Generally speaking, there are two types of music publishing agreements these days: a co-publishing deal and a publishing administration deal.
CO-PUBLISHING DEALS
A co-publishing deal is what its name implies – you share the publishing with someone else (whether an individual or a company). You as the songwriter typically assign 50% of your publishing share over to this other entity in exchange (usually) for money. The money can come in the form of an up front advance, or a draw where you get paid in semi-annual, quarterly or even monthly installments. The term of the co-publishing agreement is usually for an initial 12-month year, with options to extend the agreement for an additional year(s). Sometimes, if you are an artist as well, the co-publishing deal might be tied to each album you do.
You take on certain obligations when you sign a deal like this:
A) You must write a minimum number of 100% songs that the signing entity considers commercially satisfactory for their purposes – and if you co-write any of the songs, then the co-written songs only count towards your minimum in the share that you end up retaining (i.e. two 50% co-writes equals one full song, three 33.33% co-writes equals one full song, etc.)
B) If you are not an artist, the agreement might also specify that you have what is referred to as a “record & release commitment.” This means that you must have a minimum number of songs recorded by any artist on a legitimate label and the songs must end up getting released and start to earn income.
If you don’t meet these two main requirements then your next option typically won’t get exercised, and you will be “stuck” in your first contract year. This is why it is important to get proper legal counsel in any deal – the cost of a lawyer can save you thousands of dollars down the road. The entity you sign this deal with takes on its own obligations. It must actively pitch to get your songs recorded by artists, or get them used in film/TV/ads as long as your recordings are of master (and not demo) quality. They also should try to set you up on co-writes with other songwriters or writer/artists. And they need to do all things administratively to register, license and protect your songs worldwide.
The money you are given in a co-publishing deal as an advance must be recouped (i.e. paid back) to the entity that is paying. In the typical 50/50 co-publishing deal, since half of all income is writer’s share and half is considered publisher’s share, you are entitled to 75 cents of every dollar earned (i.e. your full 50 cents as the writer and 25 cents as the publisher, since you assigned half of the publishing away). The entity collects your 75 cents of every dollar and sets it against the advance paid to you, and you won’t see any other income from them until your entire advance has been paid back. In the meantime, they receive the remaining 25 cents of every dollar.
So as you can see, a co-publishing deal is essentially a bank loan with 25% interest. And depending on the leverage you have going into the deal, you may very well have to give complete control of these songs in perpetuity to this publisher (even though you retain 50% of the publishing). Sometimes you can build in a reversion clause where you can get control of your 50% back or maybe even the entire 100% back, but this is a factor of your leverage and your lawyer. So make your decisions carefully and with experienced counsel.
ADMIN DEALS
In the other scenario, you do not assign any of your publishing away. You retain 100% and engage a third party as your administrator to do all things administrative relating to your songs: PRO registrations, registrations in the US Copyright Office, worldwide registrations through sub-publishers to collect your foreign income, negotiating and issuing licenses, collecting your royalties from all sources, etc. Though you retain all ownership in your songs, you do give up a percentage to get these services done for you on your behalf – that percentage is typically 10-15% for domestic income and 15-20% for foreign income.
Some administration deals involve all things administrative but no creative; depending on the admin company you are dealing with, if they have a creative department, you might also get access to the team that would pitch your songs to artists and film/TV/ads. In that case, if they secure a use for your music, you typically have to pay them a higher percentage than what I mentioned in the paragraph above. This is the company’s incentive to go out and try to generate the income for you.
Of course, you could do all this administrative and creative work yourself, but most songwriters don’t have the knowledge or inclination to take care of their catalogue worldwide. You want as much time as possible to write more songs! It should be noted that some administration deals can come with an advance if you have “pipeline income,” or impending significant activity (e.g. a big record coming out). In that case, you don’t receive any of your income until the advance is recouped (just like under the co-publishing deal). But sometimes the percentage the administrator takes will go up if they are giving you an advance – so it’s always a good idea to run the numbers.
Speaking of running the numbers: let’s assume you have a song you wrote by yourself on a record that sells one million copies in the US. That generates $91,000 in mechanical royalties (1,000,000 copies x 9.1 cents as the current mechanical rate in the US). Under a co-publishing deal, you would see $68,250 of that income as your 75%. Under an admin deal at 10% for domestic income, you would see $81,900 of that income. The difference is $13,650. That’s a big difference. So choose your deals carefully, but most importantly, go with a company that you feel will be your partner. Nothing can beat the strength of a great working relationship.
By Sebastian Ngida : Endongo Music
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