Week 4 - Music Publishing and Performing Rights Organiztions

CLASS FOUR - MUSIC PUBLISHING

Publishing Law and Agreements in the Music Business; Role of Performing Rights Organizations

I. What is a Music Publisher?

A. Historically speaking, a music publisher was a company that published sheet music of songs. Today, most music publishing activity is really licensing the compositions they control to commercial companies who exploit music for profit i.e. advertisers, record companies, internet companies, satellite and film/tv companies.

Anyone who controls the copyright to one musical composition can consider themselves to be a music publisher. Therefore any writer who owns all or part of a musical composition can be considered the music publisher of that song or part of a song. Until the writer assigns his rights to that work to another person in writing, the writer(s) will remain the publisher of that composition.

II. How Do You Form A Music Publishing Company?

A. Music Publishing Companies are formed differently than most companies because no two music publishing companies can have the same name. To insure this, each of the three performing rights organizations (ASCAP, BMI, and SESAC) take applications and clear the name of the applicant against their existing data base of names. Therefore, the first step in forming your own publishing company is to apply to join one of the three performing rights organizations. In the application, Five names will be required in order to find one that is clear to use. The form of entity is not important. It can be a sole proprietorship, partnership, LLC, or Corporation.

III. Roles of Music Publishers

Professional Music Publishers take on the following tasks:

A. Acquiring and Copyrighting of new songs

B. Registering Songs with Performing Rights Organizations

C. Negotiation of various licenses with record companies, film companies, video/tv companies, advertising companies, video game producers, etc.

D. Marketing their catalogue songs: i.e.

Trying to interest producers and artists in recording their songs

C. Collecting Income from Licenses

D. Preparing Statements for Songwriters and Paying Royalty Shares

E. Enforcement of rights against unauthorized users

IV. Types of Agreements Negotiated by Music Publishers

A. Performing Rights Organization Agreements with BMI, ASCAP, and SESAC;

Public performance of musical compositions on radio (terrestrial and cyberspace)and television stations are licensed; broadcasters pay license fees based on percentage of gross income; also licensed are any public venues where music is played; stadiums, nightclubs, concert halls, retail businesses, etc.

B. Songwriter agreements with writers

A basic songwriting deal calls for the songwriter to assign their copyright to the publisher in exchange for a percentage of the income collected that ranges between 50% at the low end to 75% at the high end. Usually there are no guarantees that the publisher will get the song commercially recorded. However, if the song is not commercially recorded when delivered, a songwriter should be able to negotiate the return of the copyright if the song is not recorded commercially or exploited commercially in a film during a certain number of years. The biggest problem that songwriters face when contracting with small publishers is receiving timely payment and statements for their songs.

C. Mechanical and Digital Licenses for recording

Full Statutory rate as of 2016 is 9.1 cents for a song of up to 5 minutes, and 1.75 cents per minute for every minute or fraction of a minute over 5 minutes.

Publishers will often sometimes accept 3/4 of the full rate, but only on physical product. Digital sales are required to be paid at the full rate.

Harry Fox Agency, based in New York, and Bug Music often handle the issuance of mechanical licenses and collect mechanical publishing income for other publishers.

D. Sheet Music Reproduction and Distribution

Today, this often is done over the internet. See Musicnotes.com

E. Music Synchronization Licenses for use of music in film, video and video games

(1) the highest paid placement for film music is in either the opening or closing credits of the movie. Having music placed in the 'trailer' or 'preview' for a feature motion picture is also quite lucrative.

(2) generally speaking, the owner of the Master and the Owner of the composition receive the same fee from the film company in separate licenses. So if the movie company’s budget for the use of the song is $20,000, the movie company will negotiate and pay $10,000 to the publisher and $10,000 to the owner of the Master.

(3) some video game companies will pay per unit fees, but most pay a flat fee for the game regardless of how many units are sold.

