CHAPTER 9

Income from songwriting

Artists who are also songwriters, or who can become songwriters, add a valuable income stream to support their careers. When a songwriter writes a song that is recorded, the writer is entitled to earnings in the form of royalties when a song is performed live, on the Internet, on radio and television, in a dance club, and each time it is sold as one of the songs included on a recording. The songwriter also earns royalties from the printing and publishing of sheet music, karaoke tracks, ringtones, and from licensing the song for use in advertising, and in video game, movie, and television soundtracks. Clearly, there is considerable potential income for the artist who also develops into a good songwriter. And finally, songwriting can ensure that artists will have material they can perform that was written for themselves as part of their total creative expression without necessarily relying on other writers.

COPYRIGHT

For the artist manager with a limited background in songwriting, a discussion about income from songwriting begins with an understanding of copyright, which establishes the rights of a writer to protection from theft and is the basis for ensuring earnings from creative works.

Copyright is the right a songwriter has to his or her own work after it has been put into tangible form, typically meaning that it has been written down on paper or saved to some electronic medium like a hard drive or flash drive. Once it is in tangible form, it is exclusively the right of the songwriter to allow it to be copied or used for any purpose that they authorize. It is a common understanding that a song must be registered with the Copyright Office before it is copyrighted; however, registering the song merely adds more protection from predators who try to claim rights for themselves from the original writer’s work. Once the song is written down, it becomes copyrighted. Registering a U.S. copyright online is as easy as going to http://www.copyright.gov/forms/, filling out a form, and paying a fee of $35. If you prefer to handle the registration by mail, the Copyright Office charges $50. Understand that it may take up to eight months for your copyright to become registered, regardless of which method you choose to register it.

For purposes of recording a song, a writer holds the right to grant permission for someone to be the first to record that song. The first recording of a song by a recording artist on an album is granted what is called a mechanical license, which tells a record company what it must pay the songwriter for each copy of the recorded song that is sold. Once the copyrighted song has been recorded, the songwriter is required by law to issue what is called a compulsory license to anyone who wants to record the song. Original song licenses usually require the payment of 9.1 cents for the sale of each copy of a recorded song; compulsory licenses for previously recorded songs that are less than five minutes long require the payment of a statutory rate (meaning prescribed by law) of the same amount as an original mechanical license. Longer recordings require higher license payments. The statutory royalty rate typically increases every few years.

Earlier versions of copyright law protected songwriters for varying lengths of time, but the 1998 amendment to the U.S. Copyright Act says that a copyrighted song that was written after 1978 enjoys the protection for a term of the life of the author plus 70 years. For many songwriters, this assures that they will earn from their creative work for their lifetime and for the lifetime of those who benefit from their estate.

Copyright law provides for the payment to songwriters whose works are used in digital formats. The Digital Millennium Copyright Act of 1998 created a payment mechanism for the use of a songwriter’s works on the Internet and on satellite radio.

Managers will find that their artist/songwriters also enjoy the protection of their works by most foreign countries. The Berne Convention in 1989 resulted in an agreement to protect American copyrights in all of their member countries.

And finally, an artist manager should know the things that cannot be copyrighted: the titles of songs, songs that have been written but haven’t been fixed (placed into a tangible form), names, ideas, and information (Rolston, 2008). Volumes have been written on the subject of copyright, but as an extremely basic primer, this chapter is a good starting point to discuss songwriting and publishing. Typically, a songwriter will sign a contract with a publishing company agreeing to transfer their copyrights to the publisher in exchange for their promise to exploit the copyrights (arrange for the songs to be used commercially) for the benefit of both, which is where we begin.

SONG PUBLISHING

Artists today must often be the “complete package” if they are to have a genuine opportunity at a lasting career in the music business. They need to be skilled at performing, playing an instrument, and writing songs. If the manager signs an artist who is not a songwriter, it is advisable to begin nurturing that talent to see if it develops into a potential income stream.

What are some of the qualities that increase someone’s potential to become a hit songwriter? An informal survey by ASCAP asked current publishers of hit songs what attributes songwriters should have if they are to become successful. The top five were:

•    Ability to write great lyrics

•    Personality/compatibility with the company

•    Ability to write great melodies

•    Ability to write alone

•    Affordability (amount of draw)

The “amount of draw” (Murphy, 2010) refers to how much the publishing company must periodically pay a writer until their creative works are recorded and begin earning royalties. Among the easiest ways to begin developing the artist into a songwriter is to get the artist a writing coach, and then have them begin cowriting songs with experienced writers. It may prove that the artist will not be able to become a viable songwriter, but the manager cannot overlook an opportunity for the artist to grow creatively as a writer.

Both the manager and artist should understand that if publishing income is commissionable by the artist manager, the draw received by a songwriter is also commissioned. A draw is considered advance payments against future royalties and is recoupable under most circumstances.

