Compulsory License

In-Depth Explanation

A compulsory license is a statutory license that allows anyone to record and distribute a previously released musical composition without the Copyright owner's direct permission. The user must pay the statutory mechanical royalty rate and follow specific filing requirements. This license exists under Section 115 of the US Copyright Act. It is the legal mechanism that makes cover songs possible without negotiating with every songwriter. The catch is that the original song must have been distributed to the public in phonorecords before you can claim a compulsory license.

How Compulsory Licenses Work

The process starts after a song has been commercially released. Once a composition has been distributed to the public, anyone can record their own version and distribute it. You do not need to ask permission. You do need to notify the copyright holder and pay royalties.

First, you identify the copyright owner. You search the Copyright Office records or use a service like the Harry Fox Agency Songfile. Then you file a Notice of Intention to Obtain a Compulsory License. This notice goes to the copyright holder before you distribute your recording. The notice includes your name, the song title, the writer, and your planned release date.

Next, you pay royalties at the Statutory Rate. As of 2024, the rate is 9.1 cents per physical copy or digital download. For streaming, the rate is a percentage of revenue, which varies by service. You must send monthly statements and quarterly payments to the copyright holder. Missing these filings can void your license and expose you to infringement liability.

The compulsory license has limits. You cannot change the basic melody or fundamental character of the song without permission. You must record your own version. You cannot sample the original master recording. Sampling requires a separate Mechanical License for the composition and a master use license for the recording.

Real-World Example

An independent artist wants to release a cover of a 1990s pop hit on Spotify and as a limited CD run. The original song was released commercially, so a compulsory license is available. The artist files a Notice of Intention with the publisher. They plan to press 500 CDs. At 9.1 cents per copy, they owe $45.50 in mechanical royalties for the physical run. They also pay streaming royalties based on the statutory percentage as streams accumulate.

In another case, a band records a cover for a streaming only release. They use the Mechanical Licensing Collective (MLC) to obtain a blanket compulsory license. The MLC collects mechanical royalties from streaming services and distributes them to publishers. The band pays nothing upfront. The streaming service pays the mechanical royalty per stream, and the publisher receives it through the MLC. The band keeps their share of the streaming revenue after the mechanical is deducted.

Why It Matters for Independent Artists

The compulsory license lets you release covers legally without hunting down every songwriter for permission. This opens up revenue and audience growth. Covers attract listeners who already know the song. Many artists build their early following with cover videos before releasing original music.

Use the compulsory license correctly. File your Notice of Intention before you release. Pay the statutory rate on time. Keep records of every payment and statement. If you skip these steps, you risk a copyright infringement lawsuit that can cost tens of thousands of dollars.

For digital releases, use the MLC. It simplifies the process for streaming mechanicals. For physical releases, use the Harry Fox Agency Songfile or file directly with the publisher. The cost is small compared to the legal risk of skipping it. A $45 mechanical payment on 500 CDs is cheap insurance against a $30,000 infringement claim.

Related Terms

• Mechanical License
• Statutory Rate
• Mechanical Royalties
• Copyright