Music Publishing Publishing is often times the most misunderstood aspect to stating your own Independent Hip Hop Record Label. Many folks just ignore it thinking they will learn it better later and deal with it then. This is a big mistake. Publishing is where the big money is in owning an Independent Hip Hop Record Label.
What is publishing? Publishing is a term used for the management of Copyrights. A publishing company collects money due to a copyright holder for use of their musical work. There are 5 areas to publishing:
Mechanical
A mechanical license is granted in most cases from a copyright holder to a record label. The mechanical license grants the licensee the right to make reproductions of a copyrighted work. Basically, a mechanical license grants a record label permission to duplicate and sell your record. The royalty rate is 9.1 cents per song per record under five minutes in length and 1.75 cents per minute for songs over five minutes long per record.
To break it down even further, lets look at it from another angle.
You own an Independent Hip Hop Record Label right? You sign an artist and make a record. The Artist owns the copyrights to his/her songs. You release that record and sell a lot of copies. Now, you owe your artist 9.1 cents for every song on the album, lets make it simple math and say there are 10 songs on the CD. You owe your Artist $.91 per CD sold. This is not what you owe the Artist for sales royalties and the percentage you negotiated when signing his/her contract.
You owe this money no matter what. It is protected by the government. Your recoupment clause in your contract cannot touch this money. That means if you spent $100,000.00 for manufacturing and marketing and your Artist owes you that as recoupable costs, you do not get a penny of his/her mechanical royalty. If your Artist is using an outside publisher instead of your publishing company that means you are writing a check to an outside company every time you sell a CD. Actually it’s done quarterly, but you get the point.
Performance Rights License
A Performance Rights License is issued from the copyright holder for use of hi/her musical work in a public performance. This includes live shows, radio, video, or any other broadcasts to the public of the copyrighted song. Most folks grant one of the performance rights agencies; ASCAP, BMI, or SESAC the right to collect this money.
Let’s break this down in terms you as an Independent Hip Hop Record Label owner can full understand. Are you sitting? You will want to.
As an Independent Hip Hop Record Label, you have recorded a CD, paid a lot of money to manufacture and market this artist to the world. Your marketing efforts have paid off and your artist is getting radio play, a lot actually, they made it to the top 20. Wow, you are moving some units now. That’s a good thing because you are not getting a dime of the publishing money, in particular the performance Rights license.
The only person who gets paid when a song is played on the radio is the copyright owner. Period. If you as an Indepndent Record Label are not the publishing company or co-owner of the copyright you do not make a dime. Folks, copyright holders make a lot of money off radio play. I have heard rumors of up to $100,000.00 or more per quarter. You as a record label paid for the artist to record, marketed the cd enough to get radio play and video play, but you don’t get a dime for your efforts? I think you are beginning to see where I am going.
Synchronization Licenses
Movies, TV, Video, and anything else where you will synchronize a copyright holders musical work to images is what a Synchronization License grants. A copyright holder can get a lot of money around $75,000.00 - $200,000.00 for inclusion in a major motion release and up to about $5000.00 for a weekly TV show. We are talking about a lot of money. Again, only the copyright owner gets this money. You as a label have no right to it what so ever. Unless you have a split or co-own the copyright.
Again, you as a label owner did all the legwork to get the song enough momentum to have Hollywood call and you get nothing for your efforts. Many labels have gone bankrupt with an album that has week sales while the Artist eats good from his/her copyright ownership.
Print License
The Print License grants the printing and sale of sheet music for a copyrighted song. In urban music this is pretty rare. There are several websites that do offer lyrics, and this would fall under that category, however, it is very rare and as an urban or hiphop record label you most likely will not ever have to deal with this type license.
Digital Print Rights
This is a new one. It has only been around since about 2000. It gives the right for digital representations of a copyright owners work. PDF files containing lyrics, Midi files for use as ring tones, and Midi files for use with music for websites would fall into this category. Although, there is a fierce fight going on about ring tones and where they exactly fit in. For now, this is an important right for a copyright owner. Ring tones are getting huge and the use of unlicensed music as a ring tone is huge. Lawsuits a plenty!!
As you can see, as an Independent Hip Hop Record Label owner you want your part of the publishing pie. It can add up to a lot of money on just one hit song that makes top 20 rotation across the country. So how do you get your piece of pie?
