Once a music publisher begins to receive income from the exploitation of the copyrights it has acquired, it must begin to distribute the income to the appropriate writers. Understanding the basic principles of copyright ownership and royalty splits is fundamental to performing the task of distribution of income. One device that is often used to illustrate the concepts involved is a “pie” that represents the split of income as between the publisher and the songwriter (this diagram is borrowed from the Berklee School of Music). To fully understand this illustration, however, it is necessary to overlay the ownership of copyright which, in a typical arrangement, belongs 100% to the music publisher.
In simple terms, when a songwriter signs an exclusive songwriting agreement with a music publisher, the songwriter is agreeing to give up one hundred percent of the copyright (represented by the yellow circle in my illustration), for which the publisher agrees to pay the songwriter an equal share, usually 50%, of the royalty income stream (the dividing line in the illustration) for the duration of the copyright. So, for every dollar the publisher receives in net income from the exploitation of the copyright (the publisher will recoup certain expenses, such a demo costs, advances and administration fees — all of course subject to negotiation), it pays the songwriter fifty cents. The only exception to this concept is that performance royalties, paid by ASCAP, BMI & SESAC, are paid by these organizations directly to the songwriter and publisher respectively, so that this income stream does not get filtered through the publisher. The portion of the royalty stream paid to the songwriter is often referred to in the music industry as the writer’s share, while the portion the publisher keeps is called the publisher’s share.
If a songwriter has enough clout to negotiate a partial participation in the publisher’s share of income, he will attempt to negotiate what is called a “co-Publishing” deal. In this type of deal, the songwriter actually owns half of the copyright (half of the yellow circle in the above-illustration), and is entitled to received 50% of the publisher’s 50% share of the income, or an additional 25%. This equates to 75 cents for every dollar of publishing income received (the songwriter’s share of the royalty pie, plus half of the publisher’s half of the pie).
These principles begin to get even more convoluted when songs are co-written by myriads of songwriters, which happens all too often in Nashville. Take, for example, the song More than a Memory, recorded by Garth Brooks, currently climbing the Billboard Country charts. That particular song has three (3) co-writers and six (6) publishers listed in the credits (incidentally, if you want to gain a good understanding of music publishing, buy yourself a recent copy of Billboard magazine and study the “Singles & Tracks Song Index” that details the publisher information). So, assuming for illustration purposes that the three writers have participation deals with their publisher (this appears to be the case since there are six publishers), then each writer would own 16.666% of the copyright and would each be entitled to 25 cents of each dollar received. Three of the six publishing companies likely belong to the songwriters themselves (and one-third of the income just described would be paid by the entity through which they self-publish), and the remaining three publishers would split the remaining 25 cents, entitling them to about 8.5 cents each. To further complicate matters, any portion of the royalty stream can be sold and/or encumbered, as can the publishing interests.
In addition, both music publishers and songwriter are often the party to an administration deal in which an administrator issues licenses and collects royalties for the copyright owner in exchange for a percentage of the income, usually 10-15%. So, to continue using the example in the previous paragraph, if one of the co-writers of More than a Memory has an administration deal in which she pays 10%, then her share of the $1.00 would be 22.5 cents, because she paid her administrator 2.5 cents.
One thing is certain, the music publishing industry most often applies the converse of Occam’s Razor, i.e., the principle that, all things being equal, the simplest solution is best!
This article is not intended as legal advise. Should you require advise regarding an music publishing issue, you should consult with a competent entertainment attorney.
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