Music Publishing - Getting Started in the Music Business
Music Publishing is the business of exploiting your music through licensing your songs and collecting the royalties. As discussed in the What are copyrights? section, the owner of copyrighted songs has the exclusive right to perform those songs and to make, sell and distribute copies of the songs. The copyright owner may license others to use any or all of these exclusive rights for a fee. The income generated from granting a license is publishing income, and there are four main types:
Every time your music is played in public, you are owed a fee for the performance of your music. It is impossible for anyone to track every time a song is played in a club or on the radio, so publishers sign up with, or "affiliate with," one of the performance rights societies: BMI (Broadcast Music Incorporated), ASCAP (American Society of Composers, Authors and Publishers) and SESAC. These groups issue performance licenses to radio and television stations, nightclubs, restaurants, and so forth, so that these businesses can play a variety of music. The societies then track and collect the revenues and pay the copyright owners.
When you issue a license to a record company to manufacture and distribute copies of your songs on vinyl and CDs, the record company will owe you a fixed price per song on each copy sold. This fixed fee is the "mechanical royalty rate," and it can be either negotiated and set in your recording contract, or based on the current statutory rate as fixed by the Copyright Act. The mechanical royalty rate is set by the Compulsory License Provision found in Section 115 of the U.S. Copyright Act; the current statutory mechanical rate is 9.10 Cents for songs 5 minutes or less, or 1.75 Cents per minute or fraction thereof per unit sold - whichever is greater. The Harry Fox Agency, a subsidiary of The National Music Publishers' Association, is available to grant mechanical licenses for its almost 28,000 publisher clients. For more information, contact:
Harry Fox Agency
711 Third Avenue, Eight Floor, New York, NY 10017
(212) 834-0100; fax (212) 953-2384
A "synch" license is what you grant to film or television productions to allow them to use your song as an accompaniment to film and TV pictures. There is no standard industry fee for synch licenses. The fees are negotiated and depend on the importance of the particular song and how it is used in the production. In a situation where a popular song is used as the basis of a scene, such as the "Old Time Rock and Roll" scene in "Risky Business," the fee can be in the hundreds of thousands of dollars. For local television commercials and low-budget films, the fees are whatever you can negotiate.
These royalties are generated by any publication of your songs in written sheet music or a "folio", which is a book of songs. This category is not a big earner for many artists, but "Greatest Hits" print anthologies published for artists like Joni Mitchell and Led Zeppelin are examples of popular printed music. For each book or sheet sold, the copyright owner of those songs receives a percentage of the retail price.
NOTE: The TMO has compiled brief summaries of some of the Federal laws pertaining to the music business. Please visit our appendix.
A publisher is responsible for "administering the rights" associated with your copyrights, which involves getting your songs played, issuing the appropriate licenses and collecting the money. In the standard arrangement, a songwriter will sign over her copyrights to the publishing company for administration, and in turn the publishing company agrees to pay 50% of all revenues collected to the writer.
The publisher collects mechanical, synchronization, print and foreign release income for the author. The company keeps the "publisher's share" and pays you the "writer's share." The one exception to this arrangement is in the performance income collected by performing rights societies. The societies issue the writer's share directly to you, and issue the publisher its share separately.
Subpublishing: I have a popular song in a foreign country, but don’t speak the language and am not familiar with their music business customs and practices. How can I take advantage of business opportunities related to my work over there and ensure that I am collecting the money I am owed for use of my work?
Being thousands of miles away makes it impossible to adequately conduct business without the help of a subpublisher, a foreign representative who will act on your behalf with regards to your intellectual property. Your US publisher allows the foreign publisher (subpublisher) to act on its behalf in that respective territory. Each foreign territory has its own particular rules in licensing music, collecting royalties, and protecting copyrights. For this reason, it is incredibly important to select a subpublisher that you can work with and trust. A good foreign representative will be well-versed in the local rules and procedures regarding business affairs surrounding your music, and have a music business network in place within the territory.
What exactly does a subpublisher do?
A subpublisher functions much like your own music publisher in the US. The subpublisher protects your copyrights, registers songs with the local mechanical and performance collection societies, promotes new uses for your work, collects royalties, audits royalty statements from users of your work, negotiates licenses, and sues infringers.
Foreign publishers perform a combination of administrative and promotional tasks. Some do one or the other, while some do a little of both.It is important to match your interests with the strengths of the subpublisher. If you are an artist looking to ensure that royalties are collected for use of your song, then choosing a subpublisher with strength in administrative ability is ideal. If you are looking for new uses for your song, then selecting a subpublisher with quality contacts in the local entertainment industry would be ideal.
Another thing to keep in mind is the geographical reach of the publishing company. Some publishers have offices worldwide, while some only have offices in specific territories. If you go with a worldwide publisher any problems that arise abroad can usually be resolved through the US office. This makes conducting business and communication more efficient since you are not trying to get a hold of a publishing office in another time zone. The biggest fear in going with a worldwide publishing company is that their artist catalogue is so extensive that your work may not get the personal attention and care that you desire. Another concern is that offices abroad may run less efficiently than the US office.
