What are some of the main deal points in a music publisher's agreement?
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Most of the various types of music publishing contracts contain similar basic paragraphs in common cornering the advance, royalty payments, copyright ownership, and warranties and representations. These are the key issues that should be addressed and clarified.
(1) Term: The "term" is the length of the agreement. The duration can be based on calendar ("contract years") years or on albums ("LP’s"). For example, the contract year term in a staff writer deal is usually one year with a certain number of options. Another frequently encountered contract year term would be the longer of 12 months or until a specified number of songs have been delivered. An LP-based term is based on the albums written by the composer, not on years. While recording agreements with major labels usually range from 5-8 years, co-publishing agreements are shorter, only about 3 to 4 years in duration.
(2) Territory: While it may be possible for some established writers to limit the publisher’s rights to certain territories by way of an "admin deal," a "worldwide" territory is common for single-song contracts and "co-pub" deals. This allows the publisher to maximize its earnings on your songs by either adding it to the songs already in their subpublishing agreement, or by assigning the songs to various subpublishers around the world.
(3) Scope & Compositions: A co-pub deal can be for a single composition, an album, or an entire catalogue. The deal can include past, present and future songs. The "scope" clause specifies which songs are part of the publishing deal by expressly defining "composition" in a certain manner. It explicitly identifies in the body of the agreement which compositions will be included and excluded. If you are the writer, it is more beneficial to try to exclude previously released songs and limit the scope to songs written during the term of the publishing agreement. If existing songs are required, try to get a higher advance. This compositions clause may also determine if the writer has the right to collaborate in writing the songs and, if so, how the collaborative works are to be co-owned/co-administered.
(4) Advances: An "advance" is a sum of money paid by the publisher to the song writer for conveying to the publisher copyrights to a song or a collection of agreed songs. The royalty advance is frequently the most important issue to the writer. The only reason a writer would ever want to convey his/her copyrights in songs would be in return for money and to share in the future royalties from the songs. Therefore, if a publisher ever asks you for money for your own songs, it is not a genuine or legitimate publisher. A publisher should always offer you money to own or administrate any part of your songs, unless it is small indie publisher with no money. The amount of the advance is based on the degree to which the publisher believes that it can earn royalty income off your songs through successful exploitation. If the publisher believes your songs are going to be big hits, it may offer a lot of money. If not, the advance will be commensurately less. Market forces also often drive up the level of advances.
The advance is usually "nonrefundable and recoupable." Advances are "nonreturnable" because if the writer does not earn any royalties, the writer need not pay the advance back. "Recoupable" means if the writer’s songs generates sufficient royalties to pay back the advance, the publisher gets to "recoup" its advance. Once the writer is "recouped", all additional income collected is split between the writer and the publisher in accordance with the agreed share. The only song writer royalty a publisher cannot recoup is income form public performances.
Advances may be contingent or automatic. For example, an advance may be based immediately upon signing the publishing agreement ("on execution"). Alteratively, an advance may be paid when a single song or album reaches certain sales or chart positions.
An advance is payable usually as a flat sum, e.g. $25,000. Or, it can be paid out as a per centage (%) of earnings on previous albums, with minimums and maximums ("min-max’s").
(5) Delivery: In return for the royalty advance , the song writer must "deliver" a certain amount of musical compositions during the term. Where substantial advances are involved and the number of compositions is specified in the term, a music publisher may often insist that the compositions be released on a record in the US by a "major" record label.
(6) Ownership: The ownership of the copyright is perhaps one of the most important terms in a publishing deal. Under a single song agreement or ESWA deal, the publisher typically acquires 100% copyright ownership, worldwide, for life. Under a typical co-pub deal, the writer becomes a "co-publisher" with the music publisher on a 50/50 split, but the publisher has exclusive administration of the songs throughout the world. No ownership rights are granted in either admin, collection, or subpublishing agreements.
(7) Royalty Splits: The division of royalty income is just as important as ownership of the copyrights. In a single song deal, the royalties are usually split 50/50 between the writer and publisher, except for print income for which the writer usually receives 5¢ to 10¢ per copy sold. Similarly, under a typical "copublishing deal, there is usually a 50/50 split, which becomes a "75/25 deal." Under this deal, the co-publisher-writer gets 100% of the writers share of income, and 50% of the publisher’s share, or 75% of all income. If an admin or collection deal is possible, the royalty splits are usually 85% to the writer, 15% to the administrator. Sometimes, it is possible to negotiate a more favorable split in a co-pub or an admin deal once the writer has been recouped, or reaches certain pre-determined levels of income and success.
The calculations of your royalty splits will also be dependant on whether your royalties are calculated on an "at source" or "receipts" basis. As a song writer, always try to get an "at source" deal to maximize your income.
Print royalties are usually paid on the basis of "net paid sales", which means on gross shipments, less returns, for which the publisher received payment.
And, remember, no payment of royalties is paid to either the publisher or the writer for promotion copies of your songs.
