Breaking News: Album Sales Hit a New Low

Billboard Bulletin Announced this Week that Album Sales Hit A New Low, stating…
“As streaming gathers momentum, the U.S. music industry keeps breaking sales milestones — the wrong kind. This week’s 3.97-million album sales tally is the smallest weekly sum for album sales since Nielsen SoundScan began tracking data in 1991. It’s also the first time weekly sales have fallen below four million in that time span.”

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How A Music Publishing Deal Works

Contracts between songwriters and music publishers are negotiable, so all publishing contracts are not the same.  However, there are standards and some basic elements, that run through all of them.  This post will explore different types of deals and outline some of the basics of each.

In short, there are four types of deals between the music publisher and the songwriter which are most common: 1)  the Single Song Agreement, 2) the Exclusive Songwriter Agreement, 3) the Co-Publishing Agreement, and 4) what I would call a Catalog Purchase Agreement.   

1)  Single Song Agreement

A Single Song Agreement is offered by a music publisher to a songwriter when the publisher has interest in working with an existing individual song or group of songs, written by the songwriter.  Under this type of agreement the songwriter and the music publisher make an agreement for these individual songs only.   Under this agreement the songwriter has no further obligation to the music publisher for other songs written past or future.

Generally, these types of deals are made for songs which have not yet had any commercial activity or have not generated any revenue to date.  The songwriter assigns these songs to the music publisher so that the publisher can help secure new commercial uses of the song which generate income.  Income generated on the songs is then split between writer and publisher at the percentages agreed to in the contract and paid to the songwriter in accordance with the accounting provisions of the deal.  In standard cases the split of income between the songwriter and music publisher is 50/50.

2)  Exclusive Songwriter Agreement

An Exclusive Songwriter Agreement (ESA) is a deal between songwriter and music publisher whereby the songwriter agrees that all new songs written by him/her for a specific period of time, will be subject to the contract.   The length of these deals is negotiable and can vary, but it is generally around 1 – 2 years, with the music publisher having a number of options to extend the deal, at the publishers election.

The basic elements of an Exclusive Songwriter Agreement are:

  • Term – defines how long the deal will last
  • Territory – defines the territories of the world in which the publisher will have rights
  • Songs covered or not covered under the deal (i.e. the deal may also include some existing songs written prior to the start-date of the contract, or it may be agreed that some new songs written under the deal will be excluded or treated differently for various reasons)
  • Assignment of rights – the writer transfers the copyrights to the publisher
  • Administration – defines who has administration rights in the copyrights and any related fees
  • Royalty Provisions – defines what royalties will be paid to the songwriter for the various types of income
  • Advances – defines what, if any, pre-paid royalties may be paid to the songwriter, when they are to be paid, and how they are recouped.
  • Accounting – defines how royalties will be calculated and when they will be paid
  • Minimum song delivery – songwriter must write and deliver to publisher a minimum number of “commercially viable” songs during the term
  • Demo Recordings – defines who pays for demos, how much and how the cost may be recouped
  • Reversions – some deals may include a reversion of certain songs, percentage of ownership or certain rights back to the songwriter at a designated time
  • Special stipulations – other provisions that may be unique to this particular deal
  • And a bunch of boiler plate legal language (i.e. what happens if someone breaches the contract, warranties, how disputes will be settled, etc.)

In these types of deals, the songwriter and music publisher generally work together as a team, during the term of the deal.   In addition to simply trying to land new royalty bearing uses of the songs delivered under the deal, the publisher will often work to further the songwriter’s overall career, such as helping the songwriter land a record deal (if he/she is an artist), helping the songwriter land production opportunities (if he/she is a producer), making introductions to expand the writer’s contacts and relationships for collaboration opportunities with other top songwriters or recording artists, and working to gain press and industry exposure for the songwriter and his/her work.

Similar to the Single Song deal, under the ESA, the copyright in each song is assigned to music publisher, giving the publisher the legal right to protect, control, license and manage the songs.  This means the publisher “owns” the songs and in return any income generated on the songs is split between writer and publisher at the percentages agreed to in the contract and paid to the songwriter in accordance with the accounting provisions of the deal.  In standard cases the split of income between the songwriter and music publisher is 50/50.  In music industry speak, we usually call 50% of the revenue the “writer’s share” and 50% of the income the “publisher’s share”.

