The Inside Scoop On Music Publishing

THE INSIDE SCOOP ON MUSIC PUBLISHING:

WHAT IS MUSIC PUBLISHING AND HOW DOES IT WORK?

This article includes information from an excellent presentation made at UCLA, Los Angeles by the current President of BMG Publishing (North America) in March, 2007.

Music publishers do deals with both the writers and the commercial users of music.

Starting with the music writer himself, the publisher is on one side and the writer or writer/artist is on the other. The writer wants the publisher to place his music somewhere or administer it (see below), and if "the stars are aligned" the publisher offers the writer a non-returnable advance sum of money (the "advance"), to keep the writer on track.

The writer buys his Bentley and the publisher sets about trying to get uses ("jobs", if you like) for the music he has signed.

Note that the record company (if any) has nothing to do with this. Record companies are in any event on the decline, and some record company heads have themselves predicted that record companies in general won't exist in ten years! Record shops are already vanishing. But music will still exist, and we must assume that music publishers will also still exist. A publisher's deal and advance differs like night and day from a record company's deal: the record company charges the artist for mostof th ecost of recording and even marketing, and the writer/artist is left with very little if anything from his record company advance. On the other hand, the publisher has very few costs to charge out, no matter how indirectly, to the writer.

As an example, BMG Publishing signed (the writers in) a rock band some years ago for the relatively small advance of $200,000; that band soon became very famous and has earned many millions of dollars in sales since. The publisher has made its share, and seen a huge profit from the deal.

THE DUTIES OF A PUBLISHER

On the business side:
the publisher
a) registers songs (for copyright and therefore royalty reasons)
b) licenses the songs to commercial users
c) collects money from the users
d) accounts to the songwriters

On the creative side:
the publisher
a) tries to make the songwriters (even) better, for example by having them write with other writers
b) pitches songs to record companies and other potential users of the songs
c) introduces the songwriters to artists wanting to record a new album

So obviously, if the writer feels the publisher can find revenue-earning uses for his songs, then it may be worth signing with the publisher. The publisher will thus add value to the songwriter's situation.

The business side is obviously highly administrative, and so publishers have, amongst other divisions, a
a) royalty department, and a
b) film and TV department (it pitches songs to "music supervisors" for film, TV and commercials)

THE INCOME FROM MUSIC PUBLISHING

a) mechanical royalties

Yes, it's mechanical, and it plays music: an 1889 Edison
phonograph: the reason why the sale of a record gives rise
to "mechanical" royalties. Before this time, the only music
sold was sheet music

Mechanical royalties are money due to the songwriter from the sale to the public of the song in recorded form; someone has to pay to use the song, and here it is usually the record company (ie: it uses the song by making it into a record, and licenses the song to do this). The rate is set by the royalty office, and is currently 9.1 cents a song (so if a CD sells one copy, the writer of one song on the CD will, subject to any prior negotiations, receive 9.1 cents from that sale; if there were one million sales, the writer would receive $9,100; if he wrote all the songs on the CD and there were ten songs on the CD, then subject to any prior negotiations, he would receive $91,000). The way it works physically is that the record company has to pay the royalty from its own receipts from the recording's sales.

For the sale of the one copy of this single 45 (if it was
sold today), the writer(s) of the song on the A side (for
example) would get 9.1 cents

However, record companies have often only paid 75% of the rate of 9.1 cents, because of what used to be their superior bargaining position, but that is now changing in favour of the writer.

A download of a track is seen as a sale, and therefore earns mechanical royalties in the same way as an over the counter record or CD sale.

b) performance royalties

This money is for when the song is played (performed) somewhere, eg on the radio or on the internet, or in a club, live or on a recording.

The money is physically paid by performing rights organisations ("PROs") eg: ASCAP, BMI and SESAC in the United States. They pay the writer's share to the writer direct and the publisher's share (if the writer has signed the song to a publisher) to the publisher (see below for the explanation of copyright). Where do the PROs get the performance royalty money? The money is usually from annual subscriptions or fees paid by the radio and TV stations etc to the PROs, on behalf of the songs registered with the PROs.

The money paid by radio, TV and other music users runs into millions of dollars each year. The fees paid are called "blanket" fees, as they blanket all the songs used by the station for the year. It is easier that way. Web sites, bars and clubs also pay a blanket fee.

All the money paid to the PROs is combined into what is called the "pot". It is from the pot that the writers and publishers are paid. The amount paid out is "calculated" as best the PROs can do it: first, the PROs used to divide it up by taking samples of radio airplay etc (even spins in bars and clubs); then tapes from stations were used, and listened to by employees of the PROs; finally, computers have made the division more precise so that by way of a "fingerprint" for each track the total numbers of spins of each track can be found each year. The fingerprint is matched to the songs in the PROs' databases.

Another method of computer-tracking tracks is by business services such as Mediabase, which puport to log every play (everywhere?). These latter services are also useful for publishers and record companies watching for activity with a song that is out and selling: they watch the printouts like a stock market ticker tape to see how a track is selling day to day.

Historical note:

The concept of a public performance of your music deserving a payment to you as the the writer came about in mid 19th century France, when a composer had lunch at a restauarnat and refused to pay the bill because he noticed that the live orchestra was playng his music in the restaurant , to entertain the customers. At the following inevitable court case, the composer successfully demanded a pizza the action (I don't know if it was a pizza restaurant!), and won.

