Sources Of Publishing Income
by Robert R. Carter, Jr. Attorney at Law
A song's copyright holder owns several important rights, including the right to copy the song, distribute copies of the song, prepare derivative works from the song and perform the song publicly. A song generates revenue for its owner when the owner issues permits, (or "licenses"), to allow others to use these rights, for a fee or royalty. In the beginning you, as the composer of a song, are the song's copyright holder. In order to get the song to generate revenue for you, you may find it necessary to affiliate with a music publisher. A music publisher acquires songs, (and the copyrights), from songwriters and then exploits the songs commercially. Music publishers come in all shapes and sizes. You want to affiliate with a publisher that will be able to find users for your song, issue licenses to users, collect the revenue, and then share the money with you. Songwriter/publisher contracts specify how much of the song's copyright you are transferring to the publisher and how the money generated by the song will be shared between you and the publisher. You may transfer all or a portion of the copyright to your publisher, which will, in turn, affect the way revenues are split. Depending on your bargaining power, the publisher may give you an advance against future revenues.
As background, you need to understand exactly what kind of money a song generates for its copyright holder. A song earns money for its copyright holder from four main sources: mechanicals, public performance, synchronization and print. The way you get the money, and how much of it you get, depends on its source.
Mechanical royalties are the main source of income for publishers. Mechanical royalties are moneys paid by a record company to a song's copyright holder for the right to use the song in "devices serving to reproduce the composition mechanically," i.e., vinyl, cassettes and compact discs.
The current statutory rate for mechanical royalties is 7.1 cents per song per record for recordings of up to 5 minutes in length. For recordings over 5 minutes in length, the rate is 1.35 cents per minute, or portion thereof. The statutory mechanical rate is subject to change, and should be checked before any project. So far, it has only gone up, so it is beneficial to the song's copyright holder to negotiate a provision that the rate will be calculated as late as possible, i.e., the date of a commercial release, rather than the date of a contract.
Record companies routinely ask their recording artists who write their own songs for a mechanical license at 75% of the statutory rate on self-penned songs ("controlled compositions"). Ideally, the record company and the song's publisher work out the details of the mechanical license before the song is recorded and placed on a compact disc or other mechanical reproduction. Even then, it is a monumental task to keep up with the number of copies sold and the calculation and collection of the mechanical royalties due. Many US publishers use the Harry Fox Agency to monitor and collect mechanical royalties in return for a commission of up to 5% of the mechanical royalties collected. The revenues from mechanical royalties, or "mechanicals," are generally divided equally between the publisher and the songwriter.
Public performance income is the second largest source of income to a song's copyright holder. Almost every time any version of a song is performed publicly, whether live or on record, in concert or over radio or television, the copyright holder is entitled to public performance royalties. There are a few narrow exceptions, (for example, educational use in a classroom setting). Songwriters and publishers affiliate with a performing rights society to keep track of air play and other public performances of their songs, and to collect and distribute the resulting license revenue. ASCAP, BMI, and SESAC are the major performing rights societies. They issue blanket licenses to radio and television stations, nightclubs, restaurants, and even retail stores, which allow those users to play songs of their affiliated writers and publishers. The license fees vary, depending on the revenue of the user. The societies then monitor airplay and public performances and, using various formulae, distribute the money from the license fees, (less a commission), to their affiliated publishers and songwriters, separately. Both the publisher and writer should be members of the same society, although cowriters may be members of different societies.
As to which organization is best for you, there is no single answer. They use different formulae in arriving at payments to their affiliated writers and publishers. As to which organization pays more, the common wisdom is that it evens out in the long run. I traveled to Nashville recently with two songwriters, one ASCAP and one BMI. From their experiences and from conversations with several Nashville-based songwriters, I discerned some very definite preferences. Talk to your friends. A payment formula that is best for the writer of a platinum smash may result in no payments at all to the writer of a song with only minor air play. It's probably more important to affiliate with the organization that has better personal contacts for you. While they can put songwriters in touch with publishers and vice-versa, their strengths and weaknesses in this area seem to vary with the genre of music and the particular regional office of the society.
A synchronization license is a permit to use a song in a movie or television show. The producer must obtain a "synch license" from the copyright holder, often for a one time fee. The publisher usually splits that income with the writer 50-50. These one time fees vary tremendously- anywhere from free, (for the exposure), to a few hundred dollars for a television show, to tens of thousands of dollars for a movie, to a hundred thousand dollars or more for a commercial. It depends on how much of a song is used, how important the song is to the show, whether it is merely background, etc. The first broadcast of a "live" show does not require a synch license, but re-runs would. The live broadcast would require the public performance license described above.
Print revenues come from sales of sheet music. The relative importance of print revenue has decreased over the years as consumers have come to prefer records to sheet music. However, it is still a source of serious money and many industry watchers predict an increase in its importance with the growing popularity of detailed transcriptions (or "tabs") of heavy metal guitar licks, synthesizer programming, and the renewed popularity of acoustic music.
Print royalties vary. Copyright holders typically earn 20% of the retail price of single song sheet music and 10-12.5% on songbooks, pro-rated to reflect the number of songs in the songbook owned by that copyright holder. For example, if there are 40 songs in a songbook, or "folio", and you wrote 10, you, (or your publisher), would get 1/4 of the 10-12.5% royalty. Historically, publishers and writers don't split print income equally. For single song sheet music the writer only gets 5-10 cents per copy and only about 10% of the wholesale price on folios. I am beginning to see publishing contracts which call for a 50-50 split on all income, perhaps in an effort to keep things simple. This is great for you as a songwriter, because it results in higher print income.
Many contracts limit your payments to what is specifically set out in the contract. That seems reasonable enough, but as technology continues to develop, new income sources may develop as well--revenue sources that we can't even begin to imagine. You don't want to be shut out from those sources of income. Insist on a "catch all" phrase providing that you will receive 50% of any and all other money sources not specifically referred to in the agreement.
In addition to these four main sources of income, there is foreign sub- publishing. In a way, that's just the non-US version of the income sources discussed above. Depending on the contract, your US publisher may only acquire US rights or may be authorized to sub-license outside the US, splitting the net income with you.
Robert Carter represents musicians, performers, and songwriters of every genre, as well as independent record labels, publishing companies, managers, studios, and others in the music industry. He is a past president of the Austin Songwriters Group, secretary of the Entertainment Law Section of the State Bar of Texas, and board member of Austin Lawyers and Accountants for the Arts. He serves on the Planning Committee for the State Bar of Texas seminars on the Legal Aspects of the Entertainment Industry. He is an Adjunct Professor of Entertainment Law at St. Mary's Law School. A former Briefing Attorney for the Texas Supreme Court, and an Honors Graduate of both the University of Texas and the UT Law School, Mr. Carter has been in private practice since 1982. His articles on music law appear in monthly newsletters and magazines throughout Texas. He is a frequent speaker at artist seminars.
His book, Song Rights: Legal Aspects of Songwriting, is a 96 page soft-bound primer on these and other legal issues facing songwriters, written in plain language and with a sense of humor.