Demystifying the Profitable World of Publishing

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Demystifying the Profitable World of Publishing

This is Celia Hirschman with KCRW for On the Beat.

The world of music publishing can be so complicated, that even folks in the record business sometimes find it difficult to understand.

Music publishing is the business of acquiring and exploiting rights in musical compositions. That's legalese for saying if you want to use a piece of music - on a CD, in a game, in a film, on a TV spot, as sheet music or in fact, in any other medium, you've got to pay a publisher a royalty. There are three kinds of royalties, relating to the way the music is used: mechanical royalties, performance royalties and synchronization royalties. The publisher splits the money from these royalties with the owner of the music and the songwriters.

There are lots of twists and turns contractually regarding each of these royalties, but here are the basic precepts. For mechanical royalties, labels pay publishers a royalty per song. That can add up nicely if a songwriter sold 100,000 records, and was the sole songwriter.

And a songwriter can also generate income having their song play on the radio, TV or on the Internet. Those royalties are called performance royalties. ASCAP, BMI, and SESAC, the three performing rights agencies, collect performance royalties for the songwriters and publishers.

The third way to generate songwriting royalties is through synchronization or synch licensing. This occurs when a song is married with visuals, like on a TV show, in advertising, in games and in films. A songwriter can earn tens of thousands, if not hundreds of thousands, or even millions of dollars a year on synch licensing royalties. With popular songs making their way into fabric of film, advertising, television and gaming, the publishing business has changed its income levels dramatically.

A lot of major publishers felt that they were playing second fiddle to the record companies in the past. It was all about the record label for so many years. Now with the major label business in disarray, some of those publishers feel they are finally getting the respect they deserve.

It used to be that publishers invested regularly in the building of an artists' career in tandem with a record label. It wasn't unusual for a publisher to contribute extra dollars for tour support and radio promotion, to help defray extensive development costs. Publishers understood that investing in their assets could yield them a profitable return in the future.

So now, with all this income being generated from synch licensing, are publishers investing their profits in the development of artist careers? Hardly. In fact, contributions by publishers for artist development have been drastically reduced in the past five years. You see, synch licensing fees are not always relative to record sales, touring success or radio hits. Synch licensing fees are determined by the needs of ad agencies, film companies, gaming companies and TV shows, regardless of the artist's stature.

So much for artist development.

Still, one good synch license can put a band into the black for years to come. And it can provide the needed entry point for many new artists to get that well deserved door opened to launch their careers. Let's hope that as publishers continue to benefit from these newfound streams of revenue, they'll find ways to build the careers of the artists they represent.

This is Celia Hirschman with KCRW for On the Beat.