By Rachal Ranteesi*

Introduction

Music publishing constitutes a major source of revenue for composers.¹  Composers earn revenue by reproducing, selling, and licensing their work.  When a composer signs a contract with a publishing company, that company takes over several responsibilities including that of reproducing, selling and licensing the composer’s work.

Composers also earn revenue when their music is publicly performed.  During the 20^th century music publishers were tasked with persuading entertainers to publicly perform musical compositions in order to stimulate the sale of printed editions and player piano rolls, and create revenue for the composers and themselves.²  Due to the expansion of technology for merchandising music, there are many ways in which a composer and publishing company can earn revenue today.  “As the complexity and size of the music publishing industry increases, so does the amount of money that can be earned within it.”³  One hit song can make a composer very affluent.

Music publishing is seen as a good way to make money because the company that uses the composition in a sound recording usually does the marketing and promotion of the music.⁴  Marketing and promotion are the hardest part of selling music and can be very costly.⁵  Publishing catalogs have become valuable and currently sell for eight to fifteen times their average annual income, and some at even higher rates.⁶ “Major financial institutional investors are always on the hunt for music publishing catalogs.  Songs are like oil wells; they keep pumping revenues year after year.”⁷ 

What Do Music Publishing Companies Do?

Music publishing companies assist composers by reproducing, selling, and licensing their work.⁸ Music publishing companies authorize the sale of songs, and receive revenue in return, in which it shares with the composer.⁹  Music publishers perform many other tasks for the composers.  These include copyrighting musical compositions in the United States and in foreign countries.¹⁰  If a publishing company finds that someone is infringing on musical compositions, it will sue and negotiate settlements, when appropriate.¹¹  Protecting the publishers copyrights and enforcing the rights it has been granted by the writer and the U.S. copyright laws, is very important to both the writer and the publishing company.¹²  “The good publisher will spend a great deal of time and money to ensure that its songs are not used without permission and compensation.”¹³

Music publishing companies also arrange for the manufacturing and distribution of sheet music and composer compilations.¹⁴  A music publishing company properly registers songs with performance rights organizations, such as American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), and SESAC.¹⁵ Music publishing companies negotiate fees and issue appropriate licenses for all uses of music.¹⁶  Music publishing companies may even keep track of motion pictures, television shows, commercials, etc., so that compatible songs can be submitted to producers for possible inclusion in their production; this is also known as “pitching.”¹⁷

Sources of Music Publishing Company Income

            Music publishing companies assist composers by licensing their works.¹⁸  There are a number of licenses that support the composer and provide income to the music publishing companies.  Among them are licenses for mechanical royalties, performance rights, synchronization, print rights, lyric reprint, samples, digital media, grand rights, and foreign income.¹⁹  The licenses discussed for mechanicals, performance rights, synchronization, print, lyric print, samples, and digital media are all considered “small rights.”²⁰  Small rights are non dramatic public performing rights.²¹  Grand rights are dramatic performing rights.²²

Mechanical Royalties

Mechanical royalties are based on the number of units sold to the public that contain songs written by the composer, and are paid to the composer.²³  Any sound recording artist can record a new version of a song (known as a “cover”) and pay the mechanical royalties set by statute to the music publisher; this is known as a compulsory mechanical license.²⁴   The statutory rate for mechanicals is currently 9.1 cents per song or 1.75 cents per minute whichever is greater.²⁵  The mechanical royalty rate is adjusted every two years by the U.S. Copyright Royalty Board, and normally rises in accordance with the rise in the costs of living.²⁶  The statutory rate for mechanicals is the same whether the song is a single, major hit, or a flop.²⁷

When a composer signs a contract with a music publisher, the publisher takes over the responsibility of collecting all types of royalties.²⁸  The publisher can collect all mechanical royalties by issuing licenses and collecting royalties itself or by using an agency such as The Harry Fox Agency.²⁹  If the publisher issues a mechanical license for the composition, the record company that manufactures recordings of the composition pursuant to that license pays the mechanical income to the publisher.³⁰ Under a mechanical license, the record company is required to account to the publisher, meaning the record company must render a written statement that details the amounts collected, and makes a payment to the publisher, on a quarterly basis; audits are permitted.³¹  Once the publisher receives payment it splits the mechanical royalties with the composers that own the copyright in the composition.³²

A publishing company may contract with The Harry Fox Agency to issue mechanical licenses.  The Harry Fox Agency, established in 1927, licenses the use of a copyrighted musical composition for use on CDs, records, tapes, and certain digital configurations.³³ On the Harry Fox website it states that its mechanical license does not include the right to display or reprint lyrics or the right to print sheet music, nor does it cover the use of the songs on karaoke machines.³⁴  Instead, it advises reader to contact the publisher(s) directly for those rights.³⁵ Even if a publisher uses The Harry Fox Agency for mechanical licensing, the publisher remains responsible for issuing other types of licenses.

