Music publishers make money by entering into contracts with songwriters to promote their songs to musicians and any other person or entity that may be in the market for musical compositions for the purposes of advertising and film production, a promotional campaign and the like. They also grant licenses for the use of the songs they represent and collect licensing fees. The work of a music publisher is referred to as the “administration of a song.”
The music business is quite complex and a person who wants to operate as a music publisher might well want to work in the business in some capacity before striking off on their own to form and operate a music publishing business.
In return for providing services for songwriters, the music publisher gets a percentage of the royalty income generated from the sale of songs. If a person is a songwriter with a publishing deal, a music publishing company manages their songs and makes sure all of the royalties to which the songwriter is entitled are collected. Entities that broadcast the songs on television, radio, the Internet and in retail outlets and elevators must pay royalties to the music publisher.
Music publishers earn money in the form of licensing fees and royalties. In terms of song ownership, a publisher usually gets a 50% stake in a sound track. In other words, the songwriter or composer, who is the original copyright owner, assigns a portion of the copyright for a song to the publisher. As soon as a copyright is obtained, the author of the musical work gets an exclusive right to:
- Reproduce and distribute the musical work;
- Perform or display the musical work publicly;
- Create new derivative works based on the musical work.
Also, the copyright owner has the power to authorize or prevent others from using their composition in any of these ways. So, if anyone wants to exercise one of those rights, they must obtain a license from the copyright owner and compensate them for the license. The compensation for a license is known as a “royalty.” Of course, the copyright owner may have to take legal action to enforce their exclusive copyright ownership by filing lawsuits for copyright infringement, if someone makes use of their song without obtaining a license.
A songwriter’s earning potential can be greatly increased by the right deal with a good music publishing company. However, the wrong publishing deal can leave a songwriter cheated for many years to come. A songwriter should always seek the advice of an attorney before making a publishing deal. A music publisher would also need legal advice on a number of topics in order to succeed in their business.
How Do I Become a Music Publisher?
The first step to becoming a music publisher is to form a music publishing company in the state in which the publisher wants to do business. Songwriters and music publishers almost always associate themselves with a performance rights organization (PRO), also known as a “performing rights society”. Its role is to license public performance rights. The largest and most influential PROs are the American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music, Inc. (BMI) and SESAC.
These three PROs together represent more than 90% of the songs available for licensing in the United States. ASCAP is limited by an antitrust consent decree to licensing only public performance rights. BMI operates on a not-for-profit basis and is also subject to antitrust consent decrees that impose constraints on their membership and licensing practices. SESAC is another PRO. Sound Exchange is yet another. It negotiates and administers licenses and royalties for the public performance of a sound recording for digital transmissions, such as by satellite radio.
A PRO offers its services as an intermediary particularly for the collection of royalties between the holders of copyrights, i.e the songwriter, and the songwriter’s publisher, and entities that want to use copyrighted works. The PROs purpose is to track and collect the performance royalties that are earned whenever a song is publicly performed or streamed. There are PROs in other countries as well and organizations other than PROs in the U.S. involved in the collection of royalties for certain types of performances of copyrighted songs, such as collective management organizations (CMOs). CMOs collect performance and mechanical royalties.
PROs usually collect royalties from users of a song when the use is considered incidental to an organization’s purpose. Royalties for works essential to an organization’s purpose, such as theaters and radio, are usually collected directly from the organization.
So, after forming a business, a music publisher would want to enter into good contracts with music suppliers, e.g. songwriters, that grant all of the legal rights necessary to control of the copyright and then license the music through PROs.
Some music publishing companies are more involved in the work of the songwriter. For example, they might have an employee or even a whole department that provides feedback to songwriters on their work. They might suggest new directions for a songwriter to take, or they might match songwriters with other musicians, e.g. instrumentalists, for collaborative efforts they think may produce interesting and profitable compositions.
These more proactive companies also tend to be more assertive in working to place their songwriters’ works and finding new opportunities to market it.
Other publishing companies are much less involved in the work of their clients. They tend to evaluate a composition, make a decision about its potential to be profitable, and then purchase the song if they think it will generate royalties. These companies offer little to no creative support to their songwriters and may not be especially proactive when it comes to seeking licensing opportunities. While they still handle the administration of the songs on their rosters, they tend to respond to opportunities rather than going out and trying to create them.
If a person is going into business as a music publisher, they may want to give some thought to which kind of publisher they want to be.
Will it Cost Me Anything?
Fees are paid by the music users as license fees to PROs, which then pay royalties directly to their members, music publishers and songwriters. The royalties are divided among each PRO’s members based upon a complex set of factors.
Of course, there can be costs associated with going into business. For example, if a person plans to do business as a partnership, they may need a partnership agreement drafted by an attorney. If the person plans to do business as a corporation, there may be a registration fee in the state in which the person plans to incorporate. The person may need legal advice about contracts and copyright, and they may need to pay an attorney for guidance and services.
On What Factors Do Performing Rights Societies Base Their Royalty Divisions?
There are several factors used to determine the dollar value of a specific broadcast performance:
- The amount of music used;
- The medium on which it is broadcast;
- How frequently the music airs;
- The type of performance;
- The time of day the music airs;
- The amount of money available for distribution;
- Sample and census surveys.
How Do I Collect My Royalties?
In order to collect royalties, a music publisher must register specific works of music with the PROs. Documentation meeting specific requirements must also be reviewed and submitted to the PROs for proper crediting of royalties.
How Often Is Payment Made?
Royalty distributions are usually paid quarterly to publishers and composers. Revenue from domestic licenses is not paid out until at least the second or third quarter following the first air play.
How about Earning Royalties in Foreign Countries?
Performance royalties earned in foreign markets may take as long as two years to reach publishers in the United States.
Do I Need an Entertainment Lawyer?
The entertainment industry poses many potential legal complications. Consulting with an attorney prior to negotiating any formal contracts or copyright privileges is always a smart thing to do. Consulting with an entertainment lawyer will inform you of your rights in the entertainment industry and protect your interests.
It is especially important to consult an entertainment lawyer regarding copyright protections and contracts that a party, e.g. a music publisher, enters into with songwriters and others. Your lawyer can also advise you as to which type of business structure would best serve your needs if you want to do business as a music publisher.