INTRO
The object of this document is to provide really basic information about what music publishing is and how money is generated by musical compositions.
COPYRIGHT
When you own the copyright to something, it means quite simply that you have the right to decide who can make a copy. Copyright is the right to copy. Obviously there’s more to it than that, but this is the most basic power that you have as a copyright holder.
Copyright is formed by virtue of the fact that something you create is new and original. In certain jurisdictions, it also has to take a graphic form, which can be as simple as a boom box recording of a song, or writing down the lyrics and the chords.
Copyright is intellectual property, which means that it’s something that isn’t tangible and physical. You can’t hold a song in your hand. But that doesn’t mean it’s not a powerful tool.
Things that can be subject to copyright protection include paintings, books, photographs, choreographies, films, television programs, musical compositions and sound recordings.
A TALE OF TWO COPYRIGHTS: COMPOSITION AND MASTER
In terms of music, the key thing to understand is that each recording of music actually includes two distinct copyrights:
1. The copyright in the song itself, or the musical composition or simply the composition. This means the rights in the words and music of a song, and is often referred to as the ‘Publishing’ rights. Think of an old-school songwriter sitting at a piano, writing music and lyrics to a song. That song existed before it was recorded. Often musicians (especially in electronic music and hip hop) have a hard time grasping this because they write music while they are producing it – sitting at their computer producing a recording. The copyright in the Composition is owned by whoever wrote it, until they assign or sell those rights to a Music Publishing company. Copyright is formed when you write a song, by virtue of the fact that it is new and original and takes a graphic form, such as writing down the lyrics or doing a demo. There’s no need to register a copyright in order to create it, although it is possible to register copyrights.
2. The copyright in the sound recording, also known as the Master. The Master is a recording of a Composition, so in a sense the copyright to the Composition is embedded within the Master. The copyright to the Master is owned by whoever produced it. Often this is a record company, and the rights/terms of are included within the contract between artist & record company.
It’s essential to understand that the composition and the recording are two different copyrights, since all the income sources in the music industry will flow either to one or the other. To illustrate this, think of a famous song such as “Georgia on my Mind”. Each record company that produced each version of that song owns the master they produced, but the fundamental rights to the composition remain with the original publisher, who owns the Composition. The publisher gets a cut of each record made by each company.
RECORD LABELS v. MUSIC PUBLISHERS
The business of a record label is basically generating money with Recordings. The basic business model historically has been to manufacture product (vinyl records, CDs) and sell them in stores. It’s a manufacturing business, selling product to consumers, same as selling widgets.
Music publishers generate money with songs. This occurs in a variety of ways:
1. Public Performance Royalties. These royalties are paid by anyone who ‘publicly broadcasts’ music, for instance radio and television stations, live performance venues, retail outlets and, yes, even elevators. In Canada, this is administered by SOCAN. In the US, there is ASCAP, BMI and SESAC. Most other territories have a similar organization – referred to as a Performing Rights Organization or PRO. Keep in mind that these royalties are paid by the broadcasters, not by the producers of a TV show for instance. They have to pay a certain percentage of their annual ad revenue to the PRO for a blanket license to use all music.
Public Performance royalties are often referred to in the industry as “back end” revenues, since you only get paid a few months (if not years) after the song is actually performed on radio or TV.
2. Mechanical Royalties. These royalties are basically the publisher’s cut for record sales. Since a Master Recording is a reproduction of a composition (the composition is embedded within it, so to speak), the record company has to pay for the right to do this. The rate in Canada is set by negotiations between labels and publishers, and in the US there is a statutory rate set by the US copyright board. This rate is currently 10 cents, but is in review at this time of this publication. Labels either have to pay a mechanical rights society who collects on behalf of the publishers and composers, such as the Harry Fox Agency in the US and CMRRA and SODRAC in Canada, or the publishers collect directly from the labels.
In Europe the system works differently in the sense that the rate is set as a percentage of the wholesale price of albums sold, and it is collected on by the mechanical rights society when CDs are manufactured. Essentially what this means is that if you have albums out under license in Europe, you either need to join a mechanical rights society or get a sub-publisher to collect your mechanical royalties, since you can’t collect directly from the label
3. Synchronization. This is where a publisher allows someone to “sync”” music with images. This can be for many different purposes: film, TV, advertising, video games, multimedia, and various and sundry corporate uses (we’ll refer to all these as “Productions”). The basic idea is that the producer of a TV show for instance pays to place a song into the background of a scene, for example. Fees are negotiated on a case-by-case basis. From the publisher’s point of view, it’s an attractive proposition because you get a fee up front (the ‘”Sync Fee”). The same applies for DVD productions, although you will occasionally see a per unit rate negotiated, that in effect acts much like a mechanical royalty.
