9 Income From Songwriting

Artists who are also songwriters, or who can become songwriters, add a valuable income stream to support their careers. When a songwriter writes a song and it is recorded, the writer is entitled to earnings in the form of royalties when a song is performed live, on the Internet, on radio and television, in a dance club, and each time it is sold as one of the songs included on a recording. The songwriter also earns royalties from the printing and publishing of sheet music, and from licensing the song for use in advertising, and in video game, movie, and television soundtracks. Clearly there is considerable potential income to the artist who develops into a good songwriter, too. And finally, songwriting can assure an artist that they will have material they can perform that was written for themselves as part of their total creative expression without necessarily relying on other writers.

Song publishing

Artists today must often be the “complete package” if they are to have a genuine opportunity at a sustaining career in the music business. This means they will need to be skilled at performing, playing an instrument, and writing songs. If the manager signs an artist who is not a songwriter, it is advisable to begin nurturing that talent to see if it develops into a potential income stream.

What are some of qualities that make someone a potentially hit songwriter? An informal survey by ASCAP in 2003 asked current publishers of hit songs what attributes a songwriter should have if they are to become successful. The top five were:

(Murphy, 2003)

The “amount of draw” refers to how much the publishing company must periodically pay a writer until their creative works are recorded and begin earning royalties. Among the easiest ways to begin developing the artist into a songwriter is to get the artist a writing coach, and then have them begin co-writing songs with experienced writers. It may prove that the artist will not be able to become a viable songwriter, but the manager cannot overlook an opportunity for the artist to grow creatively as a writer.

Both the manager and artist should understand that if publishing income is commissionable by the artist manager, the draw received by a songwriter is also commissioned. A draw is considered advance payments against future royalties and is recoupable under most circumstances.

If an artist does not have his or her own song publishing company, they will need to become associated with a publisher. A publishing contract is very much like a recording contract in that the publisher agrees to exploit the commercial value of the artist-songwriter’s creativity. A publisher is someone who becomes a partner with the writer: The songwriter agrees to write songs exclusively for the publisher and the publisher agrees to handle the administrative part of publishing their songs and to get songs placed with record producers who might have an interest in songs for artists they are producing. Even for artists who write only for themselves, it is often convenient to have a publisher handle administrative things such as registering the copyright and collecting royalties for them.

The standard arrangement for a songwriter who signs with a publisher is to give the copyright to the publishing company and receive 50% of the publishing royalties. The other 50% is given to the publishing company in exchange for exploiting the songs by getting them placed on recordings and in other commercially worthwhile endeavors. If a songwriter has co-writers, the writers’ 50% will be divided between them based on their agreed sharing of the royalties. For example, three co-writers might agree to share one-third each of the writers’ half of the royalties earned through song publishing.

The flow of earnings for mechanical licensing of songs from the publisher to the artist-songwriter is quarterly, and that is based on the cycle of payment from an organization called the Harry Fox Agency. This company licenses songs on behalf of many US song publishers and then collects the royalties for their use to be paid to the publisher. The strength of the Fox Agency is in its ability to periodically audit record companies to be sure they have paid their publishing clients royalties that are owed, and it means small publishers do not need to deal with licensing issues. The Canadian counterpart to the Fox Agency is the Canadian Mechanical Rights Reproduction Agency. (Passman, 208)

Income from songwriting

The first time a song is scheduled to be recorded, the record company must pay a mechanical license to use the song. This is a totally negotiated license fee which is paid to the publisher of the artist’s song. There is no limitation on what the license charge may be. However, after the song has been recorded and released commercially, the song an artist has written appearing on another artist’s album will earn the publisher 9.1 cents for each album that is sold. (US Copyright Office, 2009) Songs longer than five minutes have a higher statutory rate. This is the current statutory rate a publisher may charge for a compulsory mechanical license for the use of one of the songs in their catalogue, though a lower rate may be negotiated. In late 2008 the Copyright Royalty Board approved a 24-cent royalty rate for each ring tone sold.

Mathematically, if an artist’s song appears on another artist’s album that sells 20,000 units and the compulsory rate of 9.1 cents is applied, the publisher receives $1,820. Assuming there is a 50/50 split between the publisher and the songwriter, the artist and the publisher receive $910 each. If the artist has a co-writer or if a pre-existing sample is part of the song, the writer’s amount is reduced further. Keeping current with the budget for the artist is a continuing responsibility, so for the manager to predict the amounts and timing of income from songwriting, he or she will need to rely on the best estimates of the publisher and the record company.