Writers wanted a pizza the action when
their music was performed in public

Now, the result is that a number one will earn about $0.5m in the US in its first year in performance royalties, and millions more world wide.

c) synchronisation licensing income

This type of song income is the fastest growing at present. Synhronisation is the setting of music to a picture eg: in a film, on TV and in an advertisement. It also includes computer games, and so on. The music is "synchronised" with the picture. A full definiton can be that such licensing gives the user "the right to use the music in time relation with an audio-visual piece".

A good example is having a song in a TV trailer for a film, as when the trailer plays the viewer looks up at the screen to check out why the song is there, and sees the trailer. This is a win-win for both the songwriter and the TV station.

The money comes to the songwriter by way of an upfront fee and later potential royalties from performances of the show, film or advertisment, etc (often called "the backend"). Backend royalties can spin in for years, as the film or TV show (for example) is played around the world on various stations.

Advertisements/commercials: publishers can charge huge fees for well known songs; the license to use a Beatles song ("Getting Better" from "Sgt Pepper's Lonely Hearts Club Band"), in a re-recorded from, was bought by an ad agency for millions.

An ad agency will typically call several music publishers and say "We want an upbeat song, sung by a woman, with "love" in it". The publishers will then pitch their song to the agencies. The terms of payment are completely negotiable (unlike with mechanical and performance royalties), and what is paid will be dependent on issues such as the time period and territories that the song can be used for/in, and how it will be used (eg: will it be re-recorded or will the original record be used?).

Because of the contract concept of "Most Favoured Nation", the publisher and the record company make the same amount of money on these deals.

Some writers reserve for themselves in their deals with publishers exemptions for certain kinds of use that they don't want their song associated with.

d) new technology uses

This area sees uses of songs that are blends of the above three areas of song income.

Shake your money maker: the writer's latest income source

Phone rings: these began as monotonic, then became polyphonic; now there are "master tones" ie: the original recording of the song itself. There are graphic tones/ring tones: it is now possible to download a video on a phone and hear it at the same time. Mobile telephones are now a massive recent source of income (see below).

To tie up money payments for these uses, BMG Publishing, for example, made deals with all the phone carriers to ensure that

a) there was copyright protection

b) there would be quarterly accounting
and

c) BMG would have audit rights

The use of music for ring tones was therefore put on an official basis, so far as the publisher was concerned.

The publisher charged the phone companies for a ringtone MORE than the royalty office's rate of 9.1 cents a song: the greater of 12 cents or 10% of the sale price of the ringtone. This is a great deal for the publisher, as ring tones can sell for $3, so the publisher will receive 30 cents for the sale of a song as a ringtone instead of the 9.1 cents that the sale of physical song (eg on a CD) would have generated. The ringtone earns triple the mecahnical royalty, on this deal!

A real life example of this is the urban writer/artist who sold 200,000 singles (at 9.1 cents mechanical royalties each, or less if he negotiated part of the royalty away to the record company), but who also sold THREE MILLION ringtones at 30 cents each (that's nearly $1m).

$0.30 for a ringtone beats out 9.1 cents for the sale of a song on a CD. There is no mechanical royalty for the ringtone, but that doesn't matter! You get the commercial fee of thirty cents instead.

From 2000, income from synch and other income (even karaoke) is on the rise. Income from music use on websites such as Myspace and Youtube will join the flow.

e) print music

This source of income is small these days. Hal Leonard does its bit.

TYPES OF DEALS MADE BY MUSIC PUBLISHERS

Publishers own some songs (the writer has his half of the copyright and the publisher has a share or all of the other half of the copyright, the publishing half), and will administer other songs (ie: collecting the royalties, but not keeping a percentage, except of course some fees). Note that immediately it is written, a song's copyright ("right to copy") in the US is nominally split 50% writer's share and 50% publisher's share; it therefore all belongs to the writer(s) at the start, but if the writer then hires a publisher to find uses for the song, then, unless the deal is administration only, the writer gives up some of his publisher's share. It used to be typically all of the publisher's half that was given up; now it is typically only half of the publisher's share. The latter arrangement is known as a "co-pub"(lishing) deal.

a) catalogue purchase: the publisher buys the writer's total output.

b) co-publishing ("co-pub") deal (as above); the result is that the writer gets 75% of the TOTAL royalties from the copyright. He has only given up to the publisher half of the publishing half of the 100% of the copyright that he started with.

In a co-pub deal, the the writer's share of the performance royalties from ASCAP and the other PROs are still paid direct to the writer (by law), but the half of the publisher's share (still) belonging to the writer is paid initially to the publisher, who then sends it on to the writer.

With a synch deal, the split between writer and publisher , for the publiher's share, may typically be 70:30, instead of 75:25.

c) administration deal (as above: the publisher just collects the money coming in, and some other functions)

RELATED ISSUES

Marketing a writer/performer

ASCAP and the other PROs can market a writer/performer by arranging showcases.

A publisher may do the same, and invite for example film and TV music supervisors. Statistically, some of them may well want to use the music the they hear at the showcase in their shows.

How a writer can hook up with an artist (other than by buying her a drink)

Go to a gig and say to the artist afterwards, "I really like your sound, etc and I'm a writer". There is a chance the artist may write a song with you, and then you have a collaboration. If the artist has a hit with your song, you are a co-writer of a hit. You can then call a publisher, who might want to sign a deal with you. You'll then have a publishing deal!

Photographs: The fantastic Wikipedia