Survey passman chap 16

1. Chapter 16
Publishing Companies
and Major Income Sources
Martin Bandier, President Sony/ATV

2. What does a publisher
do?
• Takes care of the business of songwriting
• Publisher finds users, issues licenses, collects the
money, and pays the writer.
• These are administration rights
• Standard publishing deal: writer assigns the
copyright of the songs to the publisher; publisher
administers the songs.

3. Administration
• Traditionally, publishers split the income 50/50
with writer (except sheet music and performance
royalties).
• Publisher’s Share : 50% for overhead and profit
• Writer’s Share: 50%
• FYI - writers often get a “draw” – an advance on
royalties from the publisher. It’s like a monthly
paycheck so the writer can devote more time to
writing rather than some other job. It is recouped
just like an artist advance.

4. Flow of Rights

5. Flow of Money

6. History of Publishing
• Publishers up until the ‘40s were the most powerful
people in the music industry. Heard of “Tin Pan
Alley”?
• Most singers didn’t write songs and were at the
mercy of publishers to get the good songs.
• Publishers’ power made it nearly impossible for
songwriters to exploit their works without a major
publisher behind them.

7. Publishers Role Today
• Publishers are still big players, but their role has
changed
• Creative publishers are actively involved in putting
their writers with other writers, develop their writer’s
skills, put writer’s with artists
• Can use their clout to get their writers record deals
• Some publishers are more like banks – they look at
how much money a particular “catalog” (collection of
songs) can make them, pay a portion of it to get the
rights. Not much into writer development.

8. Publishing Today
• Not as many major writers under contract
today.
• Many major songwriters keep their own
publishing and administer their works
themselves
• A major writer can get to an artist or producer
as easily as a publisher can.
• Many artists are writing their own songs so
there’s less need for a publisher to get songs
to them

9. Publishing Company Staff
• Administrator – registers copyrights, issues
licenses, collects money, pays writers and co-
publishers, etc.
• Song Plugger – “pitches” songs; runs around and
gets them cut by artists.
• Creative Director – signs writers, works with
writers, sets up co-writes, etc.
• At a small company, these can be the same
person.

10. Major Publishers
• Major companies affiliated with record companies:
• Warner/Chappell
• Universal
• Sony/ATV
• Major Affiliates – independent publishers whose
administration is handled by a major.
• Stand-Alones: not affiliated with a major and
handles its own administration.

11. Self-Publishing
• Writer-Publishers – writers keep their own
publishing. Typically hire someone to handle the
administration.
• Can be very good situation if the writer is
successful enough to get artists to cut their stuff,
or an artist/writer who writes for their own records
almost exclusively.
• Publishing share can be used as a bargaining
chip to get an artist to cut the song or to get a
paying publishing deal.

12. Sources of Publishing
Income
• Mechanical Royalties– monies paid by record
companies for the right to use a song on records.
• Publisher issues a license to the record
company that says for every record made and
distributed and each digital download, the
record company will pay a royalty on the order
of a specified number of pennies.
• Often tied to statutory rate at the time of license;
won’t go up even if stat rate goes up.

13. Sources of Publishing
Income
• Reduced Rates – a “rate” is a reduced
percentage of the statutory rate.
• Record companies ask for 75% rate (75% of
statutory rate) for midprice records and
compilation packages
• 50% - 66.66% for budget records
• Artists ask for a rate if under control composition
restrictions.

14. Sources of Publishing
Income
• Harry Fox Agency – issues mechanical licenses for
publishers; largest in U.S.
• CMRRA – Canadian counterpart to Harry Fox Agency
• These act as publisher’s agent for mechanicals.
They issue mechanical licenses, police them, and
report to the publisher
• Harry Fox charges 8.5% of gross monies collected
for the license.
• CMAA charges 6%

15. Publishing Accounting
• Publishers get paid quarterly; usually 60-90 days
after the end of the calendar quarter.
• 60 to 90 days after each March 31st, June 30th,
September 30th, and December 31st.

16. Reserves
• Record companies take much larger reserves in
reporting mechanical royalties to publishers than
to artists for record royalties.
• Publishers reserves run 50% to 75% of the amount
earned. Why? Returns!
• If label over ships, and therefore overpays a
publisher, the only way to recover the money is out
of future royalties for that specific composition.
• Can’t just recover money from same publisher
because there can be different writers involved.

