[Keeping Tempo With Music Biz] — Why Are Artists Seemingly More Afraid of Publishing Deals Now Than Ever?: Op-Ed from Killphonic’s Caleb Shreve
When I speak on panels, I’m often asked, “What is the biggest problem you encounter in the publishing world?” The real answer is The MLC, but that’s for another op-ed. My more moderate answer is the education and understanding around music publishing, and probably the most logical answer is the title of this op-ed. This comes from a lot of misinformation, an unnecessarily complex system, and a rapidly changing industry with some very stubborn industry professionals. I don’t see a sector of the industry that has a harder time changing their ways, and beliefs, than publishing.
But I don’t think it’s only a lack of education around what music publishing is and how it works. I think it goes beyond — into a lot of other questions we all have in the modern music industry. There is whiplash around the idea of whether artists should focus on retaining their rights, or get in on the gold rush of catalog sales. Even if an artist and their team navigate their own feelings on that subject, what is the value of an artist’s rights and how is that determined? What is fair by today’s standards vs. only a few years ago, and over the last 30 years? It’s historically been a trope in the music industry that an artist should hold onto their publishing, and hold out on any deal, until they can cash out at their absolute peak. I will say categorically that this is not the path to take with the many options for publishing today.
Which leads us to the last issue for an artist to consider: Is publishing worth anything in today’s world of Spotify’s insanely low streaming rates and the systems that are pushing all of the revenue in the music industry to the top 1% of artists and their labels? Is it worth an artist’s time (or their team’s time) to go figure out a solution for their publishing? The answer to that is definitely — yes.
Here at Killphonic, the same four reasons surface in our team meetings about artists’ uncertainty about publishing, each pointing to a larger issue: the system remains unnecessarily vague. These are our answers to those questions. We as a company believe it is time to bring greater clarity, transparency and accountability to publishing to address the uncertainties that continue to hold creators back.
Understanding and Education
To many, a “publishing deal” only refers to a transfer of a songwriter’s rights to a publisher, but I think the nomenclature can, and should, refer to a lot more these days. I’ve offered many administration deals to clients, and have had their lawyers say, “This isn’t a publishing deal, this is only admin.” Selling rights to a publisher was the traditional idea of a publishing deal, but now there are a lot of options for songwriters. I think the tent around “publishing deals” can get a lot bigger. I think when we currently talk about publishing deals, we can talk about these three kinds of agreements: a “publishing deal,” a “co-publishing” or “co-pub deal,” and an “administration deal.”
To begin this conversation, we have to discuss the idea of rights — the foundation of any publishing business, music or otherwise. This isn’t an article to teach rights, so scroll past if you already know this. For the less experienced — there are two copyrights in recorded music. There is a copyright for the sound recording, which is represented by the ℗ and is often referred to as “masters.” This confuses some because the “p” doesn’t stand for publishing, but phonogram. Then there is the copyright associated with the song’s composition, represented by the ©. But this also doesn’t stand for composition, but copyright. And in music, publishing is the exploitation and monetization of that compositional copyright. We all simply call these copyrights the “publishing.” In my early years, people often talked about who owns “the copyrights.” I still believe that some of them were only referring to one side or the other — and that’s what confused me. But there are in fact two copyrights: the “publishing” and the “master” rights.
Originally, a “publishing deal” was the total sale of your publishing rights to a publishing company. This is the reason why there is a songwriter share and a publisher share at Performance Rights Organizations (PROs). Commonly, the songwriter share was also called the moral rights. It was, and still is, believed that a songwriter innately deserved a royalty for their works, called the songwriter share. Then the publisher share was the economical or commercial right to exploit those works. I won’t go too deep into the history of all this, but originally professional composers would write their works and find a music publisher to sell the economic rights to. That publisher would then manufacture in whatever medium, and handle distribution of those rights, while PROs would license & collect for public performance of the works, then pay both the publishers and the songwriters a share of those residual royalties.
Later, as recorded music became more popular, it simultaneously became more common for artists to write their own songs. Artists wanted to participate more in the economic rights of their works, and a “co-pub deal” became the popular choice. This was often selling 50% of those copyrights to a publishing company. The purpose was to enlist a partner who could potentially increase the overall value of your publishing, while you still had some of the economic benefits beyond purely public performance. This especially applies to mechanical royalties. Those are the royalties paid for the reproduction of a composition, instead of the public performance of a work. Mechanical royalties do not have a songwriter share like performance royalties do. Co-pub deals are still sought after because they commonly have an impactful advance to them and often offer more A&R and creative services to attempt to help a songwriter both create more valuable compositions and further exploit their copyrights.
