and recording, with co-owners, splits and registration numbers.
2. Collect every existing publishing, recording, administration and license agreement.
3. Pull two to three years of royalty statements by income stream.
4. Search the Copyright Office public records for your works and any recorded transfers.
5. Work out the termination windows for older grants you signed.
6. Decide what you want to keep, in writing, before you see the buyer's draft.

Frequently asked questions

Do I have to sell the songs and the masters together?

No. They are separate copyrights and can be sold separately, or partly. Each transfer needs its own signed writing under section 204(a).

Do I keep my writer credit after selling?

Authorship does not change when ownership does, but how you are credited on new releases and licenses is a contract term. Ask for it.

Can I sell only part of a song?

Yes. Section 201(d) allows a transfer in whole or in part, and of any exclusive right separately. A percentage sale makes the buyer a co-owner with you.

Will the buyer get my SoundExchange artist royalties?

Not just by buying the master. The statute pays the featured artist share to the featured artist or the person conveying rights in the artist's performance (114(g)(2)(D)), so it moves only if you separately convey it.

Can my heirs undo the sale?

If you are the author and the grant qualifies, your surviving spouse, children and grandchildren can exercise the termination right in its window after your death (203(a)(2)).

Where can I learn how publishing income is collected?

Our page on collective rights management and music publishing explains how publishing income is registered, collected and split, which is what a buyer is valuing.

Zala IP Law reviews catalog sale and publishing documents for songwriters, artists and producers, and Shreepal J. Zala practices federal intellectual property law nationally. Before you sign a term sheet, request a consultation or call 404-313-1701.