V. Problem Areas in Music Publishing Administration

A. Payment and accounting of monies to songwriters

1. late, missing, or inaccurate statements

2. difficulty in tracking multiple songwriters with various shares of the song

B. Conflict in Rights

writers may sign their rights to more than one party or not control what they represent they control

C. Collection of foreign royalties

Foreign Sub-Publishing Deals may be required to enable collection of income from Foreign Performance and Mechanical Societies

D. Failure to exploit rights by Publisher ties up Songwriters copyrights

E. Small independent record labels often want publishing rights in addition to recording rights

1. if artist agrees, then he has to give up between 25 and 50 percent of his future songwriting/publishing income just to sign a recording deal

2. the worst part is if his royalties for publishing are cross-collateralized with his recording royalties. this means that the artist won't get paid any publishing money until all his recording expenses are recouped.

V. Basic Songwriter Contract Terms:

TWO BASIC TYPES: SINGLE SONG OR EXCLUSIVE TERM

IMPORTANT TO DISTINGUISH BETWEEN THEM

SINGLE SONG

can be for more than one song but agreement only applies to specific songs already written and named in the agreement

OR

EXCLUSIVE TERM AGREEMENTS

exclusive agreements last for a period of time and cover all songs written during that time period

Some Term Agreements can be limited to songs recorded by an artist’s record company during the term of his agreement; other songs she writes which are not recorded by the Artist may not be subject to the exclusivity agreement

A. Who are the Parties to a Songwriter Contract?

Usually a songwriter and a publisher; Remember, until a songwriter assigns rights to the songs they have written to a publisher, they are self-published and entitled to organize and conduct themselves as a publisher.

B. What is the Inducement for the Songwriter to enter into the agreement?

A Cash advance is usually the most popular reason; songwriter gets an advance and transfers 100% of the copyright in exchange for between 50% and 75% of the income from the song. Also, the publisher is going to be responsible for doing the administration of the songs, i.e. negotiating licenses, filing copyrights, and generally trying to the song used commercially

C. What Are Administration Rights?

Administration rights are the rights to negotiate licenses and collect monies due from various licenses of the compositions. Some songwriter-publisher deals are for administration rights only. The songwriter keeps the copyrights. Publishers such as Bug Music will perform these functions and pay the copyright owner (publisher) the monies collected less a 10% to 15% administration fee. Where copyright is assigned as part of the publishing agreement, the administrating publisher will often deduct a percentage of the gross for “administration costs”. This may be to cover a third party administrator or the costs of administrating the copyrights ‘in-house’. Actual expenses of administration are also deductible, i.e. copyright filing fees, etc. Most attorneys for songwriters fight against deduction of administration fees unless they are actually paid to a third party such as Bug Music. The amount deducted ranges from 5% to 15%

D. What are Co-publishing rights?

One publisher can grant a share of publishing rights to another publisher. Typically, under the most popular arrangement, one publisher will end up administering the publishing rights, collecting all of the income and then remitting it to the other publisher in the agreed percentage. These agreements will often call for assignment of half of the copyright to the administrating publisher, along with administration rights. 

E. What Territories are covered?

US only?

One Country?

Worldwide?

D. How long is the Term and are there Options to extend?

The length of a term in an exclusive songwriting agreement is often defined by delivery of certain number of recorded compositions released by a major label during a set period of time, which number is known as “delivery requirement”. Typically songwriters get paid ½ of a pre-agreed advance upon signing and the balance upon completion of the delivery requirement. Upon completion of the delivery requirement, the remaining balance of the advance is paid and the company can  exercise the first option period. Usually there are two option periods

The length of the term of a single song agreement is typically the life of the copyright, including any renewal terms. However, under the current copyright law, the authors can terminate their transfer of the copyright by filing appropriate notice with their publisher 35 years after the publication of the composition. Some publishers will agree up front in the agreement to a ten year term rather than the entire period of the copyright.

E. What rights are granted?

1. Under a single song agreement, the copyright to Songs identified in the agreement.

2. Under an exclusive term songwriter agreement, existing songs will be assigned, plus new songs written during an exclusive term

3. The right to recapture of copyrights to songs should be negotiated if possible; recapture should definitely should be in the deal if no advance was paid; otherwise songs could be given away for promise of commercial exploitation that never occurs.

