Publishing deep dive

Pro Songwriting Masterclass | Lee Dannay (John Mayer, Train, Brandi Carlisle, Americas Got Talent, Warner Chappell, Sony, Shawn Mullins, Five For Fighting...)

What is music publishing? Music publishing is the side of the music business that focuses on  the earning, collection, distribution, and protection of revenue earned by the composition side of the song that is the music and the lyrics. So  in the business,  a song is kind of split  on the  composition side, the lyric, the melody, the actual song. It’s really the bones of the song.  All of that is publishing income.

The other side of the song is the actual recording, the specific recording of that song. So  that’s a whole different side of income. That’s master side. We’re not gonna talk about that today. I have done prior webinars where we’ve talked about that a a little bit, but just to really be clear, what we’re gonna talk about today are all of the different ways of monetizing just the song side, just the lyric melody, the composition side of the song. So I just wanna make sure that that’s clear because the, the different income streams, that we’re gonna talk about are, are, are vast and varied and, and, and complex.

And I wanna make sure you understand that. So that’s only one side of the business that you can earn song, song revenue on.  So music  publishing monetizes the song copyright in a variety of ways. Those variety of ways are the following income stream, income streams. And that’s what I’m gonna deep dive into now. A little bit mechanical income, streaming income,  performance income  synchronization, income, just sync, and then a couple of other additional ancillary income streams that I’ll touch upon today.

hopefully we should have time to go through all of this.  Let’s start with physical. So physical mechanical income is earned by the sale of the song in physical form. That’s pretty simple and pretty straightforward.  Albums, CDs, cassettes, digital downloads, yes, a download versus a stream, and we’re gonna talk about that a little bit too.

A digital download is considered physical because you, for a price, you purchase that download. And even though you can’t totally touch it the way you can hold an album and hold a cd, it is considered a physical reproduction. So there are specific royalties that are assigned to the copyright, to the composition embedded in these physical forms. And  this amount is generally  based on the copyright laws and, and customs of  individual territories.

So this is what’s considered a territorial, right?  In the United States, for example, the mechanical rate for physical is 9.10 cents. What, what that means is every time a song is sold, it’s kind of like a unit sale. Every time a unit a song is sold, 9.10 cents  is  By the, for the songwriter for the sale, and reproduction of that song.

Now, we’re in a streaming economy for the most part. So with the exception of the advent of vinyl, which has actually kind of increased in, you know, the past couple of years, which is, is generating, you know, good money on the, on the mechanical side for songwriters, for the most part, we’re in a, we’re in a streaming economy. And I’m gonna talk about that in a little bit, in a little bit. But just, you know, to give you guys an example, and I know that, you know, you guys are here from all over the world, so, we don’t have enough time in the day to talk about the exact physical amounts and how they’re calculated in every territory.

I’m just gonna give these two examples. The US mechanical rate for one physical unit sale is 9.10 cents. And in the UK it’s calculated a little bit differently. It’s 8.5% of the dealer price, which is the cost per unit that the label sells.  The cd, for example, to a retailer. It’s not actually the cost that the consumer pays. So that’s complicated enough. I I’m not gonna do a deep dive into, into all of the mechanics of that, but just so that you understand the physical income side of music publishing.

in the days pre streaming, this was a very, very big deal.  Songwriters earned a lot of money because many singles, many albums were sold albums that went platinum and diamond generated huge amounts of money in mechanical income. It’s shifted now, you know, with streaming, and we’ll talk a little bit about that in a moment. but it’s still a very, very important income stream.

and, and in a way getting a little bit more important because even, even cassettes, even though they’re kind of more novelty things now, but they still exist and they still generate,  you know, income for a songwriter. just be, just to be clear  in terms of copyright law, copyright law allows certain protections, that guarantee that when a song is  replicated, reproduced, sold, transferred, it generates that ownership that you have of your copyright generates the, the need for that royalty payment to you.

So in your territory, your copyright laws will dictate some of the, you know, rules and regulations around all of this. But, but it’s a very, it’s that law is meant to really protect the copyright owner. So, that, that’s just a, a sort of an an aside. We’re not having a, we’re not having a loss a law webinar today. let’s see. So  really briefly too, let’s talk about streaming  in the streaming economy, which is a really, really complex web of calculations because they, they are generally, income is generally sort of divvied up and, and earned and paid out by the, the digital service providers themselves, the DSPs.

but just to sort of differentiate the, streaming income includes both a mechanical payment, a mechanical royalty, and a performance royalty.

So we just talked a little bit about what that mechanical is. again, it’s a, it’s a, it’s governmentally regulated to a certain degree. It’s a very, very small percentage, but there is still a small percentage of mechanical royalty that’s attributed to streaming. and, and then there’s also performance, which we’re gonna talk about in a moment. So just to give you guys an idea of the complex, sort of web of calculations that exists, in terms of how this money is  earned and collected and paid to the songwriters, there are very many factors involved depending on the, on the platform, depending on the DSP, anything from subscription to a subscription to the, to the platform or free tier, they generate different payments, whether there’s advertising revenue, as in the case of YouTube, where you can share, if you’re putting up music on a channel, you are able to share if you’re at a certain level in the advertising revenue.

and then of course the amount of streams.

So how many times a song is streamed is going to generate, you know, different levels of payments. So really generally the DSPs kind of calculate all those factors and then they pay,  well, they keep a percentage for themselves, first of all, as the, in the example of Spotify, I think it’s about 29%, you know, for their sort of service fee. they do pay the largest amount to record companies, and that is on, really on the master side to a large degree. ’cause the record companies tend to be master owners.

Now, if you own your own master, the,  the DSPs will pay you directly. If you have a distribution deal, that’s a different calculation as well. so there’s a lot of different sort of payment, differential differences to the payment structures, the payouts. But the structures are, you know, sort of, individualized per DSP. So the DSPs calculate all those factors. They pay out to the record labels, they pay to the music publishers directly.

and then in some cases, if you are an independent artist or independent songwriter, they might pay you directly as well. but  publishers and songwriters receive a really disproportionately small share of income from streaming compared to the labels. And and that’s  anybody who reads  any music journals, any, any mainstream, you know, entertainment publications will see, even now the DSPs are trying to lower their payments as if they weren’t low enough. It’s a big bone of contention.

The music industry and the publishing industry, in particular has been advocating very, very strongly for  fair payment and, and, and raises and in the mechanical side of things. so it’s a, it’s a complex constantly changing and evolving, issue in the music publishing industry. But, you know, those of us on the industry side are trying really, really hard to get you guys paid. So, so understanding that is also extremely important. So to continue, the income that goes, that is designated to music publishers from the DSPs on the streaming side of, for streaming income is also split between these mechanicals and performance income.

So it’s somewhere in the eight to 10%, of  song revenue goes directly, goes ultimately to the songwriter, some something in that. And, and, and it’s constantly changing. So, I’m not trying to be vague, I’m just trying to explain the, the abstract nature of it all.

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