If the artist is the writer of songs that appear on their own album, most record companies will offer to pay only three-quarters of the full statutory rate, and only for the first ten songs that are recorded. This means the label pays 6.825 cents per song on the album in which the artist is also the songwriter. From the record company perspective, they feel they are promoting the recordings of the artist-songwriter from which they will be earning royalties for the recording. Since the label is doing the promoting, the writer of the music is also getting a benefit, and that benefit should be shared with the label by reducing songwriter payments and thereby reducing their cost of sales.

If the number of songs exceeds ten, the label will charge the artist for royalties for the excess songs. Even if the artist has written the songs, remember that the royalty payments are made to the publisher, who is a partner sharing earnings with the artist-songwriter. The limitation to a specific number of songs, again, is an effort by the record company to control the costs of creating the album.

For the artist who publishes for their own publishing company, some of the income considerations just noted will still apply. The primary difference is that there is not a split with the publisher. Even if the artist also owns the record label, the manager must remember that some songs on an album will be co-written or written by other members of the artist’s group, which will impact costs and earnings for members of the group.

Timing of publishing income, as noted previously, becomes an important consideration for the artist manager who must manage budgets for their artists. Melissa Wald, owner of Copyright Solutions, provides this guidance on publishing income from songwriting:

Income from song performance

For the artist-songwriter who has success with music on radio and other public performances of their songs, earnings from the performance of their compositions can provide a nice addition to the income stream. Companies called performing rights organizations (PRO), specifically BMI, ASCAP, and SESAC, license the use of copyrighted musical compositions for public performance and then collect royalties for the use on behalf of publishers and songwriters. A PRO does not license the use of songs in dramatic productions, for example in movies and on television, nor for their use in commercials; those licenses are negotiated directly with the publisher.

If an artist-songwriter is not registered with one of the PROs, they will not earn income from the performance of songs they write until they do. The artist manager must be sure the artist who becomes involved in songwriting is registered with a performing rights organization. It costs nothing and can be done online in just a few minutes.

The amount of money paid to a songwriter is based on formulas that have a series of variables that include primarily the number of exposures of the performance of a song to an audience, and how much money the performance of the song is making for the person or company that is using it in their business. The audience for the writer’s song can be in an amphitheater, on radio or television, in a restaurant, in a retail store, on the Internet, and on an elevator.

Payments for most of the licensed uses for the performance of songs are made by the PRO directly to the songwriter and to the publisher at the same time, on a quarterly basis. The manager should note that unlike the sale of a song, where payment comes through the publisher, performance income comes directly from the PRO to the writer. (Hull, 25)

Because of the number of variables that are used by PROs to determine the value of performances they license, it is difficult to say how much performance income is. In a conversation with the author in 2005, Donna Hilley, former CEO of Sony/ATV, estimates that the performance income resulting from an active number one country song would be an estimated $500,000 US. All of the 10,000 commercial radio stations in the US pay fees to PROs in order to use a songwriter’s music on the air, and it can amount to a substantial sum. Certainly every song will have its own value in performances, but it is clear that adding songwriting to the skill set of the artist holds considerable potential in career earnings.

Publishing as a negotiating asset

If the goal of the artist is to record for a large label, the ability to write songs becomes a tool the manager can use to negotiate the recording contract. Most major labels and larger independent labels have publishing companies associated with them that become home to their artists who also write music. With estimates that only one in ten albums ever breaks even, labels look for buffers from these losses by acquiring the rights to publish the music of new artists who are signed for recording deals. If the publishing of the artist is not inextricably tied into another publisher, the manager can bring the artist’s publishing to the negotiating table with the record label as they pursue a contract with the company. There will be instances, too, where the artist is unwilling to give publishing rights to the record label and the manager will negotiate without it as a bargaining point.

Finally, if the artist is a songwriter and is seeking a recording contract, the manager must coax the artist to consider using the songs of other songwriters on their albums if better music can be found. There will be a temptation to use only the artist’s songs on the album, but the competition to get music the best placement among the vast electronic media means the artist must record the best songs that there are. The best songs get the most exposure to listeners and to viewers of music videos. Do not let the artist accept anything less than the best music available, despite what the producer and the label’s A&R department might want. This is the perfect point to begin looking at another major source of income for the artist—recordings.

References

Murphy, Ralph, 2003, www.ascap.com/nashville/murphy/murphy2.html.

U.S. Copyright Office, 2006, www.copyright.gov.

Wald, Melissa, 2007, personal interview.