From the Desk of Judith Lindsay.....

CONNECTED MUSIC GROUP PRESENTS MUSIC PUBLISHING 101


This article is designed to give an overview of music publishing.
Although the details can be 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 that 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:


Mechanical Royalties
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 their 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 through December 31, 2007 is nine and one-tenth cent ($.091) per
song. This means that a single song can generate up to $.91 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 without enormous
clout would generate a little more than 68 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 Monies
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.


Synchronization Licenses
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.


Transcription Licenses
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.


Print Licenses
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 collects 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. Registering your copyright
with the US Copyright Office provides added protection to copyright
holders, and can permit the copyright owner to recover statutory
damages of up to $100,000 and attorneys fees if the copyright is
subsequently infringed.


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.


"Song Plugging"
This obscure term refers to music bizzers who promote the compositions
of others. This may involve convincing popular artists to cover your
song, or convincing Disney to use your latest tune in their next
animated feature.


Translations
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
will look at each of these deals more closely.


This article is part 2 of an overview on music publishing. In the last
article I discussed what music publishers do and the types of income
they collect. This column looks at typical publishing deals that are
available.


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 onto
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 slightly more than
$.68 (68 cents) in mechanical royalties from the sale of one of your
CDs (actually 10 songs x $.091 cents per song x 75% rate for
controlled compositions = 68.25 cents. I'll round off the extra ¼ cent
for purposes of this article). Assuming there are no collection costs
deducted off the top, the publisher's share comes to approximately
$.34 (34 cents) and the writer's share also comes to approximately
$.34 (34 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 that 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 AGREEMENTS

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., 34 cents), while also receiving
up to half the net income from the publisher's share of the publishing
"pie"(i.e., an additional 17 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.
ADMINISTRATION AGREEMENTS

In an administration deal, the publishing administrator collects
income and also helps promote the songwriter's catalogue. 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.


FURTHER READING:


These two 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,
one book worth reading is "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 detailed guide to publishing industry practices, including
tips on what to look for in a publishing deal