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By Wendy Day
from Rap Coalition
HOW ARTISTS GET PAID: PUBLISHING 101
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.
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