Navigating the Rocky Seas of Royalties, Splits, PRO's, and Publishing Deals

Navigating the Rocky Seas of Royalties, Splits, PRO's, and Publishing Deals

The navigational tools of the music business can sometimes be confusing or misrepresented.  To newcomers seeking a way to make their climb, it is a very frustrating circus of events to hurdle.  Some of the most common misunderstandings on the business side of independent songwriting are the management of rights, registration and residuals of the business value of those works; most notably, royalties.  

It is imperative that songwriters (who do not have publishers to handle the paperwork) address questions on this topic before allowing a work to be used commercially. Otherwise, it can become an even bigger, more expensive, headache to sort out after-the-fact. While there are proprietary structures as to how each major royalty-managing operation functions as a whole, having a basic understanding will help you navigate this difficult side of the business.

ROYALTIES

What are royalties?  As naïve as it sounds, some of us started writing “for the love of it,” and in the beginning we didn’t really anticipate anyone else wanting to utilize our art for their own success.  So, we poured our hearts and minds into musical poetry with no real intention of understanding the value of our own experience and creativity.  But now someone wants to record our song?

I often find it interesting amongst newcomers that their perception of royalties is based mostly on their understanding of the major performance rights organizations, which we will discuss shortly.  But let us make a quick distinction:

“Mechanical Royalties” refers to licensing that is paid for the rights to use your work.  Obtaining this compulsory license is required for anyone to use your work commercially.  Without your expressed permission through this licensing, works recorded without your knowledge or consent are illegal. Unauthorized use may be subject to legal action, to collect due royalties and civil penalties for your protected works.  

The very first step in collecting royalties in songwriting is directly related to the licensing for use of that song. As an independent publisher, having gone through the acceptance process, my catalog licensing is managed through the premier rights organization, Harry Fox Agency (HFA).  When one of my songs is solicited for recording, my association with HFA allows me to direct the solicitor to their website, where they can pay for the mechanical rights to record my songs.  The solicitor licenses the number of product units they will be selling and will return to the site to pay the additional mechanical licensing royalties for any additional product sales later on.  My association with HFA also gives me legal backing in the event audits or collections are necessary against solicitors or people who use my works without my knowledge.   

“Performance Royalties” refers to royalties collected by your Performance Rights Organization (PRO).  In the United States, these organizations would be ASCAP, BMI, or SESAC. You can find an abundant amount of information on these organizations online to familiarize yourself.  Their responsibility is to collect for the performances of your songs on radio, television, live and digital venues. They do not handle the management of the song rights themselves, which is why you need the mechanical license in place for works made available for recordings.  

SESAC - https://www.sesac.com
BMI - http://www.bmi.com
ASCAP - http://www.ascap.com
United Kingdom - PRS - https://www.prsformusic.com/
Australia - APRA - http://www.apraamcos.com.au

As an independent songwriter, there are networking and learning opportunities your PRO can direct you to, even if your songs are not yet in a position to collect performance royalties.  It is my advice that you go through the application process of obtaining a PRO as soon as possible and continually look for ways to interact with PRO programs or advice platforms offered. Specifically, they offer songwriting workshops that will contribute to your growth in the crafting of songs while you learn to navigate the business.

For more information on royalties, please visit: https://www.royaltyexchange.com/learn/music-royalties/

ROYALTY SPLITS

I am not going to dive too deep into the science of this topic; however, I will direct you for more information below. This is VERY important to discuss with ALL music and lyric cowriters you work with UP FRONT.  

Going into a co-write session is one of the most enjoyable things I do… most of the time.  I love the psychology, chemistry, and social diversity approaches that can often thrive in complex writing scenarios.  Co-writes can simply be fun, they can create novel approaches to songwriting, or feed a mutual sense of humor. They may also reveal interesting angles and new approaches to some idea you have tunnel-vision on.  True, sometimes co-write sessions can become frustrating.  Whichever the case, the business of co-write sessions is IMPERATIVE to address, so that misunderstandings in this are minimal and promising creative opportunities are constantly promoted.  

When you sit down for the first time with a co-writer, it is important to discuss royalty splits regarding the lyric and music creation and how the royalty percentages will be owned.  As my general practice, I co-write with other writers establishing an even split agreement up front.  This means that all potential royalties earned by each song later on will be split evenly every time, regardless of who is going to address the music and who might have more lyrical contribution on a particular work.  This allows for a more song-focused approach for us, without the added pressure of arguing over whose line gets used each time to increase their percentage.  