(8) Administration: In exchange for giving you an advance against future royalties, the music publisher will be conveyed the writer’s "administrative rights." This clause grants the music publisher the right to control and exploit your composition. Publishers do this by granting mechanical licenses, synchronization licenses, and print rights. Additional provisions allow the publisher to collect the money from the rights that are granted to third parties. There is usually an "administration" fee charged by the administrator/publisher. Frequently, the admin fee is 10% to 25%. This fee is usually deducted off the top of either the gross receipts from the compositions or from the gross publisher’s share of income.
(9) Costs: The deductions from gross royalty receipts will often be the subject of negotiations. Obviously, as the writer you will want the music publishers to absorb as many fees as possible, For example, ask your publisher to waive fees charged to the publisher by Harry Fox Agency or CMRRA. If they do not agree to this, try to avoid the middle-man charge by having the music publisher agree to license directly to affiliated record companies, or perhaps to only the "majors." Other expenses that are negotiated are the copyright registration fees and the costs of lead sheets and demos, etc.
(10) Restrictions:There are a number of creative rights that a writer may choose not to convey to the publisher, and for which the writer may want to retain prior approval. Sometimes a writer can place limitations on the right to use his or her name and likeness (right of publicity). For example, a writer may insist that his songs not be used commercially in conjunction with tobacco or alcohol companies, feminine hygiene products, etc. If this restriction is allowed, the publisher will usually insist the writer must regularly supply the publisher with approved photographs and bios, and will want to use any materials approved or deemed approved for use by the writer’s record company. Or, a writer may not want any translations, adaptations or arrangements of the songs without prior approval. Often a writer who is also a recording artist may want a clause not allowing the publisher to issue "first-use" mechanical licenses with out the writer’s approval. This restriction is usually limited for periods of 6- 9 months, and applies only where the writer contemplates recording the song. Other restrictions could include limiting the publisher from commercially exploiting any demo recording, or from issuing mechanical licenses "below rate." Another provision would be to preclude any synchronization licenses without approval, or no use of the title of a song on any film/TV/stage production without writer consent. A writer can sometimes also limit the publisher’s right to settle copyright infringement or other lawsuits against the writer without the writer’s consent. If you have sufficient clout, you may even restrict your "grand rights" and "merch rights", so that a publisher cannot (without your permission) use your songs in a theatrical dramatization, or cannot license you songs on any merchandise.
(11) Reversion: Under US Copyright laws, the length of time a music publisher is allowed to retain ownership of and/or administrative rights to the post-1978 copyrights acquired during the duration of the publishing agreement is thirty-five years. At the end of the 35-year term, the copyrights "revert" back to the writer. Thus, the term, "reversion." The provision that specifies the writer’s right to regain the copyrights is called a "reversion clause." Sometimes a writer can negotiate a reversion clause that allows the copyright to revert sooner than under normal circumstances.
A reversion clause may be negotiated where the publisher fails to pay the royalties properly or on a timely basis. In the past few years, a growing trend has emerged with some music publishers in co-pub deals to agree to return copyrights to some leveraged writers after 25, 15 , or even 5 years. Alternatively, reversion may occur the later of "term plus x amount of years." If you cannot get a reversion clause based on years, try to get one based on your performance.
(12) Costs of Litigation:As in many recording agreements, there are often "Warranties," "Representations" and "Indemnification" clauses in publishing agreements. Under these provisions, the writer promises that all the songs on your albums are original and agrees to reimburse the publisher in case they are found not to be originals. Similar "warranties" and "indemnification" clauses exist in the recording agreements between the artist and the record company. At a minimum, try to avoid or limit the indemnification clause, under which a writer agrees that if the music publisher is sued for copyright infringement, the writer agrees to reimburse them for all their court costs, legal expenses and attorneys fees. Instead, try to get provisions that obligates the publisher to bring all necessary litigation in order to collect your monies and/or to prevent or cure infringements. Ask the publisher to advance and absorb all costs of litigation against third parties.
(13) Audit:Typically, publishers send royalty payments semi-annually (twice a year) at six-month intervals, usually within 45 days after the end of each six-month period. This means if the music publisher pays based on a calendar year, the writer should be paid in about mid-August and mid-February. To protect the writer, there should be an audit clause which allows the writer (or his/her financial representatives, such as a CPA, accountant, and/or lawyer) to examine and inspect the music publisher’s royalty statements and books at certain times to make sure royalty payments are accurate. Insist on one. There are usually restrictions imposed in audits clauses as to the times and frequency of audits. Try to get a longer "contractual statute of limitations" on audits and law suits, instead of the short ones usually proposed. Ask for a right to inspect the statements, books, and records 2-4 times per year. Ask for the right to audit licensees directly. In case an underpayment of royalties is found after an audit, try to include a provision that ensures your audit costs will be reimbursed, in whole or in part.
Whenever possible, a qualified music lawyer should be consulted before any music agreement is signed. With the right counsel and bargaining power, you should be able to land better deals.
(Reprinted with permission from Ruben Salazar, Esq. )