Music Publishing: Dispelling the Mystery (or at least trying)

One of the most misunderstood areas of the music industry is publishing.  Trying to explain that there are two equal halves of publishing each equating to 100% (getting you to 200%), you are bound to get some glazed over faces.  We work with several publishers, administrators, writers and producers and think (brushing our shoulders off) that we have a pretty good handle of how publishing actually works.  Our contributor, Lauren Schulz, does a great job of breaking it down in this straight forward article below. While this is by no means a comprehensive treatise on publishing, we hope that it can shine the light on some of they dark, mysterious and befuddling issues that is music publishing.  Enjoy!

The Purpose of a Music Publisher; What Does a Publishing Contract Do For A Songwriter?

Many individuals in the music industry are aware that once a songwriter or composer starts to receive compensation for their compositions or work, they often sign with a music publisher. But what does a publisher actually do? And what are the various terms of a good publishing agreement?

In a nutshell, a writer signs with a publisher to have the publisher handle the rights to their compositions for the purpose of making the writer more money. A publisher is experienced in the business side of the music industry and often has the connections to create opportunities for the writer that they could not create on their own. Additionally, when a writer handles their own administration, accounting, and/or promotion of their work, there is often very little time to continue creating music, leaving the writer with a not so successful business plan. 

To break it down, if a writer is signing a publishing contract, the writer is essentially hiring the publisher to handle copyright registration, licensing, collection of the writer’s royalties and accounting services. This is often referred to as administration. This is a huge job that often takes a considerable amount of time and knowledge of the music business. A publisher handles quote requests, license requests, monitors how a writer’s composition is used, delegates any fees or payments, prepares paperwork as well as often negotiates license terms. Additionally, publishers collect performance, mechanical and synchronization royalties on behalf of the writer. These royalties are paid in exchange for different uses and sales of the writer’s work and involve third parties such as performance rights societies or the Harry Fox Agency.

In addition to administration, publishers will provide writers with advances and career opportunities. An advance is similar to a loan, given to a writer so that the writer may have an upfront income for his or her work. Often once a song is released, it could take a year or more before it starts to collect any royalties, meaning the writer has to wait a long time to get paid. An advance allows a writer to have income so that he or she may continue to create music. The amount of an advance often depends on the writer’s popularity, skill and potential opportunities. The writer then recoups (or pays back the publisher) through his or her collected royalties. Publishers also create opportunities for the writer. Publishers are often the link to performing artists, record labels and producers that will help generate revenue for the writer. These opportunities help a writer to maintain a longstanding and successful career in the music industry; basically a stepping stone to help a writer reach the next level in his or her career.

The next question then becomes, if I am a writer trying to develop my talent and create a career for myself, how am I going to pay for these services that a publisher provides? A publisher is paid by owning a portion of the copyright to the writer’s compositions. This allows a publisher to receive a percentage of the writer’s royalties for the use of his or her works. The percentage of the copyright granted to the publisher varies depending on how much responsibility the publisher is given. A publisher who only conducts administration will receive a lower percentage than a publisher who provides all of the services listed above.  Often when a publisher provides administration services, opportunities to develop the writer, and an advance, the writer will sign a co-publishing agreement. A co-publishing agreement grants the publisher fifty percent of the ownership to the writer’s work on the publishing side (or twenty-five percent of the ownership including the writer’s share). This explains why a publishing contract is exclusive. A writer will not want to assign any additional portions of the copyrights to their work, nor will they want more than one publisher to handle the rights to their work.

A publishing contract is limited to a term, or certain period of time. A publisher will only own a percentage of the copyright for the work the writer creates during that period of time. For example, if a publishing contract has a term of three years this means that the publisher will own a percentage of the copyright for anything the writer creates during those three years. Often writers will also give their publisher the rights to their work created prior to the publishing contract. This allows a publisher to promote a work created by a writer five years ago that was never released. In exchange, the publisher might give the writer a larger advance. It is important to understand that a publisher does not control or limit a writer’s creative process. A publisher does not control the type or style of music a writer creates nor does a publisher have the ability to force a writer to collaborate with other writers or producers.  Instead the publisher will bring opportunities to the writer, and the writer and publisher often decide together whether the opportunity is a good fit for the writer. 

Overall, it is best to think of a publisher as an agent for the writer. The publisher will handle the business work, promotion, administration and accounting for the writer while the writer can be left to do what the writer does best, create music.