F. Advances to be paid

Advances are set forth in the agreement and the requirements for payment.

G. Basic Types of Music Publishing Income

1. mechanical income

2. synchronization income

3. sheet music income

4. performance income

H. How is credit for authorship for Songs awarded between songwriters?

Under the Copyright Act, it is presumed that the authors who file the copyright application together are sharing the ownership of the song on a pro-rata basis. i.e., if there are 3 songwriters, each is assumed to own 1/3 each. There is no place on the form to indicate a different apportionment of ownership. In fact, it is rarely the case that all songwriters are in fact sharing the ownership equally. So what are the guidelines for how songwriters arrive at the percentages of ownership for the songs on which they collaborate?

If a song has both lyrics and music, under music industry tradition, the authors of the music and lyrics are each entitled to 50% of the songwriting credit. Since songwriting authorship is the basis for copyright ownership, where there are only two songwriters, and one writes the lyrics and the other writes the music, they will own 50% of the song each. The credits for the song where both songwriters have their own publishing companies would look like this:

Song Title: “Move to the Music”

Songwriters:

Lyrics: Bob Smith 50% (100% of the lyrics)

Music : Dave Jones 50% (100% of the music)

Publishers/Copyright owners:

Bob Smith Music Publishing: 50%

Dave Jones Music Publishing: 50%

If there are four writers, and one of them, Dave Jones, wrote and produced all of the music, but Dave wrote none of the lyrics, the splits would look like this:

Song Title: “I Love My Hound Dog”

Lyrics: Bob Smith 16.66% (33 and 1/3% of the lyrics)

Jim Smith 16.67% (33 and 1/3% of the lyrics)

Sam Smith 16.67% (33 and 1/3% of the lyrics)

50.00%

Music: Dave Jones 50% (100% of the music)

Publishers/Copyright owners

Bob Smith Music Publishing: 16.66%

Jim Smith Music Publishing: 16.67%

Sam Smith Music Publishing: 16.67%

Dave Jones Music Publishing: 50.00%

100%

If Dave Jones and Bob Smith write another song, but this time Dave Jones writes half of the lyrics and all of music, the credits would look like this:

Song Title: “Mortgage Meltdown Blues”

Songwriters:

Lyrics: Bob Smith 25% (50% of the lyrics)

Dave Jones 25% (50% of the lyrics)

Music : Dave Jones 50% (100% of the music)

Publishers/Copyright Owners

Bob Smith Music Publishing: 25%

Dave Jones Music Publishing: 75%

In all cases where songs are created by the contributions of more than one songwriter, it is critical to get all of the songwriters to agree and sign a written document that states what how shares of the songs are agreed to be divided long before the song is released to the public. Many problems are created by songwriters failing to take this step and then having disputes over the ownership shares after the record is released, which can hold up everyone’s royalties.

Other than dividing the songwriting credit between lyrics and music, there are no hard and fast rules about how songwriters must accord credit to each other for their contributions. Writers that come up with a catch chorus often feel that it is worth a higher percentage of the lyrics. Some bands prefer to share credit equally on all songs rather than get into a divisive discussion over who contributed what to each song.

I. How are transactions involving assignment of a portion of the so-called “Publisher’s Share” of a composition calculated?

Much confusion abounds in the music industry about the term “publisher’s share”. I will try to shed some light on this important term.

First, keep in mind that the classic division of income earned by a musical composition between a songwriter and a publisher was 50% to the songwriter, and 50% retained by the publisher.  A "pie" chart is best way to think about this split. (to be drawn in class)

Over time, the music publishing industry referred to these two equal shares of the income from musical compositions as the “the publisher’s share” and the “songwriter’s share”.