If artists do not have their own song publishing company, they need to become associated with a publisher. A publishing contract is very much like a recording contract, in that the publisher agrees to exploit the commercial value of the artist–songwriter’s creativity. A publisher is someone who becomes a partner with the writer: The songwriter agrees to write songs exclusively for the publisher and the publisher agrees to handle the administrative part of publishing those songs and getting songs placed with record producers who might have an interest in songs for artists they are producing. For artists who write only for their own recordings, it is often convenient to have a publisher handle administrative things such as registering the copyright and collecting royalties for them.

The standard arrangement for a songwriter who signs with a publisher is to give the copyright to the publishing company and receive 50% of the publishing royalties. The other 50% is given to the publishing company in exchange for getting the songs placed on recordings and in other commercially worthwhile endeavors. If a songwriter has cowriters, the writers’ 50% will be divided between them based on their agreed sharing of the royalties. For example, three cowriters might agree to share one-third each of the writers’ half of the royalties earned through song publishing.

The flow of earnings for mechanical licensing of songs from the publisher to the artist–songwriter is quarterly, and is based on the cycle of payment from an organization called the Harry Fox Agency. This company licenses songs on behalf of many U.S. song publishers and then collects the royalties for their use to be paid to the publisher. The strength of the Fox Agency is in its ability to periodically audit record companies to be sure they have paid their publishing clients royalties that are owed, and it means that small publishers do not need to deal with licensing issues. The Canadian counterpart to the Fox Agency is the Canadian Mechanical Rights Reproduction Agency (CMRRA, 2010).

INCOME FROM SONGWRITING

The first time a song is scheduled to be recorded, the record company must pay a mechanical license to use the song. This is a totally negotiated license fee that is paid to the publisher of the artist’s song in the form of royalties and split with the writer(s). There is no limitation on what the license charge may be. For example, it could be negotiated to cost the label 11.2 cents or 9.1 cents or any other amount for each copy of a recording that is sold. However, after the song has been recorded and released commercially and begins appearing on other albums, it will earn the publisher and songwriter 9.1 cents for each album that is sold (U.S. Copyright Office, 2010). Songs longer than five minutes have a higher statutory rate. This is the current statutory rate a publisher may charge for a compulsory mechanical license for the use of one of the songs in their catalogue (song inventory), although a lower rate may be negotiated. In late 2008, the US Copyright Royalty Board approved a 24-cent royalty rate for each ringtone sold.

Mathematically, if an artist’s song appears on another artist’s album that sells 20,000 units and the compulsory rate of 9.1 cents is applied, the publisher receives $1,820. Assuming there is a 50/50 split between the publisher and the songwriter, the artist and the publisher receive $910 each. If the artist has a cowriter or if a preexisting sample is part of the song, the writer’s amount is reduced further. Keeping current with the budget for the artist is a continuing management responsibility, so to predict the amounts and timing of income from songwriting, the manager must rely on the best estimates of the publisher and the record company.

If the artist is the writer of songs that appear on his or her own album, called controlled compositions, most record companies will offer to pay only three-quarters of the full statutory rate and only for the first ten songs that are recorded. This means the label pays 6.825 cents per song on the album in which the artist is also the songwriter. From the record company perspective, they feel they are promoting the recordings of the artist–songwriter from which they will be earning royalties for the recording. Because the label is doing the promoting, the writer of the music is also getting a benefit, and that benefit should be shared with the label by reducing songwriter payments and thereby reducing their cost of sales.

If the number of songs exceeds ten, the label will charge the artist for royalties for the excess songs. Even if the artist has written the songs, remember that the royalty payments are made to the publisher, who is a partner sharing earnings with the artist–songwriter. Limiting the album to a specific number of songs limits the number of compositions for which the label must pay a copyright fee each time an album is sold, again. If the artist wants twelve cuts on the album, the label will require the artist to pay royalties for the additional two songs.

For artists who publish for their own publishing company, some of the income considerations just noted still apply. The primary difference is that there is not a split with the publisher. Even if the artist also owns the record label, the manager must remember that some songs on an album will be cowritten or written by other members of the artist’s group, which will affect costs and earnings for members of the group.

Timing of publishing income, as noted previously, becomes an important consideration for the artist manager who must manage budgets for their artists. Melissa Wald, owner of Copyright Solutions, provides this guidance on publishing income from songwriting:

For both the new songwriter and the seasoned songwriter, keep in mind that most labels take anywhere from two to four quarters to begin reporting sales/royalty earnings to the publishers. Many times a mechanical license is not in place within the first six months of a release. That being said, most publishers report to songwriters on a semiannual basis, 90 days after the close of the period. So, let’s say an album was released in September … even though that is in the third quarter, the label most likely is not going to actually report those sales until the fourth quarter or first quarter accountings. We could assume you are lucky and they are reported in the fourth quarter sales statements. Those statements are due to be issued and paid on February 15. Because the publisher is on a six-month reporting schedule, it will be September 30 before those sales/earnings are reported and/or paid to the songwriter. That is almost one full year under the most optimistic timeline. If there is a radio single, it will be nine months to a year for the songwriter to start seeing the bulk of that income as well.