3)  Co-Publishing Agreement

There are multiple ways to do a co-publishing agreement.  A co-publishing situation simply means that there will be more than one music publisher working with the song/songwriter at the same time.  It is an agreement between two or more publishing companies, whereby the publishers co-own, or “co-publish”, the applicable songs.

The most common use of the term “co-publishing” is generally in reference to a music publisher working alongside a songwriter’s own publishing company.  For example, if the songwriter has his/her own music publishing operation, he may at some point choose to partner with another music publisher for help.

In recent decades, high-profile, successful, or “in-demand”, songwriters have been able to negotiate co-publishing deals with a music publisher, not because they truly have an operational music publishing company of their own, but because they have enough clout to demand a larger piece of the pie in an exclusive songwriting deal.  In such case, the deal actually becomes an, Exclusive Songwriter and Co-Publisher Agreement.  In this type deal the ownership of the song copyrights would be split between the two publishers (i.e. the traditional music publisher and the songwriter’s music publishing entity), usually 50/50, which means the publisher’s share of income would also be split between the two publishers.  In this scenario the songwriter would receive his/her writer’s share of income from uses of the song, plus half of the publisher’s share of income, in effect making it a 75/25 deal between writer and publisher.  In this type of deal, the traditional publisher is only making half of what he usually makes.  This generally means the publisher is going to expect the writer to generate a lot of commercial activity on his own (i.e. acting as a partner publisher), thus increasing the overall revenue to make it a win for the publisher at the discounted rate.

4)  Catalog Purchase Agreement

In the music business the term “catalog” refers to a group of properties.  It can be a group of songs (i.e. intellectual property), a group of recorded masters (i.e. physical and intellectual property), etc.  For the purpose of this blog post, when I refer to “catalog”, I’m taking about a group of existing songs.  For example, all of the songs that we publish at my publishing company are referred to as our catalog.  I may also refer to all the songs written by Writer A as, “Writer A’s catalog”.  Similarly, if I’m talking about all of our songs that are affiliated with the performing rights organization SESAC, I may refer to them as our “SESAC catalog”.  It’s simply a way to reference a grouping of songs.

Often times, music publishers may wish to purchase a group of songs, or all the songs, from a songwriter or from another music publisher.  A recent example in the news was music publisher, Ole’ Music’s purchase of the Rush catalog, called Core Music (i.e the songs of the classic rock band, Rush).  A purchase generally only takes place with songs that have earned, and/or are currently earning, income.  (Compare to a Single Song agreement above, which is usually,  (1) for a smaller group of songs, and (2) for songs that have not yet earned any royalties).   The purchase price is usually determined from formulas based on the historical earnings of the song catalog and the estimated future earnings.

In a catalog purchase deal, the purchasing party is typically only buying existing songs.  However, in certain cases it might also include what I call a “go forward deal”, which could be the purchase of any existing Exclusive Songwriter and/or Co-Pubishing agreements that are tied to the catalog, or a new exclusive term deal with the songwriter-owner of the catalog.

SunzooStudios-Songwriting

Some Basics…

How options work

Some deal terms may include “options” to extend the term.  For example, if the term of an Exclusive Songwriter Agreement is, “one year, plus a one year option”, that would mean the deal will only last one year, but at the end of such year a party would have the option to extend the deal for another year, if he wishes.  Most commonly deals will have 2 or 3 options.

The option to extend is almost always the music publisher’s option, and is not mutual.  This is because the publisher is the one investing time and money into the songwriter.  The publisher must have the sole right to extend or to end the deal, in an effort to either stop his losses or to have more time to recover his investment.

How advances work

Music publishers will often agree to pay estimated royalty earnings to the songwriter in advance.  This is generally done because of the typical lag time between sales and royalty payments.  There can also be a lengthy start-up period after signing your publishing deal.  Let’s look at an example:

Writer A signs a music publishing deal in January.  He begins writing songs in January at the rate of 2 songs per month.   He writes his 7th song in April (2 in Jan, 2 in Feb, 2 in Mar), and the publisher flips out over this 7th song.  This is a “hit” the publisher says.  “We’ve got to get this song to Katy Perry, it’s perfect for her”.  Well, Katy Perry is not going into the studio to make a new album until July.  So let’s say the publisher successfully gets the song to Katy and she loves it.  Maybe she also wants to write a second song with Writer A.  Both songs are recorded by Katy in July.  Her record company schedule’s the release of the album for October.