When I write with new songwriters, I do not go into the co-write expecting to make a bigger percentage. I do anticipate, however, ending up with a higher count of lyrics or directing the creation of the musical composition.  I still do the 50/50 split because I am taking a risk to establish a working relationship that could reap future rewards and opportunities.  Secondly, in order that the new songwriter will not be fighting the added pressure of feeling defeated before they have even gotten a good foot in the door, an equal split is important.  

Published writers often utilize varying percentages based on their relationship with their publisher, and the splits in their established agreements.  Published writers also are not generally permitted to co-write with independent songwriters, as a matter of contract, since the publishers are in business and seek to make the most of their investments by utilizing their writers within their own network of established professionals.  That said, it is very important to address royalty splits before entering into a new co-write, so that pitfalls do not arise in the most awkwardly frustrating moments of potential success.

A final note on this topic is the discussion of creating a demo.  Once a song has been co-written by two independent songwriters, the most common question I get asked is, “Who pays for the demo?”  A demo is a recording of the song that will be used to “pitch” for commercial label, artist, or other industry opportunity consideration.  Demo production is a discussion for another time.  But, on the business side of things, it is important to establish the boundaries of the working relationship.  

Based on my working relationships with established songwriters, I have found the best advice being, “Make it your baby.”  When I co-write a song, I do not obligate myself to help pay for a mutual demo production.  I also do not solicit that obligation from the co-writer(s).  After a song is written, each writer can do with the production of that song (on their own) whatever they feel best, in order to promote it through their own networks of success.  I have demos of various genres for some of the same songs, and that is perfectly fine.  It is my belief that this broadens the opportunities of commercial consideration for that song within the music business, since you never know what can happen.  It also does not obligate my independent songwriter dollar to push songs to the top of my list that might otherwise be lower on my to-do list.  

This consideration is important to discuss up front, as I have been in situations where songwriters thought a co-write would also be a way to tap into my production skills at no cost, or that I would help them finance a recording project if I helped them write the songs for the project.  Meanwhile, in those cases, I have had a growing list of other production priorities.  So, for me, it’s more efficient to let the co-writer know up front that anything that happens with the song will be split fairly, and that they are welcome to produce it however they see fit in the end, at their own expense.  “Make it your baby.”  

For more information on royalty splits, please visit: http://www.hevedburgmusic.com/article3.html

PUBLISHING COMPANIES

I have touched on Mechanical Royalties, Performance Rights Organizations (PROs) and their importance, but I want to mention the involvement of publishing companies in the songwriting business for a minute.  As an independent songwriter, early on, it was my goal to produce a catalog of quality songs and obtain a publisher who would then promote them to the necessary people who could connect the dots.  And, while that is certainly still a conversation I enjoy from time to time, I have been in Music City since 1997 and have heard the pros and cons and watched other songwriters in my networks get trapped in shady “publishing deals,” gift-wrapping their creative achievements for a funeral.  

An effective publisher will manage your catalog and royalties, handle the necessary paperwork, promote you through their channels, direct production of your songs and develop your network.  But, within that relationship it’s still up to you and what you can do crafting your art that will determine what happens.  

Not all publishing deals are legitimate…  Let’s get that established first.  A publisher who cannot do more for you than you can do for yourself is just expensive baggage and is not a credible source of realistic achievement.  They seem to pop up everywhere.  They solicit songs, they make promises, they feed dreams, they keep you on a chain, and they look good doing it.  But if wasting time is what you are into, you can do that yourself as well.  

The viable publishers in Music City are active, have a current list of successes, and will make more money on your songs than you will (most likely) when it’s all said and done.  Just like most artist deals today, publishing deals are a loan.  They will recoup their money before you get paid royalties.  It’s important to keep that in mind, because I find today that many of the successful independent artists, songwriters, and producers are all pushing harder, reaching higher, and working more effectively on their own. Often, they choose to do this outside those structured arrangements, even if the scale of their monetary success is a fraction of what the “big boys” make.  

This industry is incredibly difficult today, even for the most established publishers.  So, you are going to have to be active (the squeaky wheel sometimes) to make things happen.  Until you can PROVE that you need an established publisher, you are your own publisher.  It benefits you most to learn the process.  There are several great books, with sample contracts available, that can get you started in handling this for yourself.  It will not be what you know, but who you know, that eventually gets you and your creative works established. Networking is still a primary push on the business side of this while you learn.

We would all like a perfect scenario. One where we come to town, we are partnered with people who can make us top-notch, we are sent to a publisher that breathes life and gives wings to our songs, and we sit around collecting money with more time to write.  That sort of thinking is why people leave almost as fast as they come to this town.  What YOU do in creating, protecting, and promoting your art is going to be the basis on which everything else comes into being.  

Jeremy Dean
www.jdeanfx.com

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