Hiring independent publishing companies on a territory by territory basis can be beneficial in that they may be able to give you more individualized attention. They may also know the lay of the land better in their specific region. Your US publisher may already have subpublishers abroad, in which case it might be easiest to allow them to handle your affairs.
Protect yourself: the subpublishing agreement
Your goal in negotiating any contract should be to maximize profits and minimize risk. To do this you want to negotiate favorable contract terms for yourself. What follows is a list of common contract elements that you will want to be familiar with so that you (or your publishing company on your behalf) may consider them when you negotiate a subpublishing agreement.
Term – The standard length of a subpublishing agreement is generally three to five years. Three years is the minimum duration foreign royalty collection societies often accept. Contract length can be negotiable dependent upon the following various factors (many of which are discussed later in this section).
Retention rights for local cover recordings
Right to collect “pipeline” royalties (money earned prior to the expiration of the term of the subpublishing agreement, but not yet paid by the music user until after the end of the term)
Extensions if advances have not been recouped
Rules of local performing rights societies
Suspensions due to breaches
Extensions based on the non-achievement of guaranteed earnings plateaus
Compositions Controlled by the Agreement – Agreement may comprise the entire catalogue of a US publisher, all songs written by a particular songwriter/artist, select compositions, or an individual song.
In agreements for the entire catalogue, the following language is commonplace
"Publisher grants to Subpublisher the following rights in and to all the musical compositions listed on Schedule A as well as any and all musical compositions currently or hereafter owned or controlled by Publisher during the terms of this Agreement."
This usually entails all future songs acquired during the agreement duration as well.
Royalty Percentages – The foreign representative’s compensation is always based upon the percentage of money generated by the songs controlled by the subpublishing agreement. Generally, this percentage is anywhere from 10%-25%. For superstar artists, this percentage can get to as low as 5%.
Local Cover Recordings – Where a subpublisher is hired for the purpose of promotion, most agreements provide that the subpublisher can take a larger percentage of the income that is generated from a local recording (usually a “cover”).
Be wary of language that provides that, if a local recording is secured, the subpublisher’s percentage on all versions of the song contained on that cover record will be increased.
This kind of provision is unfair if the original US version is a major hit. The exception is when the “cover” becomes a major hit in the foreign territory, and the original US version is not generating income in the foreign territory.
Increased Fees for Cover Records – Known as an “increased cover version percentage” clause, this only applies to mechanical income (CD sales, downloads, other audio recordings; things that can be counted on a per unit basis).
The subpublisher sometimes will take an increased fee on radio and television performance income generated by the cover version of the song. This becomes hard to monitor because performing rights societies do not account separately for different broadcast versions of the same song.
Print – the US publisher generally receives 12.5%-15% of the retail price on printed editions of all compositions, or 50% of the subpublisher’s net income.
Usually not a major source of income
Advances – This is the amount of money you will receive up front, and depending on the clout that your musical catalogue has, the advance amount can vary widely. If a song/catalogue is likely to generate income in the subpublisher’s territory, advance amounts upwards of six-figures is not unusual.
The advance amount should not be the only factor considered in choosing a foreign representative. Other factors to keep in mind;
Reputation for administration and promotion
Duration of the agreement
Do not underestimate a foreign representative because of poor English ability. A subpublisher knows their business and more importantly, their market.
How Advances are Paid – Advances are paid in any number of ways.
One-time payment upon signing (e.g., $10,000 upon execution of the agreement)
Specified advances at the start of each one-year period of the agreement (e.g., $10,000 upon execution of agreement, and $10,000 each year of the agreement thereafter)
Advances upon the release of each album, with reductions depending on the number of songs controlled by the artist on each such album (e.g., $10,000 upon the album’s release in the foreign territory provided the writer/artist has written at least x% of the compositions on the album)
Advances upon recouping all or a specified percentage of the previous advance (e.g., $100,000 upon recouping x% of the previous $100,000 advance)
Advances on local chart activity (e.g., if a song reaches the top 10, then $10,000. If it reaches number one, then another $10,000)
Advances based on a company’s acquisition of other US catalogues (e.g., a mutually agreeable advance in the event that the US publisher acquires a major company for representation)
Advances based on actual earnings in the foreign territory (e.g., if an album earns $50,000 in its first year, an additional advance of $50,000 will be paid to US publisher)
At-Source Royalty Payments – This provision ensures that there will be no extra charges or deductions from royalties passing from one foreign territory to another before being passed on to the US. Typical language follows;
“All royalties payable shall be based on gross income received at the source and shall not in any way be reduced by any charges including, but not limited to, any sublicensees granted by Subpublisher except only for: (1) those fees and commissions paid by the Subpublisher to the performing rights societies, mechanical license societies, and other collection agents in the territory; and (2) payments made by the Subpublisher for any “value-added” taxes and other taxes, if any, required to be deducted in the territory.”