When a composer is signed to a record company as a recording artist, the record company requests a controlled composition rate from the publisher.³⁶ The controlled composition rate is usually 75% of the minimum statutory mechanical rate per composition.³⁷  To avoid the 1.75 cents per minute rate, the record company will almost always contract that the minute rate will not apply in the calculation of mechanicals.³⁸

Performance Rights

In the United States, the copyright laws require that compensation be paid to the copyright owners of the musical composition for the public performance of their work.³⁹  Some common areas where compensation is paid to copyright owners for public performance are with concert promoters, nightclubs, radio stations, TV stations and elevators.⁴⁰ These people and locations pay fees to performance rights societies in exchange for the right to publicly perform or broadcast music.⁴¹

Performing rights organizations exist for several reasons.⁴²  It is impractical, inefficient, and costly for copyright owners to license the right to publicly perform their compositions to every music user separately, and, it is also impractical, inefficient, and costly for music users to keep track of copyright owners and negotiate individual licensees to authorize the performance of each copyrighted work.⁴³

The United States has three performing rights organizations, ASCAP, BMI, and SESAC.⁴⁴ These organizations collect public performance income. These organizations sell single use, single fee licenses, and blanket licenses.⁴⁵  A blanket license gives the licensee the right to exploit any song in the organizations catalogue for a fee.  Id.  Performing rights organizations divide the performance income into a 50/50 split.⁴⁶  Fifty percent is paid directly to the composer and fifty percent is paid to the publisher.⁴⁷  The first is known as the writer’s share and the latter as the publisher’s share.⁴⁸  The performing rights societies collect the fees, deduct their costs of administration, then divide the money and distribute it directly to their members composers and publishers, based on the number of public performances of each particular song as discerned through a combination of a complete count of public performances known as “census surveys,” and sample surveys.⁴⁹  The higher percentage play of a particular song, the more revenue the owner receives.⁵⁰

Where do the publishers come in?  Once a composer has signed a contract with a music publisher, it is the publisher’s job to register musical compositions with the performance rights society, so that the writer can be paid for all the public performances of his or her composition.⁵¹ The publisher in return gets its 50% share, the publisher’s share.⁵²

Synchronization

Publishing companies also negotiate synchronization licenses.  A synchronization license gives a user the right to bundle the composition together in timed relation with visual images or motion pictures.⁵³  Any time a film, television show, or video game producer uses music that accompanies their work it must obtain this license.⁵⁴ Again, once a composer has signed a contract with a music publisher the publisher takes over the responsibility of negotiating, drafting, issuing the license, and collecting all the monies due from the license.⁵⁵ If the producer wants to use a particular sound recording of the composition, then he must also obtain a master license in the sound recording.  The producer can usually obtain the master license from the record label of the recording artist.

Print Rights

A music publisher takes over the responsibility of arranging for sheet music manufacturing.⁵⁶ Some publishers do not print and manufacture their own edition of the composition but instead license the rights to another company that specializes in the task.⁵⁷  The publisher then hires the sheet music manufacturer, negotiates the license fees, drafts the license agreement and collects all monies due.⁵⁸  A publisher that does not print and manufacture its own edition and instead licenses those rights to another company, is customarily paid 20% of the wholesale selling price, which is then split fifty-fifty with the writer.⁵⁹

Lyric Reprints

When someone wants permission to reprint song lyrics, either in album liner notes, on Web sites or wherever else lyrics are printed or used, they must obtain a reprint license.⁶⁰  Once a composer has signed a contract with a music publisher, the publisher takes over this responsibility of clearing lyric reprints, which includes negotiating the reprint license fee, drafting the license agreement, and collecting all monies due.⁶¹

