It’s now time to begin getting into the industry side of becoming an artist. The next few steps will be less about you as an artist, build your catalog, building your brand, and creating, but more geared towards working with and interacting with record labels, industry personnel, and different music companies. I am going to begin with music publishing, as this step can be done partly through the distribution channel you chose a few articles/steps ago, but can also be done by sending your music out through websites without truly interacting with A&Rs and manager, which will be the next step to be explained later.
What is music publishing? Music publishing is the business of promotion and monetization of musical compositions. Music publishers ensure that songwriters receive royalties for their compositions, and also work to generate opportunities for those compositions to be performed and reproduced. Through an agreement called a publishing contract, a songwriter or composer “assigns” the copyright of their composition to a publishing company. In return, the company licenses compositions, helps monitor where compositions are used, collects royalties and distributes them to the composers. Music copyright is split into two distinct parts: the master recording and the underlying composition.
The composition is a musical work (harmony, melody, etc.) that may or may not include accompanying lyrics. Think of sheet music and words in a notebook.
The sound recording (AKA Master) is a particular expression of the underlying composition, produced and recorded by the recording artist(s). Think of music you stream on Spotify (or wherever you get your soundtracks)
Accordingly, there are two separate sets of copyrights that come with every song: the composition rights and the master recording rights. In the most basic scenario, these two sets belong to the same person, if you’ve both written and recorded a song from scratch. However, that’s not always the case, (think of cover versions) if you decide to record a Beatles cover, you will only get the master recording copyright, the composition rights will still belong to whoever owns the Beatles catalog these days. The structure of music rights can get incredibly complex quick, imagine a song featuring twelve songwriters, two lyricists, a hand-full of samples, and a re-sung line.
At the same time, making (and monetizing) a successful composition requires a very different skill set compared to the one on the master. The way publishing royalties are calculated is a subject of copyright legislation, which means one simple thing, the mechanisms regulating the publishing business can vary from country to country. That means that the industry has to rely on disconnected sets of local legislations, which creates thousands of marginal cases and grey areas (that are way too complicated to get into). So, to avoid confusion, we will focus primarily on the US publishing industry. Under the US law, the music copyright is obtained by the author as soon as the two following criteria are satisfied: the original work of authorship is created (1), and it is “fixed in any tangible medium of expression” (2) whether it’s sheet music, MIDI track or even a single tweet. As soon as the copyright is obtained, the author of the musical work gets an exclusive right to:
Reproduce and distribute the musical work
Perform or display the musical work publicly
Create derivative works based on the musical work
Also, the copyright owner has the power to authorize or prevent third parties from using the composition in any of the ways mentioned. So, if anyone wants to exercise one of those rights, they’ll have to get a license from the copyright owner and compensate them in royalties.
Accordingly, there are three main types of publishing royalties to pair up the three subsets of composition copyright. The first type is Mechanical royalties. These royalties compensate the songwriters for the reproduction of the composition, paid by third-parties that want to record, manufacture, and distribute the musical work. Back in the day, that meant mechanically producing the physical medium carrying the composition. In today’s streaming environment, however, mechanicals are primarily generated whenever the user chooses to play a specific song on a streaming service, thus reproducing the composition. The “choose to play” part also means that non-interactive streaming, like Pandora’s ad-supported radio, doesn’t generate mechanicals. There are a few ways in which mechanical royalties are paid out, depending on the type of the medium. For interactive streams (Spotify, Apple Music) the mechanicals are paid out to publishers directly by DSPs. For on-demand downloads and physical sales, the mechanicals will flow to the owner of the sound recording first. In that case, labels have to distribute the royalties due to the publisher. In both cases, the DSP/record label will pay fees to the mechanical rights organization (HFA in the US, MCPS in the UK), that will distribute them to the composition owners and their publishers. In most of continental Europe, PROs claim both public performance and mechanical royalties. In the US, the mechanical royalty rates are set by CRB, depending on the recorded medium used to host the composition. For digital downloads and physical mediums, mechanical royalties have a flat rate of 9.1 cents per copy (for songs that are less than 5 minutes long). For the longer tracks, mechanical rate of 1.75 cents per minute applies. For interactive streaming, CRB first sets the “All-In Royalty Pool,” calculated as the greater of:
All-In Royalty Rate, applied to the service’s total revenue (currently, 11,8% of the service’s revenue, with a plan in place to increase the rate to 15,1% by 2022)
Minimum All-In Royalty Rate, calculated as a percentage of what service’s pay the record labels (currently, 21-22% of the payment to labels — with a planned increase to 26% by 2022)
Subscriber-based Floor of 50 cents per subscriber
Under the CRB regulations, streaming service has to apply all three formulas and then choose whatever is greater. The resulting figure is an All-In Royalty Pool, basically everything that streaming services need to pay the songwriters (both mechanical and public performance royalties). Then, streaming service will deduct the public performance royalties (set through negotiation with PROs) from the All-In Pool. What’s left is the mechanical royalties due (distributed between the songwriters on the per-rata basis, same as payouts the master owners).
