The next two columns of the Fine Print are designed to give an overview of music publishing. Although the details are sometimes less than fascinating, music publishing remains one of the most financially lucrative areas in the music business, and one of the few areas where artists can generate real money. As a result, it is particularly crucial for recording artists and songwriters to protect their publishing rights. The best way to start is to learn the basics of the music publishing business.
What is a Music Publisher?
Before the invention of the phonograph, songwriters earned income by relying on music publishers to sell sheet music of their songs. Even as radio and television replaced the piano in the parlor, music publishers continued to play an important role as popular singers continued to rely upon established songwriters to provide their material. However, with the advent of rock and roll (and especially the Beatles) popular recording artists began to write more of their own songs. Since that time, the music publishing industry has taken on a less important role. Nevertheless, music publishers continue to perform several important functions which you should be aware of.
What Does a Music Publisher Do?
Today, music publishers are concerned with administering copyrights, licensing songs to record companies and others, and collecting royalties on behalf of the songwriter. Some of the more important music publishing activities are listed below:
The term “mechanical royalties” initially referred to royalties paid whenever a song was reproduced by a mechanical device (remember that one of a copyright owner’s exclusive rights is the right to authorize the reproduction of his or her work). The term “mechanical royalties” was applied to the reproduction of songs in music boxes, player pianos rolls, and later, phonograph records. This term is still used, and “mechanical royalties” now refers to royalties paid for the reproduction of songs on CD, DAT, audiocassette, flexi-discs, musical greeting cards, and other devices sold on a “per unit” basis.
The amount of money a record company must pay for a mechanical license is generally set by the Copyright Royalty Tribunal. This rate is sometimes referred to as a “statutory” rate. The current statutory rate is $.0695 per song. This means that a single song can generate just under 70 cents for every 10 records sold. Unfortunately, it is record industry custom to pay only 75% of the statutory rate to new or moderately successful songwriters. This means that a typical songwriter may generate a little more than 50 cents for every 10 records sold. After the publisher collects this money from the record company and takes its share of the income, a songwriter may receive as little as half of this amount.
Foreign countries sometimes have different laws governing the collection and distribution of mechanical royalties. As a result, it is often necessary for publishers to enter into agreements with a foreign publisher (or “subpublishers”) to collect a songwriter’s mechanical royalties in that territory. After the subpublisher takes a cut (anywhere from 15% to 25%) the rest of this foreign income is divided between the publisher and the songwriter according to their agreement.
Whenever a song is used with a visual image, it is necessary to obtain a “synchronization” (or “synch”) license permitting the use of that song. Music publishers issue synch licenses to television advertisers, motion picture companies, video manufacturers and CD-Rom companies. A portion of this money (usually 1/2 the net proceeds) is paid to the songwriter.
Because radio is not a visual medium, the use of a song as part of a radio commercial requires a separate license, known as a “transcription license.” Sometimes songwriters are able to negotiate provisions in their publishing contract preventing their songs from use in certain contexts, such as ads for alcohol, tobacco, political campaigns or other uses the songwriter may find offensive.
Although sheet music sales have diminished over the years, many songs are still available in print form. These include books of songs by specific artists, instruction books or compilations of hits within a given genre (i.e., “100 Country Hits of All Time”). The music publisher issues print licenses and collect this income from the sheet music company, while the songwriter receives a small royalty derived from the sale of his or her song in print form.
Administration and Registration of Copyrights
Because music publishers generate money by licensing copyrighted compositions, they must also perform various administrative tasks involving copyright transfers and the registration of musical copyrights with the U.S. Copyright Office. As mentioned previously, registering your copyright with the U.S. Copyright Office provides added protection to copyright holders (If you’ve recently wandered onto the Fine Print, you may want to link back to my earlier column on “Registering Your Copyright”).
Public Performance Royalties
A copyright owner also has the exclusive right to authorize the “public performance” of that work. This is why radio and television broadcasters must enter into licenses with performance rights organizations such as BMI, ASCAP, and SESAC. These performance rights organizations collect income on behalf of songwriters and music publishers whenever a song is publicly broadcast. A future column of the Fine Print will discuss these performance rights organizations in more detail.
Even though music publishers do not collect this performance rights income, publishers remain entitled to 50% of the money received by BMI, ASCAP, SESAC, and others. Publishers also register songs with these performance rights organizations.
This obscure term refers to music bizzers who promote the compositions of others. This may involve convincing popular artists to cover your song, or talking Disney into using your latest tune in their next animated feature.
Publishers may also authorize translations in order to generate income from cover versions of a particular song in foreign countries.
Obtaining a Record Deal
Music publishers are usually generally most in signing established songwriters or recording artists who write their own material. However, some publishers may be willing to sign new songwriters or bands without a record deal. If a publisher believes an undiscovered artist will one day sell lots of hit records, they may help the artist record demos and assist in trying to land a major record deal. If the artist gets signed, the music publisher will hope to see a reward for its investment in the form of mechanical royalties, public performance royalties, and other derivative income. A publisher may even be willing to contribute to tour support or provide extra promotions money in order to generate future publishing income from record sales and airplay.
Why Consider a Publishing Deal?
The main reason is money. Music publishers may be willing to pay a substantial cash advance for a songwriter’s past, present or future material. In exchange, the publisher will own a percentage of that artist’s musical copyrights and keep a percentage of money these songs earn.