Note:  At this point, Writer A has been in his publishing deal for 10 months with no income yet.   Things are going extremely well!  He has a publishing deal and two songs on the upcoming Katy Perry album.  But he’s still eating beans and rice and working at Starbucks between writing sessions.

Katy’s album releases in October and starts selling well on iTunes right away.  Let’s assume iTunes pays royalties monthly, 45 days after.  So, Katy’s October sales would be paid to her record company on December 15.  Her record company closes their quarter at the end of December and pays mechanical / dpd royalties to publishers 6o days after the close of the quarter (that’s the beginning of March).

Note: So now it’s been 15 months since Writer A has signed his publishing deal.  He has 2 songs on a successful artist release but has still seen zero royalties.

The music publisher receives royalties in March for the one month of sales of Katy’s release (i.e. October sales).  If the music publisher is on a quarterly royalty cycle (some are on semi-annual), he closes his 1st quarter at the end of March.  If his deal with Writer A is to pay 60 days after the close of the quarter, then he remits Writer A’s royalties to Writer A around June 1st.

Note:  So Writer A has been in his deal for 1 1/2 years before he sees the first dime.  And so far, he’s only been paid on 1 month of sales of Katy’s album.  He will have to wait until the next quarter (3 months) before he sees his next royalty payment.  Hopefully by now, he has other cuts and therefore more royalties coming down the pike.  

The scenario above is not unusual at all.  This is why music publishers agree to make “advance” payments to songwriters.  Often these advance payments are in the form of a monthly “draw”.  In other words, the songwriter is taking a draw against his future earnings, which will be paid back as the earnings come in.  Advances are almost always “recoupable”, because the publisher estimates and pays the writer his royalties early, and will then be reimbursed when the royalties arrive.

Paying royalties is a risk for the music publisher and can make cash flow difficult for the publisher.  The music publisher is in essence giving the songwriter a no-interest  “loan” for which the publisher’s ONLY form of reimbursement is from the songwriter’s future earnings.  If the songwriter has no commercial uses of his/her songs, and therefore no earnings,  the songwriter is actually not obligated to pay back the loan.  This puts the burden, and an incentive, on the music publisher to make things happen with the songs.  This is extremely advantageous for the songwriter.  However, the songwriter must be careful not to negotiate or accept too large an advance.  Because if the songwriter does not deliver strong enough songs that the publisher can generate activity for, the publisher will have a large loss and will be more inclined to end the deal early than to exercise an option to move forward, and the writer loses his deal.

Sidenote:  If there is little to no activity on songs, writers will often blame the music publisher for not landing “cuts” or generating other commercial uses of his/her songs.  But the other side of the coin is that the music publisher may be trying to do so, but the writer is simply not writing hit songs.

In Closing

Music publishing deals must be mutually beneficial in order to work.  They must be a win/win for both parties.  Publishers pony up the cash for investment in the songwriter and they crank up their company machine to go to work for the writer.  The writer has an obligation to  write commercially viable songs and to write enough of them to pay back the advances and make a profit for everyone involved.  It’s a team effort and works best when there is mutual respect between the parties, and when both parties understand the other’s responsibilities.

How Does CCLI Work?

If you are a worship leader today, you’ve most likely heard someone mention CCLI.  What is CCLI and what do they do?

WHAT IS CCLI?

CCLI is actually an abbreviation for Christian Copyright Licensing International.  They are a licensing organization that seeks to “provide churches with simple, affordable solutions to complex copyright issues”.  Churches around the world use thousands of songs each year and they need permission from the copyright owners of those songs to do most of the things they wish to do with the songs, such as record them, make arrangements, duplicate copies, project lyrics on screen, etc.  Through CCLI, today a church can obtain a single annual license that covers almost any song for just about any type of use they can imagine.

Before CCLI came on the scene in 1988 however, churches struggled with gaining copyright permission for the use of songs.  The churches that tried to be legal, discovered they almost needed a full-time person to make long-distance phone calls and send letters to dozens of  music publishers every week, to obtain the proper permission and licenses.  There were fees in most of those cases, meaning using music was an expensive proposition for churches.  It was also time consuming and an outright hassle.  There was frustration on the part of church administrators, because many of the copyright owners were almost impossible to locate and contact.  Many churches simply chose to move ahead without legal permission.  They did not have the time or money to deal with the complications.