L. What are the most common income sharing terms found in today’s agreements between songwriters and publishers?

Over the years, the songwriter has succeeded in securing more favorable terms from publishers. Today, it is common to see a songwriter receiving 75% of the income from exploitation of the song instead of the traditional 50%. In today’s publishing agreements, you will still often find references to the “songwriter’s share” and “the publisher’s share” however. In describing the total share paid to the songwriter, agreements will often state something like this:

“ the songwriter is to receive “100% of the songwriters share, pro-rated amongst songwriters, and 50% of the publisher’s share attributable to that portion of the song authored by the songwriter”

The result of this language is that the songwriter assigns his copyright to the publisher, and in return receives 75% of the income paid to the publisher from the total earnings of the song, less any contractual deductions, i.e. 100% of the songwriters share, and 50% of the publisher’s share.

VI. Music Performing Rights in Compositions and Master Recordings

A. The US Copyright Act grants to copyright holders of musical compositions the exclusive right to perform the work publicly. This resulted in the payment of royalties to songwriters and publishers whose works were recorded and played on the radio and television, etc. Oddly enough, this right was not originally given to copyright holders of sound recordings. The result is that the playing of the sound recording of the composition on Radio and Television only triggers payments to music publishers and songwriters, but not the record companies who created and own the sound recording itself.

However, in 1995 the right to perform music digitally was given to copyright holders of sound recordings. Although Master copyright owners are still are not entitled to performance income from over the air radio and television broadcasts, there is legislation now in congress sponsored by Independent and Major Labels to amend the copyright act and provide performance income for sound recordings played in these media as well. Most foreign countries already require performance fees to be paid for sound recording performances on terrestrial radio and television.

License fees for performance of Master recordings over digital media such as the internet are currently being collected by digital performance rights organizations. Soundexchange is the primary organization responsible for collecting and distributing the monies collected for digital performances of sound recordings. There is a formula that is used to divide the income between the copyright owner, the featured artist, producer, and musicians. Registration of the songs with Soundexchange is a condition of receiving payment. As digital performance of music increases (i.e. streaming over the internet, Sirus/XM and other satellite based digital performance media) the fees payable will also increase. Just as registration of compositions with performance right societies such as ASCAP and SESAC is important, the registration of the Master Recordings owned by a label or artist is also important if they are performed digitally. Given the ease of tracking digital performances using digital recognition software, performances will be relatively easy to monitor.

B. Types of public performances of music

1. live concerts or playing pre-recorded music  in clubs, concert halls, retail outlets, malls, stadiums, airplanes, and any other public place

2. tv (over the air, cable, satellite)

3. radio (over the air, digital, cable, satellite)

4. internet

C. Performing rights organizations for musical compositions

There are three major Performing Rights Organizations for compositions in the United States:

1. ASCAP

2. BMI

3. SESAC

The differences between them are not that significant. The most important action to take is to join one. Then make sure all your compositions are registered with them which have a chance for public performance. All currently collect for digital performances of compositions as well as broadcast performances on radio and television, and live performances through the licensing of venues. Each has a sophisticated website and most interaction can be done on the web in terms of applying for membership and registering songs.

A musical composition will be registered with the music performance rights organization that the publisher and songwriter of that composition is currently, affiliated. A publisher and a songwriter can only be affiliated with one performing rights organization at time. However, if portions of songs are owned by publishers that are members of each society, each society will pay based on the share of the song that is controlled by their affiliated songwriter or publisher. At the end of their contract term, songwriters and publishers can change to another performing right society if they so chose.

D. Two Types of Membership in Performing Rights Organizations: Songwriter and Publisher

1. Songwriter Membership –

Must be an individual and can only join one society at a time. Songwriters will receive 50% of the income earned from their compositions.

2. Publisher Memberships

You may apply as an individual, partnership, LLC (Limted Liability Company) , or corporation as long as you own a portion of at least one publicly released composition

If you are a songwriter who owns your own publishing company, you need to have both types of membership since you are a writer and a publisher. The monies earned by the song are paid separately 50% to the songwriters and 50% to the publishers. That is why you must also register as a songwriter even if you own your own publishing company.

SoundExchange

SoundExchange is a Performance Rights Organization that collects royalties for the digital performance of Master recordings or non-musical recordings over any digital medium, i.e. the internet, digital cable or digital over the air service.