Contract negotiations. Your contract to your artist must include a clause that grants you a percentage of publishing rights. Typical contracts are for 50%. This is a fair and equitable settlement to most Artists. They are making the song and you are exploiting it to make money from it. It’s a win win situation for all.
If/when your potential artist cries fowl, make sure you ask them how they intend on exploiting their music? You have got to make them realize if they had the money, means, connections, and labor force to put their own music out, they wouldn’t be sitting across the table talking to you. But, right here, right now, they are sitting across from you and expecting you to put thousands of dollars into making them money. Like or not, they will not find a deal without giving up a percentage…. Or at least they will have to look long and hard and in most cases, will not like the deal if they get one.
Ok, so now we know we want a piece of the pie. But what do we do with it? How do we collect those royalties?
You have exactly two choices. Start your own publishing company or negotiate with an outside company to handle all your publishing. If you are like most folks you would say hire a company, I don’t know anything about it. And in some cases this might be the answer. However, starting your own is not as hard as it seems.
Starting your own publishing company is little more than filing 2 forms and signing up with performance rights organizations. That is the easy part. The hard part is actually having the time to act as a publishing company. By that I mean having the time to exploit your music for more money like getting it in films, commercials, and on the Internet as background music.
On the other hand, you could just farm it out to an established publishing company to handle it all for you. They are going to take 50% as a publishing company to be your publishing company and handle the exploitation of your copyright, collecting money on behalf of your copyright, and registering your copyright as you produce new songs.
Lets break it down. You now own 50% of your artist’s copyright. If you hire a publisher to handle your publishing duties out-of-house you have to pay 50% to them. You now will only realize 25% of the royalties made from being a co-owner of the copyright. Not bad to do nothing. And maybe this is your option. It is at least better than where you were before only getting 0% of the money.
You still have one more option.
I know most labels do not have time or the training and full understanding of how to properly exploit a song to the world. It is a massive job, requires a staff of folks to do it, and you really have to be connected to get it done. As you are starting your Independent Hip Hop Record Label, this might not be the time to undertake publishing. But you might want to in a year or so once you are established and have a better understanding of the business involved with running an Independent Hip Hop Record Label.
Here is what I suggest.
Start your own publishing company. It’s not that hard at all. Once you do the steps, then you will hand off your publishing duties to the Harry Fox agency. The Harry fox agency is the largest organization in the world to handle the collection of copyright royalties.
By handing your publishing work to Harry Fox you ensure that you and your Artist are indeed collecting all monies due. You are only giving away 4.5% of the royalty rate to Harry Fox since the company only collects fees due. You can’t beat that. It is that simple to start and collect on your copyrighted music. However, Harry Fox is not going to exploit your music for 4.5%. They are only collecting what is due from your efforts.
Lets face it. You are a new Independent Hip Hop Record Label. The first year you will be gaining experience. You will be learning and growing. Your Artists might hit radio, and if they do you might get a movie deal and be asked to include your music in the movie. If Hollywood calls, you can negotiate the deal. By the time you have a track record, know the business a little better, and have some money in the bank, you can hire a full time employee to handle your publishing company and he/she can start exploiting your music.
As an independent Hip Hop Record Label you need to worry about your core function. Manufacturing CDs and selling them to the public. You will learn the rest on the way. I am not saying you shouldn’t start exploiting your Artists at every turn. What I am saying is that right now, concentrate on your core business. I will end this by giving you one more alternative. You can start your own publishing company and then sign a deal with an outside company to handle it for you. Most will want 50% but you can negotiate a lower fee. Why would you want to loose 50% after starting your own company? Because you are small. You don’t have resources and the exploitation of your copyrighted music might equal more record sales.
If your song gets featured in a movie or TV show millions of folks will learn about your artist. They will want to go buy the CD if it’s good. It’s kind of a win win with a loss. In true marketing terms this is called a loss leader. You give something away to get them to buy the bigger item, the CD. This doesn’t always work, but it can and it has.
By setting up your own company, you are establishing your Independent Hip Hop Record Label as having a publishing wing. This is good if your desire is to sign with a major and be under their umbrella. It will value your company higher when you go into negotiations.
This will also give you time to see what an established publishing company does and learn from their work. Sure, you are paying to learn, but aren’t you doing that now? What better way to learn than to watch your own Artist's music go through an established publishing company and watch the wheels turn. Good Luck and stay tuned. I will write future articles detailing how to exploit your Artist's music with your publishing company.
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