Somewhat recently, the “administration deal” became popular because it allows you to retain your rights while enlisting a company to handle the exploitation & collection of royalties on your behalf for a commission. With an admin deal, all the rights remain with the original songwriter, and they essentially act as their own publisher in exploiting those commercial rights. They simply enlist an administrator with the infrastructure, knowledge and network to competently execute licenses and collections of their publishing rights. Adequately doing this job is virtually impossible for a self-published songwriter, but is a job that can commonly be done for a lower share of collections than in a co-pub deal. In a digital age, there are fewer overhead costs to exploiting and collecting. With lower overhead, more publishers — referring in this case to the companies offering these services — can find success with admin deals with their clients.
There are many other structural terms to all these types of deals including passthrough revenue, reversions, and varying term lengths and rates, but I’m going to stick with the most common and simplest versions of those three deals that I just laid out.
Selling Your Rights
I think the first bit of fear, after understanding how these deals work, is whether selling any of your rights is okay. And both things can be answered by becoming educated about the deal flows. In the current mainstream, there are mixed signals from colleagues of all sizes. Taylor Swift and a lot of artists argue that it’s an artist’s right to own their own masters. Some of these artists, like Swift, are going to great lengths to reclaim those rights, while other artists like Justin Bieber are simultaneously doing massive catalog sales that include both their master and publishing rights. For artists that are in earlier stages of their careers, the same debates go on about entering into co-pub deals vs. admin deals, or licensing deals vs. net-revenue deals on the master side. I think most artists want binary answers to these questions, but unfortunately, that is not the case. It’s all about context.
Great advice I got from a music attorney once was to only sell for a life-changing amount of money. But the caveat was that that is something different for everyone. It could be someone has been renting for their whole career, and having the money to buy a house was worth a co-pub deal. For me, when I was in my mid-twenties, I was taking every mixing and engineering job I could to make rent in NYC. I signed a co-pub deal with BMG for $50k because it changed the trajectory of my life (this was also the 2000’s and $50k was worth more than it is currently). It meant that I could stop chasing rent and start to build a catalog of copyrights from writing and producing that created revenue that I still see every quarter to this day. Signing to BMG also gave me that partner and some legitimacy as a writer. But this is the rub, and the decision you must weigh. Will they be a good partner, and will the value they bring ultimately be worth the value of the rights you are selling? For an artist or a band that isn’t striving to be writer or producer, this money can still change your career in other ways. Is this the money you need to afford to go on tour opening to a much larger artist’s audience? Or is that co-pub advance going to fund a record that you can now license to a record label, and retain those masters? All these rights have value, and that’s why there’s a market to acquire them. Assess if you feel you are getting a fair amount of money, and what you are going to do with it. Are you going to reinvest that money into your career, or are you cashing out for personal reasons? These are all questions that an artist and their teams must make for themselves,every artist from the buzzy indie band to Justin Bieber.
So where do administration deals fit into this? Admin deals can include advances without requiring you to give up any rights. But know that the more money invested by a company will come with expectations of longer terms, more exclusivities, and higher rates to offset the company’s risk. I’ve found that some of the most successful clients we’ve had have gone for a no-advance admin deal that comes with the shortest terms and lowest rates. Again, it’s not binary, and this doesn’t suit everyone’s needs, but this is the most flexible solution. We believe this is best if you’re betting on yourself, and flexibility is the most important thing to have in the next couple of years in your career. The BIGGEST mistake I’ve seen artists make (mostly because of inexperienced managers) is passing up a good admin offer with flexibility because they’re waiting for a larger co-pub deal that is going to give that life-changing amount of money. If I could change this common mindset in some people, this article would be more than worth it to me. These are the reasons why:
Misunderstanding of Advance Calculations
First, if you’re signing an admin deal that is 18 to 24 months, that will never get in the way of a co-publishing agreement. Publishers that are investing in co-pub deals are looking several years down the line for their returns, and for this reason don’t move as fast as a company looking to do a low-stakes admin deal. Even if co-pub interest came the day after you signed an admin agreement, it will take several months of conversations with team members, potentially working with some of their other clients, gathering statements for their royalty team to analyze, deal negotiations with management, and then contract negotiations with lawyers. I think it took four to six months to accomplish my $50k co-pub deal with BMG, and that was low stakes for a company the size of BMG.
