Manage for Success: Music Publishing, Newsletter #28, August 2003

"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.

Copyright 2003 by Keith Holzman, Solutions Unlimited. All rights reserved.

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A key adjunct and potentially considerable asset of a record label is it's own music publishing company. Not every label establishes one, either through lack of expertise and experience, or insufficient time to deal with it. In fact, when I started my own ROM Records some years ago, I decided to forego the publishing aspect. I knew relatively little about it then, and felt I didn't have the time to deal with it since I didn't want to be distracted from the A&R, marketing, and other aspects of running a start-up. It was a big mistake that I regretted for years.

The essential purpose of a music publisher is to administer, exploit, and collect royalties for its copyright properties.

Administration entails the filing of a notice of copyright with the U.S. Copyright Office in Washington, the issuing of licenses, collecting of royalties, and paying writers and co-publishers their share of the proceeds. Exploitation involves getting artists to record your copyrights, and extends to getting them used in films, television, radio and TV commercials, etc.

Creative publishers with song-writing savvy work with their writers and help them improve their craft and ultimately their output.

A music publisher acquires rights to songs from songwriters, lyricists, and composers. Assuming you're a label that wants to start a publishing division, you should try to acquire the publishing rights to material written by your artists when you negotiate their recording contracts.

In some cases an artist may not want to grant total publishing rights, but may agree to a co-publishing deal. The record company, as co-publisher, doesn't acquire as large a piece of the pie, but it's more than it might otherwise be able to obtain, yet still be lucrative.

There are five different rights that a music publisher controls. They are:

Public Performance Rights
Performing rights societies such as BMI, ASCAP, or SESAC collect royalties on behalf of music publishers for radio, television, live public performance spaces such as nightclubs, hotels, discos, retail stores, etc. that use music in an effort to enhance their business. If your songwriters are already affiliated with any one of these agencies, then you should do so as well. As a result, many publishers affiliate with two or more societies.

Mechanical Rights
The Copyright Act provides that, once a piece of music has been recorded and publicly distributed, anyone else can record that work provided they pay the current statutory rate. This is called a compulsory license.

Not surprisingly, mechanical rights are the rights to reproduce music via mechanical means, and dates back to the early days of piano rolls and the phonograph. Permission is required to mechanically reproduce a licensed work. Thus a publisher issues licenses to those who request the right to record a work already mechanically reproduced. And the money paid and collected for such licensing is what we call a mechanical royalty.

Many publishers prefer to have someone else issue licenses and keep track that payment is received for such usage. The largest firm that handles such matters is the Harry Fox Agency, Inc. for the U.S. The CMRRA is its Canadian counterpart.

Synchronization Rights
With a bit of luck you'll have songs and copyrights that are of interest to film and television producers to use as background or source music in their productions, or for use in commercial advertising. This can be extremely lucrative. As publisher you would negotiate and subsequently issue a °ßsynchronization°® license so that the copyright can be used in timed synchronization to a visual. And in the case where, as record label, you also own the recorded performance that's used, you would issue a °ßmaster use°® license for the work as performed on your recording.

Thus there are two licenses (and two fees) involved, one for the written copyright, and one for the recorded performance. In the case of feature films each license can range from $20,000 well into six figures, so there's a lot of potential income.

Print Rights
Traditionally, music publishers issued sheet music of all of their copyrights. This was a huge undertaking for it required the actual printing of all of its copyrights and then maintaining inventories in varying versions based on instrumentation, etc. Such extensive printing is rare these days, but publishers occasionally still issue printed folios of works by major songwriters who they represent.

Digital Print Rights
Digital music rights have become a millennial addition to the previous four. It's now possible for publishers to make available digital versions of songs and sell them on-line. This can be done as MIDI files, or as digital representations of printed sheet music, such as Adobe Acrobat PDF files.

The advantage of this is that a publisher need not actually print and subsequently maintain in inventory versions of all of its copyrights, but can instead have every single one digitized and be available indefinitely on a computer server. Thus they can be made available and sold on a 24-hour basis, seven days a week! And no warehouses full of dusty print materials!

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Once established, the maintenance of a publishing division is not the easiest of tasks, and can add complications to the smooth running of a record company. That's where I come in. With almost forty years of record industry experience there are few crises or predicaments I haven't had to deal with at one time or another.

So when you come up against a wall of problems, and need some managerial advice, call me to see how I can improve your situation.

And if you have a topic you'd like me to address in future newsletters, please call or email me mailto:keith@holzmansolutions.com.

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Foreign Subpublishing
Not only do you have domestic rights to consider, but you've also got foreign rights. That's where a foreign sub publisher comes in. Many governments overseas collect mechanical royalties automatically, so you may as well get paid your share. Therefore you should retain a subpublisher in each territory where your copyrights are utilized.

Terms
The terms of publishing agreements vary considerably, and are too complicated to explain in a newsletter. However, it's common that a publisher takes 50% of all income and turns over the remaining 50% to its songwriters.

With the exception of very large publishers who can set almost any kind of deal they want, I think a record label shouldn't be too greedy. Be fair to your writers with a simple, straightforward co-publishing deal where you share the benefits. For example, an artist would not just retain their normal 50% writer's share, but might be willing to grant you half of their publishing share, giving them a total of 75%. Thus you, as co-publisher, would control 25% of their copyrights.

Dealing With All of This
Publishing is a huge responsibility. Therefore small publishers may opt to have a larger publisher handle all of the administrative work °X for a fee, of course. This makes a lot of sense if you don't have the time or experience to cope with the volume of work. And as your catalog of copyrights becomes substantial, you'll find quite a few companies willing to administer them on your behalf.

But once you've decided on an administrator, be sure they do their job, not only to issue licenses and collect funds, but also that they work to properly exploit your copyrights. There's a great deal of ancillary income to be obtained by having other artists record your copyrights and by getting them employed in other media.

Setting up a publishing company, although not terribly difficult, is beyond the scope of this newsletter. Specifics for doing so can be found in some of the books about record industry law such as those by Donald Passman, Peter Thall, and the Brabec Brothers, listed in my June 2003 Newsletter.
http://www.holzmansolutions.com/articles/26-june03.html

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And if you have a topic you'd like me to address in future newsletters,
please call or email me

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Copyright 2003 by Keith Holzman, Solutions Unlimited. All rights reserved.