Music Publishing & Songwriting

Here’s a recipe for dissension within a band:

Four guys in a group– but only one writes the songs. Happily, one of those songs becomes a huge hit, playing daily on the radio and bringing stardom to all. But look out Johnny, there’s trouble in paradise. When the royalty accounting arrives from the record company, the band is shocked to find that they’ve earned… $0. No payments are due, as the income from record sales, while significant, are not yet enough to pay off the expenses incurred in making the record and promoting it.

Meanwhile, back at the ranch, the one guy in the group who wrote the songs is walking out to his mailbox, where he finds a very large surprise: an envelope from BMI or ASCAP or SESAC. “Oh yeah. I remember those guys”, he thinks to himself, vaguely recalling that he signed a contract with them, but never really understood what they were supposed to do. It now appears that what they have done is to keep track of every time his band’s song was played on the radio and television. In the envelope, there is a very long statement showing the various uses. There is also a very large check, made out to him alone. Indeed, it’s so large that this lucky band member is now buying a new, much improved ranch.

Things are getting very tense on the tour bus right about now…

Here’s a similar scenario for strife within an industry:

Record company pays A&R people to find the band. Pays to make the record. Pays to promote the record. Pays ridiculous amounts of money to get the record on the radio. Then when the label finally bribes so many stations that the record is playing all around the country, the label earns… nothing. Sure it sells a few records (these days, very few). But as far as earning money off the radio play? Nada.

Meanwhile, the music publisher, having heard the finished record a few weeks before release, signs a deal with the primary songwriter in the group. The publisher pays nothing to make the record, and does nothing to promote it. The publisher does however register the song with ASCAP, BMI or SESAC, which means that once that song is playing all over the country, the publisher, like the songwriter, is earning a big, pleasantly plump check.

All of which brings us to: The Public Performance Right for Sound Recordings.

At present, labels and artists have joined forces to demand that they too receive performance royalties each time one of their songs is used on the radio or on television.They are trying to convince Congress to change the rules that require broadcasters (radio stations, television stations, etc.) to pay performance royalties to songwriters and music publishers, but exempt them from paying those same performance monies to record labels and artists.

Granted, the present set-up is a little strange. It’s odd to think that if Rihanna’s “Umbrella” is played 1 million times on pop radio stations around the US, the writers of that song will get paid for each play, but Rihanna, as the artist, will earn nothing. However, the argument has always been that Rihanna benefits from the radio play because of the exposure it offers her– it fuels record sales, concert tours, and her general, all-purpose fame. Likewise, the label benefits from the radio play to help sell albums– that’s why labels spend so much money to get things on the playlist. It’s a quandary for the music industry, for the broadcasters (who would prefer to keep more money, and forgo paying the artists), and for the lawmakers (who have a lot more ties to broadcasters than they do with rockstars or label presidents).

The interesting thing is: the performance right for artists and labels already does exist… in the digital realm. In fact, it was the 1995 Digital Performance in Sound Recording Act, that ultimately led to the current call for performance money from radio and television. In the digital world of webcasters, satellite radio, cable subscriber channels, etc., the user of music must not only pay ASCAP, BMI, and SESAC, but also SoundExchange, which is the performance rights organization for artists and the sound recording owner (i.e. the label).

The fact is, SoundExchange is a pretty cool thing… if only people knew about it. Unfortunately, many labels and performers have no idea that they are earning a royalty each time their song is on satellite radio or a webcast. Consequently, much of the money is unclaimed. SoundExchange can’t find you– you have to go to it and tell them where to send your money.

Am I saying that you should be for or against the performance right for artists? I’m saying, don’t worry about it. Let the big boys fight that one out. I’m saying: GO GET THE MONEY YOU’VE ALREADY EARNED. If you are a label, an artist, a band, or a featured musician on a sound recording that has been used on satellite radio, webcasts, cable tv, or anywhere else in the digital world, go visit the website of SoundExchange today. I just hate the idea of unclaimed money. Go for yours at:

www.soundexchange.com

Bad week for the record biz. In one three day span, the industry news revealed Madonna’s defection from Warner Bros. to Live Nation, which doesn’t even call itself a label, followed by the successful release of Radiohead’s album directly to its fans (with no price tag attached), followed by today’s announcement that industry legend Ray Davies will follow Prince’s example by releasing his latest album as a prize giveaway with a London tabloid.

It’s ugly out there, kids. That crashing sound you hear is the record industry crumbling under its own irrelevance, and the bigger the companies are, the harder they will fall. Heard a story today about a major label president who started an A&R meeting by switching off the lights in the conference room. He was trying to make a point– either the label better find some hits fast, or it’s lights out. Warn your A&R friends– better cancel that lunch at the Ivy.

What does all this have to do with Music Publishing (which is our topic here, right?)? The short answer: Nothing. And that’s my point. As the major record labels watch their collective lives flash in front of their glazed eyes, it’s tempting to look at the music biz as an industry in crisis. Well, a crisis it may be– but so far, it’s a contained crisis, and the safe ground just happens to be Music Publishing.

It’s not that many of the problems of the labels don’t apply to publishing. Certainly, the prospect of people taking music for free doesn’t work any better for publishers than it has for record companies. But so far, despite plummeting record sales, income for publishers continues to rise– ASCAP and BMI have both posted increased earnings this year, thanks to those hundreds of cable channels, pay per views, satellite radio stations, and other public performance venues that just keep cropping up. Advertisers continue to rely increasingly on songs, often by relatively unknown artists like Feist, to brand their products. Gamers use music, karaoke singers use music, greeting cards play songs, and all of that makes publishers considerably happier than their fellow music business weasels down the hall.

Herein lies the rub. It’s sometimes very difficult for someone like myself, who has been in the industry, on both the record and publishing sides of the fence, to separate the two businesses. We’re all part of the same industry– in many cases, publishers and label folk share offices, lunches, late night drinks at seedy nightclubs, and friendships that go back decades. When things are going bad upstairs at the label office, it’s hard to feel secure down on the publishing floor. For so many years, our fortunes have been tied together, so it’s hard to divorce now.

Last week, I spoke to a couple of investment advisors for a large European pension fund. They were considering investing in one of the many hedge funds that are now actively acquiring music publishing catalogues, and wanted to learn more about the industry. That’s right– with all the talk of crisis in the music industry, bankers are now clamoring to enter the publishing business. In talking with these gray-suited whiz kids, I realized that their greatest asset is having zero experience in the music industry. By standing outside of it, they can see with a kind of clear-eyed optimism. Here’s what they’re looking at:

The record company model may be so broken that no amount of tinkering can get it running again. But the music publishing industry is an entirely different business. Because it’s tied to the song, rather than the physical product (CDs), it’s able to adapt to, and profit from a future where music is instantly accessible, and ever-present.

If you don’t really know what music publishing is– don’t worry. That’s what Pub Talk will be about: how to turn songwriting into a business. You can be sure that most record industry people don’t know much about it either. But they’ll learn. They have to. And so do you.