Second, we have public performance royalties, compensating composition owners for the “perform or display the musical work in public.” Every time a composition is publicly performed, the rights owners get paid, whether it’s a radio broadcast, a background playlist at a restaurant, or a digital stream. (yes, streaming a song on your phones is considered a public performance too) Public performance royalties are managed, collected and distributed by performance rights organizations, or PROs (ASCAP, BMI, and SESAC in the US, PRS in the UK, etc.). The entire landscape of public performance can be separated into two parts: royalties paid by streaming services, and royalties paid by conventional public “broadcasters”. In the first case, the DSPs will pay out a share of their revenue to the PROs, split between all right owners on the platform, in the same manner as streaming royalties on the sound recording side are calculated. As mentioned above, that share is a subject of negotiation between streaming services and PROs. Based on the quotes available, it should fall somewhere close to 6-7% of the service’s total revenue, deducted from the All-In Royalty Pool. Then, there are all the public performance users: venues, clubs, restaurants, TV channels, radio stations and so on. To get a right to publicly perform music, broadcasters acquire what is known as a blanket license from PROs. The blanket license allows broadcasters to play any music they want, with the overall cost depending on the potential audience of the platform. Users regularly report their playlists to the PROs through cue sheets, broadcast logs, etc. Put simply, if you hear music playing in a public space, there’s a blanket license behind it. The PROs then use that data to calculate royalties due to rights owners, factoring in an extremely wide range of variables, unique to the public performance medium. Every calculation system aims to link the royalties due to the scope of the performance. A song played in primetime on national TV will earn much more than a song played in the middle of the night on a non-commercial college radio station.
The last type of publishing (synchronization license fees) cash flow is linked to the last part of the copyright, creating a derivative work based on the composition. Every time someone wants to use the composition as a part of any other type of content, (TV show, a movie, an ad or a radio show) they need to get permission from the copyright owners. There are two main conceptual points of difference between sync licensing and mechanicals and public performance royalties. First, sync agreements always target a specific piece of music. Unlike performance royalties, (covered by blanket licenses and predetermined mechanical fees) syncs are always directly negotiated by music users and copyright owners (or their representatives). In other words, it costs the same to play Drake as it would an unknown artists on the radio. However, if you want to sync those songs to an ad, Drake will cost you about a million times more. Second, syncs have to be negotiated with both composition and sound recording owners. Which means that licensors have to go through representatives from both songwriters’ and recording artists’. Synchronization cash flow is shared between the recording and publishing sides of the music business.
There are a couple of reasons why songwriters actually need a dedicated publishing representative to manage, collect, and claim their royalties. Collective management organizations like ASCAP or the HFA are not incentivized to distribute the money to a particular songwriter. Their primary job is to collect royalties from music users, and that’s what they focus on, but they won’t go over their head to make sure that the songwriters get ALL the royalties due. Without proper control from the songwriter’s representative side, a sizable portion of royalties gets lost in the publishing “black box,” a pile of unclaimed or wrongly attributed payments. There are a bunch of reasons for that, from music metadata issues and human errors to disorganization, disputed claims, and straight-up fraudulently assumed royalties. Then, there are international royalties generated outside of your domestic market. On paper, CMOs across the globe work together and exchange royalties, but in reality (due to the same publishing chaos), this process doesn’t work great. That means that songwriters have to register with all the CMOs across the globe to get 100% of their royalties. Songwriters need a dedicated publishing administration rep to get anywhere near claiming 100% of the royalties due. They need someone who will register, audit, claim, and dispute other’s claims on their behalf.
Due to the intricacies of international royalty collection, the publisher needs to cover all the markets across the globe to claim effectively. Oftentimes, smaller publishing will delegate their catalog to international companies for worldwide representation. (known as sub-publishing) Usually, an independent publishing company will claim and audit royalties in its domestic market, while “outsourcing” the rest of the world to major publishing companies, like Sony ATV, Warner Chappell, BMG, UMG, Peermusic, Downtown Music Publishing (Songtrust) or Kobalt in exchange for a small share of the royalties. Accordingly, full-publishing deals are more common if the publisher sign with a perspective, yet unknown songwriter, implying that the company will dedicate a lot of resources into developing the artist’s career, while the songwriter doesn’t have a sufficient track record.