Similarly, copyright owners were frustrated because they were receiving hundreds of calls each month from churches and spending their own administrative time and money to issue thousands of licenses and permissions for $5 here, $10 there and many for free.  They also spent countless hours on the phone answering the same questions over and over, trying to educate churches on copyright law issues and licensing procedure.  Most of all, copyright owners were upset that so many churches had abandoned the entire process, moving ahead illegally and denying songwriters and publishers the income that was due them for the use of their assets.  No one was happy.  That’s when CCLI stepped in.

CCLI provided a solid solution to everyone’s problem.  Twenty-five years later, they are still a life-saver for churches (providing a very simple and cost effective solution), and a significant source of revenue for songwriters and publishers (the copyright owners).  Everyone is happy.

HOW IT ALL WORKS

With the purchase of an annual Church Copyright License from CCLI, churches can use any song in the CCLI catalog.  There are over 200,000 songs available for use under the CCLI license because all of the major publishers of Christian music now offer their songs through CCLI.  The CCLI Church Copyright License fee is based on the size of the licensee’s church, making it easy for a church of any size to legally use copyrighted material at an affordable price.  License fees are collected by CCLI each year and, after CCLI takes an administration fee, the remainder of those fees are paid out as royalties to the copyright owners, according to song usage.ccl

The Church Copyright License grants a church the right to do a number of things such as record songs in audio and/or video format, create and duplicate arrangements or chord charts, create digital lyric files and display them in the worship service, etc.  CCLI calls these types of uses “copy activity”.  Each type of copy activity has an associated credit weighting.  Churches that hold a CCLI license, report back to CCLI on a semi-annual basis noting which songs they’ve used during the period and the specific type(s) of copy activity for each song.  CCLI calculates the credit weightings for those uses each period, multiplies the credit weighting by a factor that is determined by the size of the church, and then pays out royalties to the copyright owners, based on the credits for each song.  CCLI publishes a chart each semi-annual period that shows the top 2000 songs in each country, according to credit weighting (or usage).

In addition to the Church Copyright License, CCLI now offers additional “add-on” licenses that cover other types of uses.  For example, if a church worship leader wants to duplicate copies of his favorite worship CD to give to his musicians for rehearsal purposes, this would not be covered under the Church Copyright License.  However, there is now a CCLI Church Rehearsal License that covers this very thing.  Churches that show clips from commercial movies, need the Church Video License.  Also, the new CCLI Streaming / Podcasting License allows churches to offer music for online streaming and podcasting.  These types of uses were not covered under the original Church Copyright License.cvl

CCLI also offers a service called SONG SELECT.  For a small annual fee, churches can join this program which gives them access to thousands of songs in printed form.  These songs can be downloaded right from the CCLI site – chord charts, lead sheets, etc.

CCLI has certainly become an invaluable service for the contemporary Church as well as for the song copyright owner.  However, the existence and growth of CCLI has led some songwriters, music publishers and worship leaders to become overly aware and even focused on the money that can be earned from church use of songs.  This is a tragedy.

CCLI now licenses over 150,000 churches in America alone (and more around the world).  They collect tens of millions of dollars every year, most of which is distributed in royalties to copyright owners.  One song in the CCLI top 25 can, by itself, easily provide a nice annual salary for a songwriter.  Multiple songs in the CCLI top 25, or even top 100, can make a songwriter wealthy.  This is strong motivation for a writer to want his songs sung by as many churches as possible.  This is why churches are overwhelmed today with songs being pitched to them, and given free to them, from every possible direction.  Today, some songwriters write their worship songs with potential CCLI chart position in the forefront of their minds.

CCLI is a blessing that can help songwriters make a living when using their God-given talent to write songs for the church.  However, we must never allow CCLI revenue to become the motivating force behind what we do.  

 

For more about CCLI, check out their website at www.ccli.com.

For related Songsphere articles see: AUTHENTIC and AUTHORITY AND ANOINTING 

Ask Not What Your Song Can Do For You, But What You Can Do For Your Song

So, you realize that you’ve written a very good song.  Not good because YOU think it’s good, but because other people have voted by saying they want to use it … either on their album or in their regular worship services.  Or because you’re starting to get numerous requests for the chord chart.  Congratulations!  It sounds like you’re on your way.  Now what?