 

 

Help Me “Clear” This Song

L4M has been hard at work.  Working so hard that we have neglected the site for a bit.  To make up for it we have enlisted the services of our newest member, Lauren Schulz of Troglia Kaplan LLC.  Lauren helps bring us back to the basics of Copyright law below.  Enjoy!

         Everyone from major movie producers to ad agencies to independent business owners all have the desire to incorporate music into a film, commercial, sampling or other production. Unless you have some serious skills to create your own musical composition, the majority of the time you already have that “perfect song” in mind to use in your new spot.  While it may be tempting to just borrow a song from the internet or your own library, we all know (or should know) that that would be a big no-no.  So how do you go about getting the permission to use that perfect song?

             In music publishing world, this is called ‘clearing a song,’ which basically means that in order to use Queen’s “Bohemian Rhapsody” in your new commercial, you need to get the okay from its copyright holders. But how do you go about doing this and how do you find out who owns the rights to a particular song? The tricky part is that each song has two separate copyrights and you need to get permission from both of the right holders in order to use it.

            The two copyrights are for the rights to the musical composition and the sound recording of the song. The musical composition consists of the actual written music, think notes on a bar staff. It makes sense that this is owned by the writer(s) of the composition, which is then usually assigned to a publisher. Be careful, if there is more than one writer to a song this could mean several publishers might split ownership to the copyright as well. The other copyright is for the sound recording of the song.  This is the performance of the composition. This is often referred to as the master recording and the right holders are referred to as the master owner(s). Think of the master recording as a person in a studio recording a track to put on a CD. Usually the copyright to the master recording is owned by the record label, which generally finances the making of the album.

            Now that you know about both copyrights, how do you find out who owns the rights to those copyrights, and then ask them for permission to use the song? First, start with the copyright for the composition to find out who the publisher(s) and writer(s) are for the song. The best place to look is the performance rights organization’s (“PRO’s”) websites. The most popular PROs in are ASCAP (American Society of Composers, Authors and Publishers), BMI (Broadcast Music Inc.) and SESAC (Society of European Stage Authors and Composers). The majority of artists register with a PRO in order to receive performance royalties. (see the post below for more discussion on PRO’s). So all you have to do is search for the song or artist on one or more of these websites and it should tell you who the publisher(s) are. If the song does not appear, look for songs on the same album. Although the publisher might be different for the song you are looking for, generally that publisher will know who owns the rights and who you should contact.

            The more complicated task is finding out who the master owner is. This becomes difficult because there is no database or website that lists the master owner(s) for each song, so it might involve some trial and error. Remember, the majority of the time the master copyright belongs to the record label, so your first step should be finding out which label produced the album that the song you’re look for is on. A few places to start your search are the U.S. Copyright Office website, Spotify, iTunes, Wikipedia, or any site that includes a biography of the performer.  Often the biographies will include which label the performer was signed to at that particular time the song was recorded.

            The next step is to contact these publishers and master owners and send a request to license the use of the song. Make sure to tell them the purpose of the use, how much of the song you want to use, the type of media you are incorporating the song with, the length of time your production will be available for public view, and an estimated quote. The quote usually depends on the popularity of the song, the term, and the type of media you are using.  For example, an unknown jazz instrumental used for the background of a TV commercial set to air for one year, will be considerably less than Queen’s “Bohemian Rhapsody” used in a commercial distributed on the internet forever. Therefore, pick your battles when you have a strict budget. 

            Although this process can get discouraging, it is something that everyone who uses music has to do. Once you start getting the hang of it, it becomes easier. Know that the process could take from one week to several months, so plan accordingly. Thus, be patient and in the meantime let us know if there are questions we can answer to help you along the way!

Check out this article by our friend, Chris Rucks for the biggest mistakes people make in music clearance.

http://www.musicthinktank.com/blog/the-top-5-biggest-mistakes-to-make-when-clearing-music-for-l.html

Film Tax Credits: Yes They Still Exist

A few years back it appeared as though every state in our fine Union was scrambling to get some sort of tax incentive or tax credit on its books.  The “Runaway Production” (film productions moving to Canada or beyond to save on production budgets) panic that spread across the nation caused state government officials to introduce and fast-track a wide variety of new legislation.  The calm after the storm has left a rather muddied landscape with certain states eliminating their programs while some continue to thrive, albeit under the radar.

