In the world of music publishing, three primary types of agreements exist: full publishing, co-publishing, and administration. For years, these agreements and royalty participation schemes governed publishing deals. Now, with mechanical and digital download revenues declining, publishers are seeking ancillary sources of revenue by finding alternative ways to take advantage of their position as the first investor in a new artist’s career.
The onset of the publisher as investor, manager, producer, artist developer, movie/tv placement broker and more is becoming the norm. Publishers are participating in various revenue streams—and rightfully so, if they can add real value.
TV, Film, Internet and Branding Placement Income
An artist’s publisher hooked them up with a national salon chain for song placement ads on tv and in stores. The deal also involved selling the artist’s music on the salon’s website and in select stores. The music license income was approximately $25K, but sales on the product was $100K. Should the publisher participate in the record revenue side of the deal that it brought to the table?
Probably yes, but most publishing agreements do not have additional commission language for brokering these ancillary types of deals. As a result I’m starting to see 10-20% commission language in publishing deals (similar to ad or talent agent commissions) when the publisher is the procuring cause for the revenue.
YouTube and the Promise of Fair Compensation?
Earlier this year, Google disclosed that its YouTube video platform has distributed in excess of $1 billion to copyright holders “over the last several years” in ad revenue. While YouTube keeps the specific figures it pays publishers and songwriters confidential, industry sources estimate payments range from 60 cents to $2 for every 1,000 views. YouTube, and streaming services as a whole, represent a growing new revenue stream for songwriters and publishers. According to Nielsen SoundScan, the number of songs streamed from 2012 to 2013 increased by more than 30 percent, totaling more than 118 billion songs. Considering these figures, songwriters and publishers must pay close attention moving forward to opportunities to exploit music through the various streaming services. Over time expect an uptick as the fight for higher rates continues through the PRO’s, NMPA, and the larger publishers.
Jumping the Fence—The Sacred Writer Share
For many years, it was very hard to transfer a songwriter’s share of performance income from a PRO in perpetuity to a third-party much less a publisher. ASCAP has various income hurdles that a writer would have to meet before effectuating a proper transfer forever. BMI, however, has changed its stringent rules in the past few years and a songwriter can now very freely assign their songwriter’s share if they so please using a one page assignment. SESAC has always allowed the transfer to be seamless. Given the above, how about this new twist on a publishing deal structure? Instead of writer advances being recouped out of the writer’s side of the royalties, how about sharing all net profits, including the songwriter’s share of performance income? Would that be fair enough to justify all monies, including the writer’s PRO share, being included as gross income? For example, if this new twist publishing deal stated that income from all sources will be licensed and collected by the publisher (including the writer’s share of public performance income) and therefore advances are not advances on royalties or net income, but deductions along with other expenses like admin, then are the publisher and the writer in more of a true partnership since they share income and expenses rather than recouping? The writer will definitely recoup faster, and so will the publisher. This might be mutually advantageous unless the publisher holds money for 6 months and/or has a history of improper accountings.
In the past, some publisher’s have been given a bad name by trying to recoup from the writer’s shares, but if they reworked the revenue model as a net profit model rather than a royalty recoupment model, sharing future net income could work smoothly as long as it’s truthful and just. The devil is obviously in the details, but with care in drafting and understanding the cashflows, this model could be a great fix. It could also deal with any other ancillary income as a true net profit share, and would be easier to calculate rather than carving out separate deals for those separate revenues.
Publisher As A 360 Career Launch Pad
The publisher is becoming a primary launch pad for creative careers which benefits writers, producers, A&R staff, managers, agents and attorneys. One major publisher has hired a former national talent agency agent to assist with booking shows, enhancing social media and organizing merch sales for its stable of new acts. The need for this person was obvious. In return for $50 to $75K in seed capital, this publisher wanted 3-5% of gross revenues from all sources (except publishing—thank you for not double-dipping) for up to 10 years. The seed capital will be spent on masters, website content, merch and/or tour support.
Because there are fewer opportunities to get cuts from major label acts, publishers must instead grow their own by developing major label acts. The hope is to get these developing writer/artists on the road building a fan base, garnering some radio airplay and benefitting from increased YouTube views or download sales. Once there is enough traction, these acts can be acquired by a major label.
In another deal we worked, the publisher pulled in participants from outside the company to add value for the new artist while still owning a piece of income within each area of investment. The publisher invested in recordings, publishing, and touring (including merch). Securing the recordings deal was the most complicated as it became a mini-record deal negotiation, but the publishing part was similar to other deals the publisher had done and not so complex. The tour support/merch agreement was in essence a management deal with some advances. At first, the publisher was reluctant to fund three deals and three entities, but eventually realized the artist and their counsel would want to see separate investments in each asset. Also it was prudent for the publisher to separate itself from the liabilities that can occur with artists being on the road, etc. The other side saw it properly as three separate investments and three separate deals to help launch the act, so once we had the right structure, the deals closed quickly.
These various income streams can allow songwriters and publishers to succeed financially and professionally if correctly navigated and strategically exploited. Understanding these ancillary streams is important for any artist considering entering into a publishing agreement and any publisher wanting to thrive in the new marketplace.
Derek Crownover is Leader of the Entertainment and Media Law Group for Dickson Wright, PLLC. He is experienced working on funding deals, estate planning, asset allocation, copyright infringement litigation and other issues for artists, publishers and record labels. Selected by Best Lawyers each year since 2011.