But this brings us to what I think delivers the most value from admin deals: the cleaning and organization of your catalog. The worst thing I hear from artists — but mostly from young managers and lawyers — is that they KNOW there are outstanding uncollected royalties, and they think that that pipeline income will garner them a larger advance. I will unequivocally preach that this is the opposite of true. For one, those old uncollected royalties don’t stay around forever. Unclaimed royalties go into black boxes and are ultimately distributed by market share after a certain period and lost to the original copyright holder forever. Publishers are always uncertain about what is going to be recoverable, especially in cases where the catalog is unorganized with missing registrations and unsettled claims. It cannot be emphasized enough that having clear statements from a competent administrator for another publisher to analyze for an advance calculation will get you the larger amount of money.
And lastly, if time were still not on the artist’s side, there are options you can negotiate. Some agreements have buyout clauses that are minimal. Some administrators pride themselves on flexibility and will simply ask for a right to match the co-pub offer, or let an artist out for a larger deal. And we’ve had many clients that simply ask us to accept a letter of direction to their new publisher while they wait out the end of our term. Again, the new publisher is looking long-term. Paying a low administration fee in a flexible short-term deal won’t interrupt their interests. I know I’m a little biased, but there is almost no reason to not enter into a publishing admin deal that will almost certainly net you higher returns from collections.
We touched on a lot of the answers we had come up with, but are unfortunately only scratching the surface. Obviously, understanding publishing rights and publishing deals is a lot more complicated than a couple of paragraphs can explain, and we really only gave one perspective on selling your rights. There are many other pros and cons that could use much more in-depth thinking and conversations. And the understanding of advances and advance calculations is a bit more complicated as it is different for different companies depending on their strengths, weaknesses, and goals for their roster. I know a lot of companies that don’t include creative sync licensing history in advance calculations, but others do. This all leads to the fourth idea we mentioned earlier:
The Disparagement of Financial Value
The most upsetting thing I hear when we’re having discussions about a client’s publishing options is that none of these decisions are necessary to fret over because none of it is worth much money at all. Again, we can only scratch the surface on this, but there are so many reasons we would love to dispel this idea. But at the same time, I also understand. Publishing rates are sometimes abysmal for independent artists. The organizations around publishing have rigged this system to push as much money to the top of the food chain as possible. PROs already have special credits for clients that cross certain commercial thresholds so that they can incentivize more of the top 1% of music creators to choose them over so many other options. Independent and major songwriters are not paid one-to-one. The Spotify bundling issue that came up a couple of years ago never faced any legitimate challenge. It looks increasingly like this was an intentional plan to once again push money to the top. Instead of negotiating rates back to where they were, they offer a “solution” in a new audio/visual license, conveniently a royalty outside of statutory rates that seems to again favor major label artists that create and distribute more video content on Spotify than independents. The bundling issue ended up taking a large amount of money away from all publishers, then months later had it repackaged and given back in a form that gives greater gains to major label artists, and almost nothing to independents.
Which leads us to whose responsibility it is to fight for more equity. I know we all see songwriters argue that things aren’t fair, and there doesn’t seem to be much to do. But that feeling of despair is how justice is lost. We wanted to write a whole article on who has to enact change. Some think it’s impossible without some of the top artists actually standing up, but I don’t think they ever will. We aren’t that culture anymore. It has to be that the middle class of artists maintain a desire to keep up with their rights. There is money there.
Publishing money may only be gas money for tour, another run of T-Shirts, even a few months’ rent. I know it’s hard to make a fulfilling life around publishing income for most, but it has to be a part of your music career. Don’t be afraid of it, don’t stop asking questions about it, and don’t let your money simply go unclaimed and to the majors. That’s the worst outcome we can imagine.
By Caleb Shreve, Founder & CEO, Killphonic
You can read past Keeping Tempo’ articles via the portal linked here. And, stay tuned for more insightful discussions from our members and partners from across the industry!
