220 !!Chapter 13
reality, unions in most right-to-work states do not have much clout; there-
fore, music companies generally negotiate buyout fees. One fee encom-
passes the performer’s participation, and there are no residual payments.
The music company negotiates individual fees for each musician, singer,
composer, and/or arranger that are deducted from a music company’s
gross budget.
In the United States, the majority of nonunion work is created in Dal-
las, Texas. Most radio identification jingles and a substantial number of
commercials are recorded for regional and local advertising in Dallas
because there are no residual payments required and session payments are
negotiated. Clients can use the music for a predetermined period of time;
occasionally, they purchase the rights in perpetuity.
Recording in right-to-work states is less costly than recording in union-
controlled states. Fees and residual payments are based on the size of the
markets; larger markets warrant higher creative fees.
Music Budget
Most music companies pay composers and arrangers based on a percent-
age of the creative fees received by the music company. For example, a
composer or arranger might receive 33^1 / 3 or 40 percent of the fee received
by the music company for composing and/or arranging commercials.
The music company usually deducts the portion of the budget that
covers studio charges, engineering fees, and other direct fees because these
charges are not considered part of the creative fee. A rep’s commission is
also deducted before arriving at the net creative fee.
The net income is determined after the charges have been deducted.
This serves as the basis for determining the creative and arranging fees.
Composers encounter substantial expenses. To remain competitive,
they must continually upgrade their equipment. Most computers have
to be upgraded every two years. New software and hardware, which
include synthesizers, samplers, samples, and effects units, are continu-
ally being developed; existing software and hardware must also be
upgraded.
Demo Fee
The demo is the first step in the creative process. Most music companies
submit several demos but are usually paid to submit only one. If several
commercials require different scores, a demo fee is paid for each submis-
sion. A demo budget is usually not included when calculating the final
budget. Demo fees are frequently deducted from the final budget of the
company that is chosen to record the final production.
Demos are not simply demos anymore. Demos must sound like fin-