17. Controlled Composition Clauses
• A controlled composition is a song that’s written,
owned, or controlled by the artist – in whole or in
part.
• It means any song that the artist has an income or
other interest.
• Even if the artist doesn’t own or control the song, if
they make money from the song it’s a controlled
composition.
• Can apply to songs that producer owns or
controls, too.

18. Controlled Composition Clauses
• A controlled composition clause puts a limit
on the amount of money that the record
company has to pay for each controlled
composition.
• Since record companies don’t recoup any
costs out of mechanical royalties, it’s money
going out before they break even. They want to
pay as little as possible.
• Artists should fight for mechanicals because
it’s the only money they’ll see for awhile.

19. Controlled Composition Clauses
• Artist only gets artist royalties after they’re
recouped; if it doesn’t sell well, that may never
happen.
• Touring, especially early-on, can be a money-
losing game. (remember tour support?)
• Mechanical royalties are a very substantial
part of the record deal. Label wants to limit
them, artists want to maximize them.

20. Two Ways to Limit Mechanicals
• Rate per song – record companies pay 75% of
the statutory rate on controlled compositions
for most artists.
• *Actually, the label “requires” the artist to license
the controlled composition for 75% of the statutory
rate.
• Rate per album – typically 10 times the single
song rate for each album.

21. Max Rate Per Song
• Percentage of Statutory – record companies
pay standard 75% of the statutory rate on
controlled compositions for most artists.
• New artists can’t do anything, mid-level and
superstars can get a little better rate or an
escalation on later albums.
• Minimum Statutory Rate – all songs on the
album treated as if 5 minutes or less regardless
of actual duration.

22. Max Rate Per Song
• Changes in Statutory Rate – controlled comp
clauses are set a rate that doesn’t go up.
• Typically lock in statutory rate on either:
• The date the album was recorded.
• The date the album was delivered.
• The date of first release of the master.
• Free Goods, Real and Imagined:
• Record companies only pay mechanicals on 85%
of sales because of free goods.

23. Max Rate Per Song
• Multiple Uses – controlled comp clauses say that
even if a song appears more than once on an
album, they will only pay for one.
• Reduced Rates – label typically asks for reduced
rates (of already reduced to 75% rate) on:
• record clubs – 50%; means 50% of 75% = 37.5%
• budget – 50%
• T.V. advertised packages – 50%

24. Max Rate Per Song
• Public Domain Arrangements – record
company doesn’t want to pay mechanicals for
public domain songs.
• Compromise can be 50% of mechanical rate if
ASCAP/BMI pay 50% performance royalties for
that song.

25. Max Rate Per Song
• Noncontrolled Songs - rate limits can be
applied to all songs on the record – not just
controlled compositions!
• “Outside songs” – songs that the artist didn’t
write; therefore not controlled compositions.
Artist must get publisher to go for the reduced
rate; many times this is impossible.
• Record company takes excess mechanical
royalties due outside writer/publishers out of
their mechanical rates. How?

26. Effects on Outside Songs
4 Outside Songs on an 8 song album looks like this:
If not enough controlled comp songs to cover it, difference comes
from artist’s record royalties

27. 10 Song Limit
• If artist is limited to 10 times 75% of the
statutory rate, to pay outside publishers the
full statutory rate:
• Artist has to take a reduced rate on their own
songs or
• Put less than 10 songs on the album
• Ex- 5 outside songs and 5 controlled comps.
Remember max per album rate applies to all
songs on the record; not just controlled
comps

28. 10 Song Limit
So artist doesn’t get 75% of stat(6.82¢), but only 4.55¢ (22.75/5
songs)

29. No Penalty for Limited Number of
Outside Songs
• Allowed to pay statutory rate for outside songs,
and exceed the max amount in order to pay full
rate to outsiders.
• Usually limited to one or two songs per album
Company will pay excess for two outsiders and not take it out of artist.

30. Outside Songs
• No Penalty for Any Outside Songs – with
enough clout, artist can get a clause that allows
an overall limit of 10 songs at full statutory rate,
even though controlled comps are still at 75%.