Samples

Music publishing companies also negotiate sample licenses for their composers.⁶²  Sampling can occur in many different forms.  One example is when the recording artist or record producer uses a portion of an existing song as a bridge, insert, or portion of a new song.⁶³  Sampling can also occur when the recording artist or producer uses an instrumental portion of an existing master recording and inserts it into a newly recorded master.⁶⁴ In order to use a sample the creator of the new work must obtain the original composer’s permission in the sample license and also a master license from the owner of the sound recording.⁶⁵  Once a composer signs a contract with a publisher the publisher takes over the responsibility of clearing the sample licenses for the composition.⁶⁶  The publishing company takes over all clearance procedures consisting of negotiating the sample license fees, drafting the license agreements and collecting all monies due.⁶⁷  The publishing company usually negotiates an up-front license fee and a percentage share of the ownership of the new composition, in this situation.⁶⁸

Digital Media

The new use of copyright materials in digital media can also generate additional royalties for owners of copyrights.⁶⁹  Some of these digital medias are “monophonic ringtones,” “ringbacks,” “master ringtones,” and “digital downloads.”⁷⁰  The Harry Fox Agency, traditionally dealt with mechanical licenses covering CDs, records and tapes.  Id.  More recently, the Register of Copyrights of the U.S. Copyright Office issued an administrative ruling the held that ringtones (including monophonic ringtones, polyphonic ringtones and master ringtones) are also subject to compulsory licenses.⁷¹ The Harry Fox Agency has also begun issuing licenses and collecting royalties for “digital licenses” including full downloads, limited-use downloads, on-demand streaming and CD burning.⁷²

The Harry Fox Agency is not alone; performance rights societies now license songs for use on Web sites and as ringtones.⁷³  In circumstances where digital media is not covered, publishers are “currently sailing in uncharted waters as they negotiate fees for these new types of licenses of digitized music.”⁷⁴

Grand Rights

Grand rights are the right to publicly perform, in whole or in part, dramatic works that combine musical works with dramatic settings.⁷⁵  The music publisher takes over the responsibility of clearing the grand rights, by negotiating the license fees, drafting the license agreements and collecting all monies due.⁷⁶

Foreign Income

Domestic publishers do not generally have access to foreign licensing.⁷⁷  Thus domestic publishers enter into foreign licensing or sub publishing agreements with music publishers that operate outside the United States.⁷⁸  This allows the domestic publishers to collect more money or behalf of the composer but also collect its share from foreign countries.⁷⁹  The more successful commercial composers often retain foreign rights and make their own sub publishing deals.⁸⁰

Music Publishing Deals

Full publishing deals are not as common today.⁸¹  The traditional division of income between the composer and publisher in a full publishing deal is a fifty-fifty split.⁸²  The writer keeps their writer’s share under all circumstances.⁸³  If a composer signs a full publishing contract, it gives the publisher sole ownership of the copyrights contained in the composer’s catalog, for the total length of the copyright.⁸⁴

Most composer’s attorneys negotiate for co-publishing deals.⁸⁵ If a composer signs a co-publishing deal the writer holds onto half the ownership of the copyrights in their catalogue.⁸⁶  Many of the modern co-publishing deals provide for a reversion in the copyrights to the composer.⁸⁷  Those reversions are usually subject to the recoupment of any advances from the publisher to the composer, and take place 7 to 12 years after the song is first delivered to the publisher.⁸⁸

Co-publishing agreements also have a traditional division of income at a fifty-fifty split, but this split refers to the income representing the music publisher’s share.⁸⁹ Under a co-publishing deal, the writer keeps their writer’s share under all circumstances.⁹⁰ For clarity, in a standard full publishing contract the writer usually receives 50% of the net income earned from the use of his or her songs, and the publisher receives the other 50%.⁹¹  Under a co-publishing agreement, the writer not only receives his or her 50% share of the composer income but also receives a 50% share of the publisher’s share.⁹² This means the writer ends up with 75% of the share.  Co-publishing deals are advantageous to the writer because the co-publisher usually takes over the administration of the catalogue.⁹³  If the co-publisher takes over the administration then it will usually charge a fee of 5-10% for its services.⁹⁴

Administration Deals

Composers may also enter into administration deals.  In this type of deal, the publisher does not share in ownership of the composer’s copyrights, and so the composer retains 100% of the catalogue.⁹⁵  The term for an administration deal usually range from three to ten years.⁹⁶  The administration fee is generally between 10-20% and for the fee the administrator is responsible for negotiating contracts, collecting monies and accounting to the writer based on these collections.⁹⁷  Some administrators will also “pitch” songs, meaning they solicit uses of the music in the catalogue.⁹⁸ “Administration agreements usually provide that if the administrator secures a cover recording, the administrator will retain administration rights for a longer period of time and obtain a higher percentage of the income generated by the cover secured by the administrator.”⁹⁹