A Co-Publishing deal is the most common contract in the publishing industry nowadays. Under co-publishing, the songwriter’s micro company and the publishing company put the composition out together divvying up the publisher’s share 50/50. The songwriter ends up getting 75% of the royalties: the writer’s 50% and half of the publishing share, or the other 25% of the overall copyright, owned by songwriter’s micro-company. Co-Publishing deals are commonplace for the mid-level songwriters, that are still in need of the promotional support from the publisher but have enough negotiating power to skew the deal in their favor (compared to the full-publishing agreement). The co-publishing deals also have some “duration of rights” to them, meaning that eventually, the songwriter will get the entirety of their rights back. It might take a while, though, as the duration of rights is set up on a case by case basis, ranging from 2 years to 20 and more. The co-publishing deals are a lot like traditional full-publishing. Publisher will provide an advance (recouped by the songwriter’s share until made whole) and actively work the writer’s career. (pitching the compositions, maximizing sync opportunities, financing the recording of demo material, setting the songwriter up to write for prominent recording artists) The songwriters, will commit to the minimum number of songs deliverable under the contract duration. For both co-pub and full-pub deals, the sync fees splits will be defined on a case by case basis. Essentially, the publisher will maximise and collect all the sync revenues, and distribute it according to whatever the individual deal is. Once again, it will come down to the negotiating power of the songwriter.
Administration deals are a whole other breed of publishing services. Under the admin deal, the publisher has only one role, collecting and auditing the royalties on behalf of the artist. In that case, the songwriter keeps full control over the copyright, paying the publisher 10-25% of the publisher’s share in the form of an “administration fee”. The publisher earns a percentage of the revenue only while the deal is still in place, without any sort of “duration of rights”. For that reason, the admin deals are usually longer than the co-publishing once, stretching up to 5 years. Administration deals are commonplace for the well-established songwriters and recording artists writing their own compositions. For example, Jake Gosling and Max Martin don’t need the publisher to promote their compositions and get them in touch with performing artists. They’re already big enough to get all the representation they need from their publishing. However, they do need someone to register their work with all the CMOs around the globe, audit and claim their royalties, look over countless syncs, and many other aspects. The triple-A songwriters usually go for administration deals, keeping full control over their music, while maximizing the incoming royalties. The same generally goes for the artists that write music for themselves, focusing entirely on the recording side of the business. If the only person you’re writing for is yourself, and plan for it to stay that way, there’s no point in getting a full-blown publishing representation. That is precisely why most of the distribution aggregators, like TuneCore and CDBaby, offer publishing administration deals in addition to distributing their music to the likes of Spotify.
Music publishing, the contracts, and different types of agreements (as seen above) can be extremely difficult to understand, and terrifying if you don’t fully know where your money is coming from and who it is going to. It is a must that you as an artist have someone that understands entertainment contracts look over your publishing deals before you sign on the dotted line. This is one of the areas artists get the most screwed on, and why you hear most of the new artists start complaining on social media that their label and/or representation is robbing them. (most of the time because they didn’t fully know and understand the language and terms of the contract they were signing, because they were only looking out the payout numbers up front) When you hear artists screaming about owning their masters, this is why. When it comes to owning your own masters and catalogue, you will be the only one receiving money from your music, thus obtaining more royalties than if you have to spilt it among x amount of people. Think of when you always hear Russ speak about owning his catalog so he can make money from home, and not have to worry about constantly doing shows, or having to participate and amount to different antics in order to make money, because part of or most of his music royalties are going to different representatives and companies. Russ is one of the few artists that owns all of his masters and his whole musical catalog, so every cent he makes goes directly to him. Most of the artists you hear signing to major labels aren’t so luck, as they now have to break their pie between, the labels, the publishers, representatives form both companies, all before getting anything that their music financially generated.
Don’t get me wrong, music publishing is extremely important, as this can get your music placed in different mediums as a way to make money other than simply streaming and selling records. Placements and syncs in most cases will garner you a bigger financial gain than record sales and streams. Think of Pusha T owning 40% of the Arby’s theme song that gets played on every commercial, or being the musical mind behind the McDonald’s commercial theme song too. A placement like this is a constant revenue stream that never goes away, where in turn, your music will eventually either drop dramatically in sales and streams, or sometimes completely stop altogether. (for certain songs at least) Music publishing is a great thing, especially for new artists, as it provides a lane to get your music placed and heard through different mediums that can garner huge results both financially and career wise. Be careful and mindful of the contract you are signing before you go down this road, as the wrong deal could set you back drastically in your career.
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