Sync licensing also generates back-end public performance royalties, when the TV show of film gets played on TV, for instance (see # 1 above). In that sense, the sync licensing is a powerful tool because you end up getting paid twice: the front-end sync fee paid by the producer of the Production, and the back-end public performance royalties paid by TV broadcasters. Obviously this only applies for the type of Productions that end up on TV, such as films, TV shows and commercials, and not for video games.
Another key thing to understand is that since there are two copyrights involved, two licenses need to be issued in order to make sync use of a recorded song:
* Synchronization License: gives you the right to ‘sync’ the Composition with images in a Production, as described above.
* Master Use License: It’s exactly the same rights as the sync license, except it applies to a Master and is often issued by the record company.
Since the publisher owns the Composition (sync license) and the record company owns the Master, often two different negotiations have to happen and two different contracts signed in order to a song to be used in a Production. Obviously this can lead to complicated and time-consuming negotiations.
If a single company owns or controls the rights to both the Master and the Composition, this is called a One-Stop-Shop. This means that the company can sign both the Sync license and the Master Use license, which is a lot less complicated and more attractive from the point of view of a film or TV producer.
It should be noted that the end result of these negotiations is usually that both copyright licenses receive the same upfront fee. This is what is referred to as MFN (Most Favored Nation). However it’s not always the case and certain concessions can be made based on budgets and other factors.
Since a lot of independent artists write their own songs and produce their own recordings, they are in a great position to license music for film and TV and whatnot, since they are by definition a One-Stop-Shop for their own music. However it is generally the work/contacts of a publisher and/or record label that generate these incomes. If the music is good and the band is willing to license, it can be as simple as getting the music into the hands of your friendly neighborhood music supervisor. These music supervisors tend to have a lot of options to pick from and often need answers right away, so it’s important that the publisher & label you’re working with are in a position to turn deals around quickly.
4. New Media. Of late a variety of new media licenses have taken shape. This can be as simple as a pure digital download, which in essence works as a mechanical license, or a streaming based service (like Rhapsody), which creates a right that many feel is a hybrid between a mechanical and a performance. The latter rates are being negotiated between new media companies and collection societies, as well as with publishers directly. Another recent phenomenon has been user-generated content, which tends to utilize compositions in synchronization with user video. This creates a synch usage and ways to monetize this action are in discussions between new media companies and publishers.
PUBLISHER STRUCTURE
Given the above mentioned revenue streams as the goal for the publisher, most publishers are made up of a few key departments:
1. Administration – these are the folks who register the song data (writers, splits, etc) both internally (publishers system – often counterpoint) and externally (to societies and international affiliates or “sub publishers”)
2. Licensing – this staff are the ones who finalize mechanical, new media and synch licenses. They generally deal with licensing departments from Film and TV studios, gaming companies, ad agencies, trailer companies, ringtone companies, etc.
3. Creative – This is the department that signs new writers and catalogs to the publisher. They also are charged with promoting the music to potential licensors and getting their writers opportunities to write or co-write with artists.
4. Business Affairs – This group act as the internal legal services group. They finalize all acquisitions, as well as are involved in the language related to licenses drafted for traditional and new media licenses. They also will go after companies / persons who infringe on copyrights that the publisher may own.
5. Royalties – This is the group that processes incoming revenue from all sources and in turn pays out the writers.
PUBLISHING DEALS
There are two common types of deals a writer can enter with a publisher.
1. Administration – where a publisher does NOT own the copyright, but rather will do the back end, administrative work to ensure the copyright is registered and protected on behalf of the copyright owner. In this scenario, the publisher is not as motivated to invest in proactively pitching the music.
2. Co-Publishing (or full-publishing) – where a publisher has an ownership stake in the copyright. The most common stake is 50% (co-publishing) with 100% ownership of the copyright (full-publishing) being rare. Bear in mind, the writer always controls “the writer’s share” of the song and when people refer to “copyright” they are referring to the publishing half of the song, which contains the administration right, or right to control what happens to the song. Writers will often maintain approvals over synchs, however. In a co or full publishing scenario, a publisher is highly motivated to invest in promoting the songs, as they are owners.
