Music Publishing & Songwriting

I was recently speaking on a panel, when one of the other panelists asked the audience, “How many of you are songwriters?” Not surprisingly, a show of hands indicated that almost everyone was a member of that not-so-exclusive club.

I followed up with another question: “How many of you are music publishers?” Now, the crowd hesitated. One… maybe two hands were raised. I couldn’t let it go at that. “How many of you need a music publisher?” Once again, unanimity prevailed. Every songwriter had decided that he or she needed a music publisher. That’s when I broke them the news:

If you’re a songwriter, you already have a music publisher. You’ve had one for quite some time. In fact, your publisher is your greatest untapped resource, ready to take your assets (that’s your songs) and put them into action (placing them somewhere where they can earn…) to yield income (which is the goal, last I checked).

Newsflash to Songwriters: Your music publisher is… you.

From the minute that you finished your first song, you became not only a songwriter, but also a music publisher. When you write a song, you control the rights to that song and are able to license those rights (which is what a publisher does), until the time when or if you decide to assign your publishing share to someone else.

Every song is divided into a writer share and a publisher share. If you, Joe Songwriter, have written the entire song on your own, then the writer share belongs entirely to you. If you have not made a publishing deal for your share of the song, then the publishing share belongs to Joe Songwriter Music, or whatever you choose to name your publishing entity. When a songwriter asks me how to find a good publisher, I usually say, “Become one.”

That of course, is a little bit trickier. That means work. It means research. Above all it means figuring out the answer to a question that perplexes even many people with years of experience in the music industry: What does a music publisher do?

Music publishers turn music into money. Did that get your attention?

It often takes songwriters by surprise when I point out that songwriting is not, in fact, a business. It’s just something that songwriters do. In the actual course of writing a song, there’s no money changing hands, nor is anything bought or sold. Hours are spent, lunch is ordered, ideas are exchanged and at the end of the day, something exists that never existed before. But it will take someone else to turn that new song into something that generates income. This is the role of the music publisher.

When I titled my book about music publishing “Making Music Make Money”, it was with this fundamental purpose in mind. The basic role of a music publisher is to find every possible opportunity to place the song somewhere it can make money, which is known as “exploitation”. Music publishers control the rights to a song, which means that anyone seeking to use that song in any way, anywhere in the world, must obtain the permission from the music publisher—that permission or “license” usually comes with a price. Publishers make their money not by creating a physical product, as record companies do. Publishers create income for themselves and the writers they represent, by granting “licenses” for the use of the song. Those “licenses” create several different kinds of income streams:

Mechanical Income: From CD sales, digital downloads and other sales from physical product.

Performance Income: Collected through ASCAP, BMI and SESAC for any public performance of the song– on the radio, television, a website or a sports arena, a hotel lobby, an elevator, or a shopping mall.

Sync Income: For any use of music “in synchronization” with a moving picture. That’s old-fashioned lawyer-speak to describe songs that are used in motion pictures, advertisements, television shows, or video games.

Other Income: This includes “reproduction” rights, which includes the right to print sheet music, or lyrics from a song—it also includes everything from uses in greeting cards to toys to karaoke machines.

Anytime you hear or see a song being used, there should be at least one, and often several licenses that have been granted, and which are now generating income for both the publisher and the songwriter.

If all that seems like a good business to you, you’re not the only one. While even major companies like BMG seem to be fleeing the record business, new publishers are sprouting like spring flowers—many of them with seed money from investment banks, hedge funds, and financial institutions. If you’re a wealthy investor, buying a publishing catalogue has become akin to acquiring an Old Master painting.

But there are plenty of opportunities in music publishing for people other than Wall Street financiers. Managers, record labels, studio owners, booking agents or other music entrepreneurs—anyone who has relationships with songwriters and the ability to recognize new talent—should be thinking about starting a publishing entity as a part of their business structure. Given the explosion in music use for ring-tones, YouTube videos, and electronic games, even in the face of falling CD sales, it doesn’t take an economist to figure out that a music publisher is a good thing to be.

Of course, if you’re a songwriter, you already are a publisher. Now, the challenge is learning to be a good one. Education is part of it. Experience is a part of it as well. But the all-important first step is simply understanding and accepting your role, as the one who will create a business out of your own songs. Who needs a music publisher? You do. And now you know where to start looking.

Want to read more about becoming your own music publisher? Click the my book below to read more about it:

Those who have been following this blog regularly will recognize this as a dispatch from the war-zone. At the moment, the music industry is embroiled in a battle that could be a matter of survival for publishers and songwriters, and arguably, for record companies and other content providers as well.