Most of the existing state film tax incentives require all aspects of production of a film or television production to take place within the state borders.  Depending on how much is spent, how it is spent and the type of production, certain states provide incentives that can result in tremendous savings or “free” returns on investment (depending on your viewpoint).  

A great chart of the remaining state tax incentives and the applicable requirements can be found HERE.

Coupling the various state tax incentives with the mysterious but enticing Federal Tax Incentive, Section 181 (which still exists) and you can potentially see upward of 50% of your overall investment returned in the form of credits and write-offs.  

If your film or television production qualifies for one of these programs you can use it as a great way to entice investors.  We don’t have to tell you how hard it is to get financing for independent film projects.  Not only do you have to convince people that your film is the one that will succeed, but you have to scare the pants off them by telling them all of the risks and ways they may lose their investment through your investment documents (PPM/Offering).  Throwing a few pages in these documents describing the various tax credits and incentives offered by the federal and state governments can be just the thing to get an investor off the fence and into your film production.  

Pandora at War with Musicians???

So this one keeps getting more and more interesting and worrisome (depending on your viewpoint).  Check out this article from The Verge:  http://www.theverge.com/2013/6/13/4428106/bmi-sues-pandora-calling-radio-station-purchase-a-stunt

We’ll continue to monitor and let musicians and rights holders know what it means for them (other than lower streaming rates).

 

Pandora: More Users. Less Cash?

Pandora recently announced that it has passed 200 Million Users on its streaming music platform.  This reportedly includes over 100,000 artists that compile the Pandora catalog of music.  

Pandora which went public back in June 2011.  Its stock has fluctuated after an inflated IPO.  However, the recent news made public by the SEC, shows that its founders are cashing out as if they were dependent on streaming revenue to pay their bills (sarcasm intended).  The SEC Form 4 report show that Pandora’s top brass has cashed out approximately $87.6 million dollars of their own stock all within less than 2 years of going public.  

So what does this mean?  Well, it means several things: 1. the executives are now rich (assuming they weren’t before they sold their own Pandora stock), 2. the stock will likely slide in value as the market watches the top executives’ behavior as an indication of the health of a company, 3. the streaming music model is not working well.

Point 3 should be the most alarming and obvious to artists.  We’ve reported numerous times of the apparent inadequacies of streaming revenues (e.g. 1,000,000 streams equal some insanely low amount of money).  With this new information it is clear that the streaming financial model in place with Pandora, while inadequate for most artists seems to be inadequate for Pandora itself.  It appears that the royalty rates that Pandora agreed to pay the labels set the bar at too high of a rate to be a sustainable or scalable model. 

For the artists out there, how much have you seen in terms of streaming revenue to date?  Are you sound exchange numbers increasing in a proportional manner?  Curious minds want to know. 

Please write in with your comments.  Stay tuned for more.

Recapture Your (Copy)Rights

An off again on again trend in music news is the story of artists recapturing their copyrights.  As with most music related matters, the law in this area is pretty straight forward but has been made to seem complex and insurmountable to artists.  We wrote about this a few times over the years and have helped a handful of older musicians fight to get back their copyrights in music that was created before a certain time period.  Each day a new set of rights holders has the opportunity to recapture rights that they previously signed away to a label or third party.

Read (or re-read) our post on how to recapture your rights here:  http://lawyer4musicians.com/2011/07/01/does-forever-really-mean-forever-recapture-your-copyrights/  and contact us to see if we can help get back your rights.

Fiscal Cliff Averted and Section 181 Renewed!

The big news of the day is the narrow escape the country had from falling off the Fiscal Cliff.  Buried within the passed legislation is the long-awaited renewal of Section 181.  The film and television production incentive that has been in limbo since December 31, 2011 was officially renewed and extended through December 31, 2013.

For Hollywood and all independent film and television producers, this marks a huge victory.  Those soliciting investments into qualifying projects such as garcinia cambogia growing and export will be able to offer incentives to investors on top of the remaining state tax credits making film and television productions much safer (obviously still risky) investments.

We imagine that productions that began in 2012 will be grandfathered into the new renewal, but will find out and post any info we get here.  In the meantime, if you or your project need help or have questions about how to implement Section 181 when seeking investment into your qualified film or television project, please contact us at josh@lawyer4musicians.

Here is a link to the American Taxpayer Relief Act of 2012, scroll to Section 317 for the renewal of Section 181.