(Wald, 2010)

INCOME FROM SONG PERFORMANCE

For the artist–songwriters who have success with their music appearing on traditional, satellite, and Internet radio, and other public performances of their songs, earnings from the performance of their compositions can provide a nice addition to the income stream. Companies called performing rights organizations (PROs) license the use of copyrighted musical compositions for public performance and then collect royalties for the use on behalf of publishers and songwriters. A PRO does not license the use of songs in dramatic productions, for example in movies and on television, or in commercials; those licenses are negotiated directly with the publisher, for which there is no established fee. In the United States, BMI, ASCAP, and SESAC are the major PROs; SOCAN and Resound are among the Canadian PROs; and PPL is among the well-known performance rights organizations in the United Kingdom.

SoundExchange functions in the United States like a PRO, in that it collects performance royalties on behalf of the owners of copyrights of sound recordings used on satellite radio and on the Internet. The owners of copyrighted recordings are typically record companies, and SoundExchange secures payment on behalf of the label as well as for those who perform on recordings such as artists and their musicians. Traditional terrestrial radio (stations with broadcast towers) in the United States has been exempt from paying artists and labels for the use of their recordings, but there is an active movement to reverse the exemption.

If an artist–songwriter is not registered with one of the PROs, he or she will not earn income from the performance of songs he or she writes until he or she registers. The artist manager must be sure the artist who becomes involved in songwriting is registered with a performing rights organization. It costs nothing and can be done online in just a few minutes.

The amount of money paid to a songwriter through public performance is based on formulas that have a series of variables that include primarily the number of exposures of the performance of a song to an audience, its chart position on radio airplay charts, and how much money the performance of the song is making for the person or company that is using it in their business. The audience for the writer’s song, for example, can be in an amphitheater, on radio or television, in a restaurant, in a retail store, on the Internet, on satellite radio, and in an elevator.

Payments for most of the licensed uses for the performance of songs are made by the PRO directly to the songwriter and to the publisher at the same time, on a quarterly basis. The manager should note that unlike the sale of a song, where payment comes through the publisher, performance income comes directly from the PRO to the writer (Hull et al., 2011, 132).

Because of the number of variables that are used by PROs to determine the value of performances they license, it is difficult to say how much performance income is. Donna Hilley, former CEO of Sony/ATV, estimates that the performance income resulting from an active number-one country song would be an estimated US$500,000 (Hilley, 2008). All of the 10,000 commercial radio stations in the United States pay fees to PROs in order to use a songwriter’s music on the air, and it can amount to a substantial sum. Certainly, every song will have its own value in performances, but it is clear that adding songwriting to the skill set of the artist holds considerable potential in career earnings.

When you consider the various sources of income for an artist/songwriter who wrote a song for someone else, a theoretical but realistic example of how much a writer could earn from a country song that reaches the top of a sales and airplay chart is shown in the following table:

As noted earlier in this chapter, payments to a songwriter—unlike payment for a concert performance—can extend two to three years, which becomes a budgetary consideration for the artist manager when considering timing of income.

PUBLISHING AS A NEGOTIATING ASSET

If the goal of the artist is to record for a large label, the ability to write songs becomes a tool that the manager can use to negotiate a recording contract. Most major labels and larger independent labels have publishing companies associated with them that become home to their artists who also write music. With the continued erosion of the sale of recorded music, labels look for buffers from these losses by acquiring the rights to publish the music of new artists who are signed for recording deals. If the publishing of the artist is not inextricably tied into another publisher, the manager can bring the artist’s publishing to the negotiating table with the record label when pursuing a contract with the company. There will also be instances in which the artist is unwilling to give publishing rights to the record label, so the manager will negotiate without it as a bargaining point.

Finally, if the artist is a songwriter and is seeking a recording contract, the manager must coax the artist to consider using the songs of other songwriters on his or her albums if better music can be found. There will be a temptation to use only the artist’s songs on the album, but the competition to get music the best placement among the vast electronic/digital media means the artist must record the best songs there are. The best songs get the most exposure to listeners and viewers of music videos. Do not let the artist accept anything less than the best music available, despite what the producer and the label’s A&R department might want. This is the perfect point to begin looking at another major source of income for the artist—recordings.

References

CMRRA. (2010). http://www.cmrra.ca.

Hilley interview, circa 2008.

Hull, G. Thomas Hutchison and Richard Strasser. (2011). The Music Business and Recording Industry, 3rd ed, Routledge, Ny, NY p132.

Murphy, R. (2010). What Publishers Really Want. Retrieved from http://www.ascap.com/nashville/murphy/index.html.

Owens, C. (2008, October/November). Writer Earnings from a No. 1 Country Song. Music Row Magazine, pp. 48–49.

Rolston, C. (2008). Lecture notes from Belmont University.

U.S. Copyright Office. (2010). http://www.copyright.gov.

Wald, M. (2010). Personal interview.