You may be wondering, “Wow, how big will this song get?  Is it a hit?  Will it buy me a new car … pay off those bills?”.  Hopefully, you’re asking what might this song do for other people (i.e. “Will it bless them, or help them in some way?”).   But invariably we also ask, “What could it do for me?”.

In my experience, a good song is like a good car.  And taking your song to the top of the charts, is like taking your car to the top of a mountain.  It takes fuel.  And unless you keep putting fuel into your tank, you’ll never make it to the top. 

Many great songs seem like a “flash in the pan” … straight to the top and then they disappear almost as quickly.   Others may make a slow climb to the top and then linger there for decades.  Why?  Is it all just random?  The answer is a resounding, “No.”.

I have learned over the years that for your song to make it to “hit” status, you have to take it there.  You have to drive it, just like you do the car.  And for your song to not only make it there, but to maintain that level of status and income for an extended period of time, it takes a strategy and a lot of hard work.  That must be done by either you, your music publisher, or both.  It doesn’t happen automatically.

GIVE YOUR SONG FUEL:
Those people who first gravitated toward your song … how did they know about it?   How did they discover it?  You had to do something to get the song in front of them.  You recorded it on your album, or made a video, or played it live, right?   Those uses of the song, are your fuel.  And you need A LOT of fuel to get to the top.    The bottom line is that each and every new tangible form of the song, or new performance of the song, has the possibility of reaching an additional group of people.  Therefore, creating as many unique commercial, and non-commercial, uses of the song as you can, will help drive the song to the top.

If you’re a songwriter/artist and you’ve recorded the song on your own album, don’t be afraid to let someone else record it too.  What you want is a male version, a female version, a rock version, a pop version, a kid’s version, a choral version … as many different recorded versions as possible.  You want printed versions for piano players, for guitar players, for singers … chord charts for bands, choral arrangements … even a marching band version when your song hits the radio (And we could go even deeper with this – easy piano, intermediate piano, advanced piano and the same type of thing for guitar, choir, etc.).  You want the song on television, in film, available as ringtones, and even in advertisements when possible.  You want visual resources for church worship (if it’s a congregational song).  You want multiple artists performing the song live and on different radio formats.  You want churches to use it in their services (for congregational songs).  You want the song on concept albums and compilation albums. You want the title of the song to be used as the title of projects.  You want the song to be available in all these ways in as many languages as possible, and available in as many countries as possible.  The list goes on and on.  The more people you can put the song in front of, the better chance it has of making it to the top.

That’s the hard work I’m talking about.  This is why a music publisher is so important.  The publisher has contacts, relationships and business deals that most songwriters don’t have themselves, or couldn’t secure as an individual.   With these relationships and business deals, the publisher’s primary job is to keep your song tank full of fuel by generating consistent uses in various formats year after year after year.   Ever wondered why a decades old song may have a modern resurgence?  That’s the work of a good publisher, generating a significant new use of the song years after the song was a successful hit, to do it all over again!  

One of the most common mistakes I see today is that many young artists are afraid to work with a publisher, because they don’t want to give away any portion of the income that they might make on the 5,000 copies of their indie album.  The common phrase in my town among these amateurs is, “keep your publishing”.  But they’re missing the bigger picture.  Although these indie songwriter/artists may even score a successful radio hit, their songs rarely find their way onto any other commercial project past the artist’s own, and the song soon dies.  They are thinking about what their song can do for them, instead of what they can do for their song (which ultimately WILL benefit the writer).

I realize that every good song is not going to be signed by a publishing company.  That means it may be a longer road and a slower climb.  But there are many things you can do yourself to maximize exposure for your song.  My philosophy has always been to “give it away” first.  Seed the market, create interest and demand.  Get it to as many people as possible, in various forms.  If you can consistently generate great exposure for your song, exposure that will touch a broad spectrum of people types … and if your song is truly a good one, it will catch on like wildfire.  But you have to keep putting fuel in the tank (0r on the fire, in this case) to make that happen.  The good news is that with social networks and email, this process is much easier now, than ever before.  When your great song gets the right level of exposure, the people making commercial projects will hear about it.  So, work hard and don’t be surprised when you get that phone call to use it on one or more of their projects!