Administration deals seem like the better deal.¹⁰⁰  The composer gets to retain all rights in the copyright of its works and the administrator negotiates, issues, and collects money based on the licenses it issues.¹⁰¹  Administration agreements are difficult to obtain for independent composers.¹⁰²  The major music publishers rarely enter into administration deals, except for superstar writers, because they prefer the full publishing or co publishing deals.¹⁰³  Although it is not common there are administrators that will sign composers to an administration deal.  One of the leaders in this market is The Royalty Network located in both California and New York.¹⁰⁴

* The author would like to thank Richard Greenstone for his insight and editing of this article.  Article Copyright © 2012 Rachal Ranteesi.

1. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 139 (4th Ed. 2008).
2. Id.
3. Id.
4. Id.
5. Id.
6. Id.
7. Id.
8. Sherri L. Burr, Entertainment Law: In a Nutshell 61 (2004).
9. Id.
10. Jeffrey Brabec, Music Money and Success: The Insider’s Guide to Making Money in the Music Business 3 (6^th Ed. 2008).
11. Id.
12. Id. at 6.
13. Id.
14. Id. at 3.
15. Id.
16. Id.
17. Id., see also Mark Halloran, ESQ., The Musician’s Business and Legal Guide 148 (4th Ed. 2008).
18. Sherri L. Burr, Entertainment Law: In a Nutshell 61 (2004).
19. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 140-146 (4th Ed. 2008).
20. Id. at 140.
21. Id.
22. Id.
23. Id.
24. Id. at 135.
25. Id. at 141.
26. Id.
27. Id.
28. Id.
29. Id.
30. Id.
31. Id.
32. Sherri L. Burr, Entertainment Law: In a Nutshell 61 (2004).
33. Id.; see also The Harry Fox Agency (visited on March 21, 2012) <http://www.harryfox.com/public/MechanicalLicenseslic.jsp>.
34. The Harry Fox Agency (visited on March 21, 2012) <http://www.harryfox.com/public/MechanicalLicenseslic.jsp>.
35. Id.
36. Jeffrey Brabec, Music Money and Success: The Insider’s Guide to Making Money in the Music Business 149 (6^th Ed. 2008).
37. Id.
38. Id.
39. Id.; see also Sherri L. Burr, Entertainment Law: In a Nutshell 62 (2004).
40. Id.; see also Sherri L. Burr, Entertainment Law: In a Nutshell 62 (2004).
41. Id.
42. Id.
43. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 142 (4th Ed. 2008).
44. Id.
45. Sherri L. Burr, Entertainment Law: In a Nutshell 62 (2004).
46. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 142 (4th Ed. 2008).
47. Id.
48. Id.
49. Id.
50. Sherri L. Burr, Entertainment Law: In a Nutshell 62-63 (2004).
51. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 142 (4th Ed. 2008).
52. Id.
53. Sherri L. Burr, Entertainment Law: In a Nutshell 61 (2004).
54. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 144 (4th Ed. 2008).
55. Id.
56. Id.
57. Id.
58. Id.
59. Id.
60. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 144 (4th Ed. 2008).
61. Id.
62. Id. at 143.
63. Jeffrey Brabec, Music Money and Success: The Insider’s Guide to Making Money in the Music Business 163 (6^th Ed. 2008).
64. Id.
65. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 143 (4th Ed. 2008).
66. Id.
67. Id.
68. Id.
69. Id. at 141.
70. Id.
71. Memorandum Opinion “In the Matter of Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceeding,” U.S. Copyright Office (Copyright Royalty Board 2006) Docket No. RF 2006-1; See also 17 U.S.C. §115.
72. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 145 (4th Ed. 2008.
73. Id.
74. Id.
75. Id. at 146.
76. Id.
77. Id.
78. Id.
79. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 146 (4th Ed. 2008).
80. Id.
81. Id.
82. Id. at 147.
83. Id.
84. Id.
85. Id.
86. Id.
87. Id.
88. Id.
89. Jeffrey Brabec, Music Money and Success: The Insider’s Guide to Making Money in the Music Business 59 (6^th Ed. 2008).
90. Id.
91. Id.
92. Id.
93. Id.
94. Mark Halloran, ESQ., The Musician’s Business and Legal Guide 148 (4th Ed. 2008).
95. Id.
96. Id.
97. Id.
98. Id.
99. Id.
100. Id.
101. Id.
102. Id.
103. Id.
104. Id.; see also <http://www.roynet.com/>.