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.

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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.

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Tip of the Month for Canadian Songwriters

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To my CANADIAN songwriting friends, here’s a helpful tip from SOCAN, Canada’s performing rights organization….

What is copyright?

Copyright is a bundle of rights granted by law to creators of original work. The public performance & communication right, which SOCAN administers on behalf of its members, is only one of these rights. In Canada, the copyright in a musical work exists for the life of the creator(s) plus 50 years after the death of the last surviving creator.

Why is copyright important?

Copyright protects specific forms of intellectual property, which are creative endeavours that can be protected under the law.

Does SOCAN copyright my songs?

No, SOCAN cannot copyright your songs for you. In actuality, copyright is automatically granted as soon as an original work is fixed into a tangible form. This means that as soon as you write it down, record it, make it into a computer file or fix it in any other way, it is your copyright. However, in order to protect your copyright, registering your claim to legally document ownership is best. Registration of copyright is useful if you ever need to prove that the work is indeed your own copyright- protected property.

How do I formally register my copyright ownership in Canada?

Contact one of the following or visit their website for further information:

Canadian Intellectual Property Office (CIPO)

www.cipo.gc.ca

Songwriters Association of Canada (members only)

www.songwriters.ca

SPACQ – The Society of Authors and Composers in Quebec

www.spacq.qc.ca

SARTEC (members and non-members) for French language copyrights

www.sartec.qc.ca

Or contact the U.S. Library of Congress

www.loc.gov/copyright.com

Copyright Made Simple

I frequently receive questions from young songwriters regarding the US Copyright Law.  “How do I ‘copyright’ my song?“, “What if someone steals my song?“, etc.   Most of these questions come from unfamiliarity with the law and/or with common industry practices.  In this blog post, I will attempt to answer those questions and provide a simple understanding of the law, as it pertains to your songs.

imagesFirst of all, if you are a songwriter keep in mind that the US Copyright Law is what makes it possible for you to actually earn a living with your songs.  Copyright has always been important, but is of particular importance today in an age of file sharing, disc burning, streaming and illegal web downloads.  Songwriters and publishers alike should make it a priority to make others aware of copyright law.  Get involved with organizations like ASCAP, BMI, SESAC, NSAI and others and join the fight to protect your rights as a songwriter.

Note:  I just learned from my staff that today is, Talk Like A Pirate Day at Krispy Kreme Doughnuts.  Unfortunately, it would seem that every day for the last 10 years has been “Act Like A Pirate Day” all over the world, as a new generation of music users is in a habit of stealing music rather than buying it.

WHAT IS COPYRIGHT?

The “copyright” in a musical work is an exclusive legal right given to the originator of the musical work.   If you write a song, then you own the copyright to the song, unless or until you formally assign the copyright to another entity.  There are actually 5 rights wrapped up in the copyright.  We often call this a “bundle of rights”.  The bundle of rights for musical compositions is described as follows:

1)  the right to reproduce copies of the work (print, recorded, etc.) 

2)  the right to prepare derivative works from the original,

3)  the right to distribute copies of the work,

4)  the right to publicly perform the work,

5)  the right to publicly display the work

If you hold the copyright in and to a work, then you have the exclusive right to do these 5 things with your work, or to authorize others to do the same.

COPYRIGHT IS AUTOMATIC

There is a common misconception that registration of a work with the US Copyright Office is what establishes copyright.  In fact, many misinformed songwriters call this registration process, “copyrighting” a work.   However, registration of your copyright is simply a way to document the work and your authorship of the work with the Library of Congress.  It does not establish copyright.

Under the current Copyright Law, a work is automatically protected by copyright from the moment it is created.  It is considered to be created at the time it is “fixed” in a tangible form (i.e. chords and lyrics hand-written on a piece of paper or a voice recording of the song on your iPhone would both be considered “fixed”).   In other words, as soon as you document the song in a tangible form, then the work is protected.  There is no need to publish the work, nor register it with the US Copyright Office, for the work to be protected.  And you may immediately attach a notice of copyright to inform others that the copyright belongs to you.

LICENSING

When someone wishes to use a musical compositions in one of the 5 ways listed above (i.e. reproduce copies, prepare  derivative works, distribute copies, publicly perform or publicly display), then they must obtain permission from the work’s copyright owner.  The copyright owner, negotiates and issues a license for such use of his/her song.  Although there are some standard industry rates and practices, in most cases, the copyright owner can actually say “yes” or “no” to any use and can charge whatever fee he or she may desire to get for such use.  There are exceptions to this rule (primarily with regard to audio recordings after the first use), which is outlined below.

The 4 most common types of licenses include:

  • Mechanical License –  for audio recordings.   The royalty rate is set by law for such uses and permission cannot be denied, except for the very first recording of the song.  However, if the user does not follow specific guidelines in obtaining such permission, permission may be denied or a greater fee may be charged.
  • Print License – for any type of printed music or lyric (physical or digital).   Permission may be granted or denied by the copyright owner at will.  Royalty rates and fees are set by each individual copyright owner, although there are standard industry practices.
  • Synchronization License – for synchronizing a music composition with visual images (i.e. film, video, television, multi-media, etc.)   Permission may be granted or denied by the copyright owner at will.  Royalty rates and fees are negotiated between licensee and each individual copyright owner.
  • Performance License – for public performance of a song (i.e. live performance, radio broadcast, television broadcast, digital streams, etc.)   Copyright owners most often use a licensing agent such as ASCAP, BMI or SESAC (performing rights societies) to represent this right and to license / collect fees for the copyright owner.  Performing Rights Organizations seek to license all radio and television networks, digital and satellite networks, internet broadcasters and live venues such as hotels, bars, concert halls, etc. on behalf of the copyright owner.

For more detailed information on Copyright, see this circular from the Library of Congress.

Do It Yourself

So, what’s the big deal about a deal?  I mean, in today’s market do you really need a publishing deal?  A record deal?

I’ve been a music publisher for 25 years and I can tell you that yes, there are serious advantages to landing a publishing deal (a record deal may be a different story).  And I’ll go through those with you.  But at the same time, I want to make one very important statement …

Publishers are looking for hit songs and hit songwriters.  Period.  They are not looking to find amateurs to develop into superstars.

Why, you say?  Isn’t that the way the music business has always worked?  Then, how do I get my start?  Well, let’s begin with the the first question …

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