This language prevents foreign companies from double-deducting fees on monies earned in portions of the territory covered.
E.g., if you have an agreement with Germany, Austria, and Switzerland, the agreement will prevent the German affiliate from deducting fees that may have been already deducted by Austria and Switzerland. Without the provision, the German company could deduct 20%, then forward the remaining 80% to Austria who would deduct 20%, then forward the remaining onto Switzerland, whom would also take 20%.
Rights Granted to the Foreign Representative – The writer/publisher usually grants the following rights in and to the musical compositions to the subpublisher.
Mechanical Rights – The right to issue mechanical licenses and collect royalties for the manufacture and distribution of records, CDs, downloads, and other audio recordings.
Performance Rights – The local foreign representative is given the right to register the songs with the performance right society in the territory and collect the publisher’s share of income earned by performances of the songs on radio, television, live in concert, in restaurants, bars, etc.
The writer’s share is paid directly to ASCAP, BMI, or SESAC (depending on writers’ US affiliation), and NOT the foreign subpublisher.
TV and Film – The US publisher normally grants the foreign subpublisher the right to issue synchronization rights to include songs in television shows and films that originate in the subpublisher’s territory.
Home Video – For US films (and TV shows and video games, usually), the film producer will always demand that the US publisher grant home video rights on a worldwide basis via a one-time non-royalty buy-out basis. Under this agreement, no money is paid to the foreign subpublisher. The foreign subpublisher is usually given the right to negotiate home video licenses for audiovisual projects produced in the foreign territory, at least with respect to sales in that particular territory.
Recording Artist Videos – There is usually always a record company provision that grants worldwide right to manufacture and distribute short or long home video versions of the artist’s performances.
For songs written by outside writers, the record company will have to negotiate a separate agreement with the publisher of each song. In most cases a worldwide license granted on a per unit royalty or buy-out basis.
It’s rare that a subpublisher be allowed to negotiate a separate video license for this product for sales in its territory.
Commercials – The right to include a song as part of a foreign commercial to be broadcast in a foreign territory is sometimes given to the subpublisher.
When granted to the subpublisher, this right is usually conditional upon the subpublisher receiving approval for each particular request from the US publisher.
Print – The right to manufacture and distribute sheet music is virtually always included in the rights being granted.
Rights Reserved by the US Publisher - The following rights are commonly reserved by the US publisher;
Commercials, political campaign uses, and endorsements
Grand rights (the right to use a song in a musical, live theatrical drama, opera, etc.)
Ownership of the copyright
All other rights that are not specifically granted by the terms of the subpublishing agreement
Royalty Payment Dates and Audit Rights – Royalties are normally accounted for twice a year, with semiannual payments and statements sent to the US music publisher 45-90 days after December 31 and June 30 of each year. Audit rights are similar to those contained in US publishing agreements (30 day notice, audit conducted during normal business hours, limited number of times one can audit)
Retention Rights – Upon the termination of the agreement, many subpublishers will want to retain the following rights for some period of time after termination.
Pipeline Monies – Enables the subpublisher to collect money that has been earned during the term of the agreement, but has yet to be collected at the time of the agreement’s expiration.
The US publisher generally concedes this, though usually demands a time limit on such rights (6-18 months). This prevents the pipeline collection period from being open ended.
Retention Rights if Advances are Unrecouped – if advances paid to the US publisher have not been recouped, the foreign subpublisher may have the right to extend the agreement for a specified period of time so that advances can be fully compensated.
The US publisher should place a time limit on such retention rights.
The US publisher is often allowed to repay advances for full recoupment to the foreign subpublisher.
Retention Rights on Guaranteed Albums – If advances are paid upon the release of an album, the subpublisher will normally have retention rights to the songs on any such album that is released in the last six months or one year of the agreement.
This is fair for the subpublisher because royalties generated by such an album will not be received by the subpublisher until four to nine months after release. The subpublisher needs to be allowed to receive earnings derived from use of the work.
Retention on Local Cover Records – The subpublisher often retains the right, (duration to be negotiated) to administer a composition if a local cover record has been released during the time of the agreement. The same applies to local film and television uses generated by promotional efforts of the foreign subpublisher. Various provisions can be written up for this retention right;
Retention only if the cover record becomes a hit
Retention only if the cover record earns in excess of x amount of dollars
Retention only if the cover record charts in the Top 10
Information that must be supplied to the foreign representative – In order for the subpublisher to properly represent you, certain basics must be provided;
Correct composition titles
Authorship percentages if there are co-writers
Performance rights affiliation of the songwriters and music publishers
Publisher’s control percentages if there is more than one copyright owner or administrator
Multiple authors = multiple publishers
The US publisher should submit the following information to the subpublisher;
Date of the recording’s initial release in the US
Release information in other territories