A New Administration
the sea-changes that have been upending the record industry over the past year, it’s no surprise that the changes currently transforming the publishing business are happening somewhat under the radar. While these changes are, in their own way, as significant as the ones altering the lives of record execs and recording artists, they don’t imperil the entire industry, which naturally makes them a little less newsworthy. Even more importantly, the changes might actually be good news– which despite its rarity, rarely makes for much media interest.
Still, for publishers and songwriters, there’s no denying that things are changing quickly at the very core of our business– these changes will drastically affect the way we do business over the next decade, and in many ways could entirely alter the nature of music publishing itself. Interestingly, most of this change emanates from one company that in only a few years of existence has markedly re-drawn the playing field. Love ‘em, like ‘em, or loathe ‘em, that company is Kobalt Music.
Founded back in 2000 by Willard Ahdritz, Kobalt represents a significant paradigm-shift in music publishing, by coupling sophisticated collection and registration technology with a payment system that is both uniquely transparent (meaning that writers can monitor their accounts directly) and responsive (payments are made much more frequently than the twice annual schedule that has been the industry standard). But most importantly, Kobalt represents a drastic change in the music-publishing world because their business model is built on “administration” deals with songwriters, a deal structure that previously had been reserved largely for a small group of elite superstar writers or catalogs.
Rather than the traditional music publishing deal format, which granted the publisher control of the copyright, and often an ownership share in the song for the life of copyright (which extends after the death of the composer), an administration deal is essentially a service contract. In an administration agreement, the publisher agrees to handle all of the licensing, collection and protection issues for the writer, in exchange for an “administration” fee, usually around 10-15 percent of the income collected. An administration agreement never provides any long-term ownership interest for the publisher, and usually only endures for a three to five year period.
By building their business model on the “administration” deal, Kobalt is defining their company as a “service” organization– basically a book-keeping, bill-collecting service for songwriters– rather than a “copyright holder”, which is how music publishers have traditionally viewed themselves. It’s a model with both positives and negatives. Because they are primarily functioning as administrators, Kobalt assumes much less responsibility to exploit songs, discover and develop new writers, or revitalize older catalog, making their job considerably easier. On the other hand, they have no long-term “publishing” assets– there is no older established catalog to keep cash flowing in, and there is no ability to build the long-term value of the company by acquiring new songs.
Needless to say, the question of whether or not a business like Kobalt can endure is the subject of considerable debate in the industry. Experienced music publishers will point out that it’s very difficult to build a business venture based on keeping only 10% (and often much less) of the income generated by your songs, no matter how successful those songs may be. It’s even more difficult to gauge the value of the return on investment, if songwriters can literally take their songs and go elsewhere anytime, at the drop of a hat. So far, Kobalt has been funded by large institutional investors, and has received cash injections on regular basis. How that plays out over the long-term is a topic of much speculation.
What can’t be debated is that Kobalt has single-handedly altered the standard of service expected by songwriters, and has made the administration deal into a much more viable option for many copyright-holders. Not surprisingly, Kobalt has proven very popular with songwriters– attracting a slew of A-level writers like Max Martin, Gwen Stefani, Billy Steinberg, Desmond Child and others. The administration service offered by Kobalt, which allows writers to see in real time what they’re earning all over the world, to receive monthly accountings, and now, to take advances against that pipeline income (almost like a credit card backed by future royalties), is revolutionary. Coupled with one of the best creative teams in the music industry, Kobalt’s service is without dispute, a huge step forward for music creators.
Predictably, the changes pioneered by Kobalt are now reverberating across the industry. Universal Music recently announced a similar administration system, which will allow Universal writers (even those in full or co-publishing agreements) access too much of the same information that Kobalt writers have. Overall, it has grown much more difficult to sign writers to co-publishing agreements in general, as even new artists and writers are beginning to ask for administration deals, rather than sharing their copyrights for long-term publishing contracts. Life of copyright agreements are becoming even rarer still– with most writers insisting on getting their copyrights back after 15-20 years.
The transformation of the music publishing business from “copyright owners” into a “service industry” has significant repercussions for both writers and publishers– some good, some bad. Certainly, with only 10% of the income at stake, writers would be naive to think that publishers will be as aggressive or as risk-taking when it comes to placing new songs, developing a young writer’s career, or offering a big advance for an unproven artist. At the same time, a writer can now expect faster cash flow, more accurate registration and collection, and the opportunity to hold on to his or her songs for the long-term, either for the life of the copyright, or at least until the writer retires, and decides to “cash out” the value of his or her life’s work.
All in all, some beginning and developing writers may be better off sticking with co-publishing deals that will provide more hands-on support from the publisher. But songwriters with hits in the catalog are in a better position today than ever before to demand top-level service at a bargain price, and then hold onto the copyrights on top of it all. No one deal model works for everyone. But there are more options out there for copyright holders to choose from than just the old-fashioned “full” or “co-pub” agreements. For songwriters, that’s change for the good…
