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What Publishing Is
February 10, 2003

It Pays to Play:

HOW ARTISTS GET PAID: PUBLISHING 101
By Wendy Day

Publishing is the most valuable thing that artists own, yet the least understood. The moment an artist creates lyrics or music, the artist owns that composition--as soon as the pen writes a lyric or a note is played next to another to make a song. Most artists underestimate the value of their songs and too often give away their publishing or sell it too cheaply because they need money. There are only a few ways for artists to get paid when they are signed to a record label (and even fewer when they aren't signed). Aside from any advances paid by the label to the artist (which they have to pay back before they ever see any royalties, or profits, from the sale of their records, CDs, cassettes, digital downloads, etc), one of the greatest sources of income for songwriters (including lyrics and beats), both long term and short term, is the money artists get from ownership of publishing, provided they keep the ownership of their publishing. There are four types of publishing royalties: performance royalties, mechanical royalties, synchronization fees, and print royalties (although sheet music is rare for rap music). An analogy can be made between publishing and real estate: when you make a song, you are the owner of the property--the landlord. Sometimes you sell a piece of the land when you need money, but you never give away a piece of the land. And if someone wants to use your land, then they pay you for the privilege of renting it.

Each song is one copyright, roughly speaking, with 50% being the lyrics and 50% being the music. Each half is also comprised equally of writer's share and publisher's share as it pertains to royalties. For example, the lyrics may be 50% of a song, but that share is comprised of 50% writer share and 50% publisher share. When an artist has a co-publishing deal with a publisher (such as EMI Publishing, Warner Chappell, Sony Publishing, Zomba, Rondor, Famous, BMG Publishing, etc), the deal is for a percentage of the publisher's share but not the writer's share. Provided the artist has not signed a "work for hire" songwriter's agreement (the most evil contract that exists in the music industry), the artist always retains the writer's share of a song.

Performance Royalties are the royalties that artists receive for live or broadcast music. Anyone who broadcasts music (recorded, live, or in video form-- like a radio station, TV or cable station, a nightclub with live shows, concert hall, airlines, or a juke box at the local bar) has to pay a fee to use the licensed music to either ASCAP, SESAC, or BMI. These organizations basically exist to negotiate and collect fees to make certain artists get paid for performance play of their music. In order to comply with U.S. copyright law, any establishment that plays copyrighted music is legally required to secure permission to use it. Each year, licensing fees are collected, and then divided up by each organization amongst its artist members and publishing members. These collected fees are divided based on a mathematical formula that changes depending upon the amount of licensing fees taken in annually. Of the over $2 Billion performance royalties generated each year around the globe, US organizations collect about $800 million. ASCAP is responsible for 55% of the total, BMI collects about 44% and SESAC approximately 1%.

According to Music, Money and Success: The Insider's Guide to The Music Industry, by Jeff and Todd Brabec:
-in just a few years, a #1 song of the year can generate a $2 Million writer and publisher payout,
-a successful television series theme song can generate in excess of $1.5 million over a ten year period,
-the background score of a top box office film can generate well over $2 million in performance income over its copyright life.
-#1 pop chart single in one year can garner over $350,000
-#10 pop chart single in one year: over $225,000
-#50 pop chart single in one year: over $50,000
-Lifetime copyright earnings of a major popular song: upwards of $7,500,000

The three performing rights organizations are as follows:
ASCAP: American Society of Composers, Authors, and Publishers, is a not-for-profit membership association of over 80,000 composers, songwriters, lyricists, and music publishers. ASCAP's function is to protect the rights of its members by licensing and paying royalties for the public performances of their copyrighted works. ASCAP is an organization run by the very members it benefits, elected by the members. For more info check www.ascap.com

BMI: Broadcast Music, Inc is owned by broadcasters and issues licences on behalf of their over 140,000 writer and 60,000 publisher members. BMI was founded in 1940 as a non-profit organization. BMI distributes performance royalties quarterly, beginning in January. For more info check www.bmi.com

SESAC: SESAC was founded in 1940 and set up as a "for profit" organization. When a songwriter or publisher affiliates with SESAC, they are then represented for the right of that music to be played in public and are paid royalties based on how much their songs are played. The system required to compute compensation is based on many factors, including music trade publication chart activity, broadcast logs, computer database information, and monitoring. SESAC is the smallest of the three U.S. performing rights organizations. For more info check www.sesac.com

Mechanical Royalties are paid by the record label from the sale of CDs, tapes, and records. The rates are set by Congress (known as the statutory rate) and increase automatically every two years. On January 1, 2000, the current rate became .0765 cents per song (the rate increases every other year) for a maximum that is set by the record label in the recording contract (usually a maximum of 10, 11, or 12 songs per album no matter the actual length of the album, and this is definitely a negotiating point). This means that if the statutory rate is provided at 11 songs, each album or CD sold would automatically bring the artist 84.15 cents per unit sold (or $420,750 for a Gold album, which is 500,000 units sold). Because this industry can't just let an artist make money without having some dumb clause for the label to get back some pennies, there is a clause called "Controlled Composition." This stipulates that the statutory mechanical royalty can be reduced (and this is another point of negotiation) often to 75%. This means that the 84.15 cents per unit could be reduced to 63.11 cents per unit, which would actually be $315,563 for a Gold record. Other than being established for no reason other than for the record company to make more money, I can't seem to find anyone who can explain to me why it exists. I traced its first use, however to CBS Records.