The fight is centered on the Copyright Tribunal, the board that will determine the statutory mechanical royalty rate to be paid for records sold (people do still sell records, right?) as well as downloads and digital streams. On side of the battle lines, we find music publishers and songwriters who want the rate raised–on the opposing side, we find record labels and digital music distributors, who claim that the current rate should be reduced. The lines are drawn, and the battle is raging in full—last week, music publishers began, not terribly successfully, to make their case. Now, the labels will have their day in court. It would not be an overstatement to say that in many cases, both sides are fighting for their lives.

For those joining us with the war already underway, here’s a quick bit of background. A mechanical royalty is the amount that a label or digital distributor must pay to the music publisher (who collects on behalf of the songwriter) for the use of a song on a physical record that is sold commercially, or through some means of digital distribution. Here’s a quick trip down the income stream, to try to clarify the process:

You, Joe Songwriter, and your publisher, Pennies Music, have a song on the new album by Next Big Thing, on the Cut-Rate Records label. Every time Cut-Rate sells that Next Big Thing album, the label must take part of that income, and pay a mechanical royalty to Pennies Music, who will then, in turn, pay a portion of that royalty to you, Joe Songwriter. At present, that mechanical royalty is: 9.1 cents. In other words, for every $20 CD sold, the publishers of each song on the record receive 9.1 cents. If there are ten songs on the album, then the label will pay out roughly one dollar in mechanical royalties, for every album sold.

This “statutory” rate of 9.1 cents is determined by the Copyright Tribunal, and reset every few years—which is precisely what’s happening at the moment. But what’s being lost in this debate is the difference between theory and reality. Unfortunately, what I just described above is “theory”. It’s the way that things are supposed to work. Publishers will grant mechanical licenses, record labels will sell records, and pay the writers and publishers 9.1 cents a song. But as Steven Tyler might say: Dream on.

The truth is that record labels have devised a myriad of ways to avoid paying full statutory rate—that whopping $1 per album. Instead, the labels have created the controlled composition clause, which simply means that the label pays only 3/4 of the full royalty rate, or roughly 6.8 cents a song. Why? Because they said so. This is one of the great bargaining maneuvers in history—try it sometime at your local supermarket. Just tell your grocer that you’d prefer to pay only 3/4 of your bill. Let me know if that works for you.

On top of requesting a 3/4 rate, many labels also employ the “cap”, which they have cleverly inserted into artists’ recording agreements. The cap stipulates that the total amount of mechanical royalties shall not exceed ten times the 3/4 rate, for all of the songs on the album. This means that if the album contains 12 songs, the label pays only 5.12 cents, or 10 x .068 divided by 12. And it gets worse.

Not everyone on the album is necessarily subject to the controlled composition clause. The artist (assuming they write at least part of their own material) is almost always considered “controlled”, and usually any producer or other person associated with the artist will be considered “controlled” as well. However, covers of songs not written by the artist or the producer, samples, or interpolations of outside songs are not generally “controlled”. That is to say, if you sample a Gamble & Huff composition in your song, you can be sure that Gamble & Huff will be demanding full rate. The result of this can be brutal:

When one or more writer receives full statutory rate rather than the controlled rate, the difference (2.5 cents) is made up out of the share of the controlled writers. This means that if you have a song on an album that contains 13 songs, one or two of which are covers of well-known earlier hits or which contain sizeable samples, you could find yourself earning not 9 cents per record sold, but as little as 4 cents or less—if you are unlucky enough to be subject to the controlled composition clause.

When that happens, this whole war over statutory mechanical rates seems pretty irrelevant indeed. In fact, I’m prepared to offer a simple settlement that could stop this whole war over statutory rates with nary a casualty. Try this:

The publishers agree to leave the full statutory rate where it is right now, at 9. 1 cents. But for their part, the labels agree to actually pay the real statutory rate. No clauses, exceptions, negotiations, or extortion. Just pay the amount on the price tag. Period. Maybe the courts could even close a couple labels down for putting music out on the market without a mechanical license—a practice that has now reached the point where multi-platinum albums remain unlicensed four and five years after their release.

I suspect that any real-world publisher would take this solution in an instant. Fast, easy, no fuss licensing? A chance to actually collect what is owed? That would be a peace treaty any publisher could accept.

Please visit the below site for information about National Music Publisher’s Association: NMPA