Music Publishing: A Guide to Understanding the Management of Songs
Sources of Income
Music publishing has a number of potential sources of income. These are as follows:
Mechanical Royalties from Manufacturing
A song can only be manufactured into a product (a CD, for example) by securing a 'mechanical licence', and on payment of a mechanical royalty to the songwriter. To simplify this process, standard rate scales are used, and collection agencies are assigned the task of collecting and distributing royalties. In the UK, for example, the current standard mechanical royalty rate is 8.5% of the published dealer price of the record (or 'phonograph'). Thus, a record with a dealer price of £7.99 will attract for the songwriter a mechanical royalty of 68 pence per record. This sum is then collected by the local collection society - in this case, the MCPS (Mechanical Copyright Collection Society). In the USA, the statutory mechanical rate is currently set at 7.55 cents per track (to be raised to 8 cents per track from 01/01/2002). This money is usually gathered in by a collection body (such as the Harry Fox Agency). Due to historical circumstances - and because there is such a strong buyers' market - most songwriters are only paid three-quarters of this US rate. (Copyright law and mechanical levies in the US market involve various caveats - dependent on the length of the track and the year of record release.)
Other territories, of course, have their own local collection societies - such as AMCOS (Australia & New Zealand), CMRRA (Canada), JASRAC (Japan), NCB (Scandinavia) and GEMA (Germany). Most collection societies usually charge a fixed commission fee for their service. Music Business Journal has compiled a substantial list of these organisations (with hyperlinks) at www.musicjournal.org.
Note that mechanical royalties are not only generated from the obvious products, such as CDs or videos, but also from other physical items, such as film reels, and even novelty items such as cakes, birthday cards, and mobile phone ringtones - indeed, any product containing copyright music.
BIEM is an important Paris-based organisation, which was set up to oversee reciprocal arrangements for the collection of music publishing mechanical royalties across international territories. Hence, most CDs now carry the small stamp, BIEM, on the actual disk itself - e.g.:
GEMA/BIEM (means manufactured in Germany, income collected via BIEM agreements);
BIEM/MCPS (means manufactured in the UK, income collected via BIEM agreements);
BIEM/STEMRA (means manufactured in the Netherlands, income collected via BIEM agreements).
This appellation is useful, because the corporate groups tend to focus their manufacturing in specific territories (Sony Europe, for example, manufacture in Austria). BIEM agreements now cover 38 international territories. Further information on BIEM can be found at their official website: www.biem.org
Performance and Broadcasting Income
Performance and broadcasting income is a key source of income for the songwriter and publisher. Every time a copyrighted work is broadcast, or performed in public, it should theoretically generate income. Again, to simplify the collection process, standard formulas are employed, and specific collection bodies have been set up to achieve an economy of scale in collection.
In the UK, the local collection society is the Performing Right Society, or PRS. Other examples are IMRO (collecting within the Republic of Ireland), APRA (Australasia), SOCAN (Canada), SACEM (France) and STIM (Sweden). Songwriters and publishers in the USA have three main options. They can join ASCAP (the American Society of Composers, Authors and Publishers), BMI (Broadcast Music, Incorporated) or SESAC.
The world's oldest collection society for performance income is France's SACEM, which was established in 1851. Most countries have unified collection bodies for the joint collection of all mechanical, broadcasting and performance royalties.
As live music generates performance income, some paperwork is needed in order to monitor playlists. Where applicable, this paperwork is completed by an act's Tour Manager. Again, formulas are commonly used - in the UK, for example, this formula is 3% of gross box office receipts. Note that many unregistered venues do not generate performing right fees (particularly where performing music is, for them, an incidental activity).
Public places that play music must also pay for this performing right. 'Blanket' licenses are therefore issued for this purpose. Buildings such as bars, restaurants, clubs, gyms, shopping centres and train stations must pay a set annual fee to their national performing right society. This income (known as 'black box' income) is then pooled collectively, and re-distributed on the basis of analogies from radio airplay, and other sources such as jukeboxes.
Broadcasters, such as TV and radio stations, will either be sampled, or, for those with a significant audience reach, fully monitored. They will then pay a set rate per minute to a collection society. This income is, in turn, passed onto the songwriter and publisher, after administration commission is deducted.
Internet sites which play copyrighted music also require performing rights licenses. The application of traditional music publishing procedures and rights to the online environment is still in its infancy. In time, however, online licenses should become more structured and manageable, so providing additional income for songwriters and publishers.
Overall, in terms of logistics, performing and broadcasting income are rather difficult to collect and administer. Mechanical royalty income is easier to collect; however, the main problem for mechanical rights societies (and record companies) is piracy and illegal duplication. Such piracy can range from large-scale operators (sometimes financing organised crime), to individuals illegally burning music onto CD-R's, at home.
Some publishers are better than others at securing synchronisation income. This income is generated when songs are integrated into moving images such as films, TV programmes, TV commercials, and multimedia software.
Such synchronisation agreements are individually negotiated between the publisher and the production company. The fee generated depends on the politics of the situation - how keen is the production company to use a particular song? Some synchronisation fees have generated seven figure sums.
Sales of Sheet Music
This is the traditional activity of the music publisher. Even in our hi-tech age, a market still exists for items such as songbooks and sheet music. Note that music publishers usually take a much greater royalty rate for this activity (e.g., 90%-10% in favour of the publisher) for sheet music income.
These are particularly lucrative sources of income. As the song is separate from the record, artists recording a cover version must therefore forsake the mechanical royalties for manufacturing, as well as broadcasting income from airplay, etc.. Instead, these royalties are payable to the original songwriter.
Note that sampling without approval is illegal. A common music industry myth is that sampling is acceptable if limited to a short excerpt. In fact, all samples require written approval from both the music publisher, and the record company (if lifted from an existing record).
The Printing of Lyrics
As the lyrics of a song are also subject to copyright control, the publisher can negotiate printing fees with other publishers - such as magazines - for re-producing these lyrics. Some records also contain these lyrics within the sleeve, thus generating more income for the songwriter and the publisher.