Here's the difference those few pennies make as it pertains to an artist's mechanical royalty check provided he or she owns 100% of the song listed from best scenario to worst, based on the mechanical royalty rate from December 1998 (.0715 cents per song), so I could use an actual scenario of an artist to further illustrate the point:
# songs controlled comp
mechanicalper unit 100,000 sold 250,000 sold 500,000
(Gold) 1,000,000
(Platinum)
12x 100% .8520 $85,200 $426,000 $852,000 $1,704,000
12x 85% .7242 $72,420 $181,050 $362,100 $724,200
12x 75% .6435 $64,350 $160,875 $321,750 $643,500
11x 100% .7810 $78,100 $195,250 $390,500 $781,000
11x 85% .6639 $66,390 $165,975 $331,950 $663,900
11x 75% .5899 $58,990 $147,475 $294,950 $589,900
10x 100% .7150 $71,500 $178,750 $357,500 $715,000
10x 85% .6035 $60,350 $150,875 $301,750 $603,500
10x 75% .5363 $53,630 $134,075 $268,150 $536,300

*based on the rate of .0715 per song, which was the rate from 1/98 through 12/99 so I could use Fiend as an
illustrated example.

The dollar figure above represents monies due an artist (regardless of recoupment) per album based on ownership of 100% of publishing. So for example, Fiend who used to be signed to No Limit, provided he owned 100% of his publishing (I can dream can't I?), if his deal gives him 11x rate at 85%, then on his first album, There's One In Every Family, which came out 4/28/98 (the rate then was .0715 cents per song) and sold 565,977 SoundScan units, No Limit would have paid him (hopefully) $378,370. If No Limit owned half of Fiend's publishing, he would have received $189,185 provided he wrote all of his own songs (which he did, except the verses by artists who appeared which lowers the ownership percentage and dollar amount) and provided he made all of his own beats (which he did not; he features outside producers on this album like
Beats By The Pound).

Synchronization Royalties refer to music used in film, tv (including commercials), and
soundtracks--anytime that music is used in a timed synchronization with visual images. When a film or television show uses music in the background or prominently, they have to pay a fee to the owner of the music. The fees vary widely with the usage and importance of the song. Print Royalties are for sheet music, where a royalty is paid to the publisher for the use, and are roughly 20% of the retail selling price of a single song-sheet.

Although this is not considered publishing money, I'm going to include here an explanation of retail royalties. They are often confused with publishing because the money an artist receives is called a "royalty." This is one of the main areas of negotiation in a recording contract. These royalties, also known as "points" are based on a percentage of the manufacturer's suggested retail selling price for every unit sold AFTER the artist recoups. "Recoup" means to pay back most of the money spent on the project such as advances, recording, usually half the video costs, and often half of the independent radio budget. Most recording contracts specify what is recoupable
and what is not (another area of negotiation is to reduce the recoupable items and to set limits on what can be spent in areas such as video, radio promotions, free goods, etc). Retail Royalties usually run between 11 points and 18 points (a point is roughly equal to 8 cents per unit sold). And in the true fashion of a record label reducing what they have to pay the artist whenever they get the chance, some contracts include "packaging deductions," special "CD rates," and/or "breakage fees" to further reduce the royalty. There is always a reduction in points for units sold outside of the United States (US and Canada should almost always be paid at 100%, and I'd even
try to negotiate to include all of North America if I were doing the deal) as well. The more leverage an artist has in the negotiations, the higher the point structure usually. If the artist has a strong buzz or has sold a lot of units prior to being signed, it should not be difficult to secure 18 points. But again, points, or retail record royalties are only paid after an artist recoups, so if too much money is spent on marketing the project, videos are shot for hundreds of thousands of dollars, and the artist is unrecouped, it doesn't matter how many points are involved--it could be
100, no money will be paid to the artist. Almost all artists are unrecouped.

A copyright is the ownership of the written lyrics or music of a song. It is a legal protection of the ownership granted by law. By filing a copyright form (SR Form for a Sound Recording) with the Copyright Office in Washington, DC for $20 (202.707.9100 or
http://www.loc.gov/copyright/forms/formsri.pdf to get applications), it protects your ownership of the song. It is important to distinguish between a copyright and a "work for hire" which is when a songwriter agrees to write a song for an employer while an employee of that person.

At Rap Coalition, we do not believe in "work for hire" under ANY circumstance, as the creator of a body of work should always be in ownership and direct control of his or her art/creation. Under the law, the creator of a work, who is not an employee acting in the scope of an employment agreement, is considered the copyright owner from the moment the work is created--fixed in a tangible medium of expression. That means you write a lyric, or create a beat, and you own it! A "poor man's copyright" (which is mailing your songs to yourself with a signature across the seal of the envelope, and not opening it upon receipt to yourself, using the postmark as proof of date), while offering proof of authorship, is NOT a legal proof of copyright ownership. Only filing with the Register of Copyrights on an official form to the copyright office in Washington, DC qualifies proof of ownership in a court of law.

Don't be discouraged if it takes some time to completely understand publishing and all of the different aspects of it. Donald Passman's book All You Need To Know About The Music Industry has a pretty clear explanation of publishing. Also, Rap Coalition's website has some articles that clearly outline publishing at www.rapcoalition.org.

Source: rapcoalition.com


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