31. Controlled Comp Clauses
• Ultimate is to only limit to 10, 11, or 12 times
statutory. Still minimum statutory rate, though.
• Multiple Albums – double albums don’t pay double
the allowance on controlled comps. Can get the
ten-times limit raised but it won’t be to twenty.
• Typically, companies only increase the mechanical
royalties in proportion that the wholesale price
increases over that of a single disc album.
• Box set mechanicals are negotiated beforehand.

32. Controlled Comps and
Videos
• Promotional usage – record company should get a
free promotional video license. It’s being used to
promote the artist’s records.
• Commercial Usage – for home videos,
independent publishers not subject to controlled
comp typically get 8 to 15¢ per song.
• Hard for Artists to get anything for home video
use.

33. DPDs
• In 1995, Congress added a provision for digital
downloads
• For any record contract made after June 22, 1995, the
mechanical royalty rate can’t be reduced for digital
downloads.
• So, controlled composition clauses don’t apply for
digital downloads – artist/writer gets full mechanical
rate for DPDs!
• Controlled comp clauses becoming less important as
digital downloads become the norm.

34. Public Performance Royalties
• Impossible to police every club and radio station in the
country and make them get a separate license for
every song they play.
• Blanket Licenses – covers all of the music that a
particular performance rights society represents.
• The blanket license fee gives the user the right to
perform all of the songs controlled by all of the
publishers affiliated with that society
• ASCAP, BMI, and SESAC are the biggest in
performance rights societies U.S. (SESAC only 1%)

35. Public Performance
Royalties
• Writers are paid directly by the societies with
which they are affiliated.
• A writer’s performance earnings (radio, T.V.,
clubs, restaurants, etc) are not paid to the
publisher, but paid directly to the writer.
• Writers can only affiliate with one society.
• Publishers can affiliate with both ASCAP and
BMI (and SESAC, if they want)

36. How Do Societies Keep Track?
• BMI requires licensee stations to keep logs of all the
music they play; rotating between the stations for
about 3 24-hr days per year.
• BMI projects from those logs to the entire country
• BMI also uses a digital listening service that monitors
major stations, matches the to a database and reports
what it hears.
• ASCAP doesn’t use station logs. They use a digital
monitoring service to listen to hundreds of thousands
of hours of programming and extrapolate that for the
rest of the country.
Radio

37. How Do Societies Keep Track?
• T.V. stations are required to keep cue sheets
• Lists all songs played, how long it was played, and
how it was used: theme, background, etc.
Cue sheets are filed with the societies and specific
dollar amounts are paid for each song and type of
use
Amount also varies with size of market; Network pays
a lot more than local.
ASCAP and BMI supplement cue sheets with digital
monitoring of broadcasts.
Television

38. How Do Societies Keep Track?
• Upside – digital providers have lots of very
accurate data on what’s played, how often, and to
how many people.
• Downside – huge amounts of data overwhelm the
societies’ ability to go through the data and sort it
out.
Digital

39. How Do Societies Keep Track?
• Societies now pay for domestic live performances,
but only for the top 200 grossing tours according
to PollStar.
• Pay is based on set lists
• BMI recently started tracking sports stadiums and
arenas.
Live Events

40. How Do Societies Keep Track?
Muzak – aka “elevator music”
Stuff that plays in waiting rooms, grocery stores, etc.
Logged separately.
Muzak

41. How Do Societies Keep Track?
ASCAP, BMI, and SESAC are not permitted to collect
public performance monies for motion pictures
shown in theaters in the U.S.
Reasons are historical and political
Foreign film performance monies can and are
collected.
Can be substantial as they are a percentage of the box
office receipts.
Fees are collected by local societies, then turned over
to ASCAP, BMI, and SESAC
Motion Picture Performance Money

42. Which Society is Best?
• Cross-registered songs can show the
difference in pay rates between the societies.
• ASCAP usually pays a little better, but both will
match the other on a specific song situation
where an ASCAP writer makes more on the
same song than a BMI writer, and vice versa.
• SESAC is a very small player
• FYI - I’m an ASCAP writer and publisher