Of course, publishers are unlikely to pay an advance unless they believe they can make a profit on the deal. Like everyone else in the industry, music publishers are in the business of buying something of yours in order to sell it to others at a profit. Unfortunately, many artists do not realize how valuable their publishing rights are. The history of the music business is littered with sleazy promoters who paid pennies for songs that later generated millions in income.
Not every artist needs a publishing deal, and some artists may be better off by avoiding traditional publishing deal altogether. Many different publishing options may be available to an artist today. Some publishers may be willing to enter into a more limited “co-publishing” deal, and “administration” deals may be available for independent artists who seek to retain their valuable copyrights. The next column of The Fine Print will look at each of these deals more closely.
Should I Enter into a Publishing Deal?
Actually, not every artist needs to enter a publishing deal. It may be wiser to first obtain a major record deal before finding a music publisher. Conversely, publishers may want nothing to do with an artist who doesn’t have a record deal or some other guaranteed way to generate income. In addition, some artists may prefer to hold on to their copyrights and let administration agencies collect their publishing income.
How is Songwriting Income Split with a Publisher?
With the exception of print music, income from musical compositions is generally split on a 50/50 basis between the music publisher and writer. The publisher’s half of this income is called the “publisher’s share,” and the writer’s half is the “writer’s share.”
To illustrate how this works in the real world, let’s take the following example. Imagine a publisher collects approximately $.52 (52 cents) in mechanical royalties from the sale of one of your CDs ($.52 = 10 songs x $.0695 cents per song x 75% rate for “controlled compositions”). Assuming there are no collection costs deducted off the top, the publisher’s share comes to $.26 (26 cents) and the writer’s share also comes to $.26 (26 cents).
This financial split is a basic, but important, concept. When discussing publishing income, be sure to remember this distinction between “publisher’s share” and “writer’s share.”
What Types of Music Publishing Deals are Available?
Standard Publishing Agreements
Standard music publishing deals come in several varieties. These include song-by-song publishing deals for specific compositions and exclusive songwriter agreements which may last for a fixed period of years (usually 1 year with options to extend the term). These publishing deals may cover all songs written by an artist, or just those songs commercially released during the term of the agreement. Under either arrangement, the publisher becomes the copyright owner of the songs. In exchange, the Publisher may pay the artist an advance based upon the potential value of the compositions. Subsequent income generated from these songs is then split, usually on a 50/50 basis. After the publisher recovers its advance, the artist is paid the “writer’s share” of net income received, while the publisher retains its publisher’s share.
Co-publishing deals are similar to the above arrangement, except the artist (or the artist’s publishing entity) co-owns a percentage of the copyright along with the publisher. It is common for both parties to each own 50% of the copyright, though percentages can vary from deal to deal. In a co-publishing deal, the songwriter’s publishing entity also receives a percentage of the “publisher’s share” of income. Thus, using the above hypothetical, an artist would receive the “writer’s share” of the publishing “pie” (i.e., 26 cents), while also receiving up to half the net income from the publisher’s share of the publishing “pie.” (i.e., an additional 13 cents) Although co-publishing deals are sometimes better than standard publishing deals, not all co-publishing deals are in the artists best interest. For instance, some independent record labels require new artists to enter into a co-publishing deal with the label’s “publishing” entity. (Ironically, few major labels require this of their artists). Even if you are offered an additional advance for such a deal, you should resist it! Here’s why:
- The record company’s goal here is to reduce the amount of money payable to you from record sales (since the record company gets to keep 50% of the “publisher’s share” of mechanical royalty income);
- Independent record labels may lack the experience and resources to promote your songs like an independent publishing company;
- An independent publisher has more incentive to demand and accounting and collect publishing income from your label; and
- It may actually be in your interest to retain these copyrights and enter into an administration deal instead.
In an administration deal, the publishing administrator collects income and also helps promote the songwriter’s catalog. An administration deal may last for a specific period of time (i.e., 3 years) or for one year with several options to renew. When the term is over, all rights revert back to the artist. A publishing administrator is typically paid by deducting a percentage of the income it collects on behalf of the artist. After deducting this administration fee (anywhere from 10% to 20% of the gross proceeds) the administrator distributes 100% of the remaining net income to the songwriter(s). As an incentive to promote your songs, some administrators may also charge a slightly higher collection fee for income earned from cover songs. In some cases, a songwriter may receive as much income from a co-publisher as a publishing administrator. However, while a co-publisher may be able to offer a generous advance, an administration deal can provide an artist with greater financial and artistic control. There are also many advantages to retaining the copyright to your songs. For example, if your first record sells only moderately but your next CD becomes commercially successful, you may gain greater leverage to negotiate a favorable publishing, co-publishing or administration deal at a later date.
These two Fine Print columns provide just a brief overview of the music publishing industry. Because publishing money is often a major source of revenue for recording artists, it is important to know about your publishing rights. For those who want to learn more about this area, I strongly recommend the book “Music, Money, and Success: The Insider’s Guide to the Music Industry” by Jeff Brabec and Todd Brabec. The authors have years of experience in the music business, and their book provides a comprehensive guide to publishing industry practices, including tips on what to look for in a publishing deal.
(c) 1996 Alan Korn
Alan Korn, Attorney at Law
c/o Berchenko & Korn
240 Stockton, 3rd Floor
San Francisco, California 94108