SOURCES OF INCOME

        A song's copyright holder owns several important rights, including the right to copy the song, distribute copies of the song, prepare derivative works from the song and perform the song publicly.  A song generates revenue for its owner when the owner issues permits, (or "licenses"), to allow others to use these rights, for a fee or royalty.  In the beginning you, as the composer of a song, are the song's copyright holder.  In order to get the song to generate revenue for you, you may find it necessary to affiliate with a music publisher.  A music publisher acquires songs, (and the copyrights), from songwriters and then exploits the songs commercially.   Music publishers come in all shapes and sizes. You want to affiliate with a publisher that will be able to find users for your song, issue licenses to users, collect the revenue, and then share the money with you.

        Elsewhere on this site, I will analyze the various provisions in songwriter/publisher contracts.  These contracts specify how much of the song's copyright you are transferring to the publisher and how the money generated by the song will be shared between you and the publisher.  You may transfer all or a portion of the copyright to your publisher, which will, in turn, affect the way revenues are split.  Depending on your bargaining power, the publisher may give you an advance against future revenues. 

        As background, you need to understand exactly what kind of money a song generates for its copyright holder.  A song earns money for its copyright holder from four main sources:  mechanicals, public performance, synchronization and print.  The way you get the money, and how much of it you get, depends on its source.

MECHANICALS

         Mechanical royalties are the main source of income for publishers. Mechanical royalties are moneys paid by a record company to a song's copyright holder for the right to use the song in "devices serving to reproduce the composition mechanically," i.e., vinyl, cassettes and compact discs.

        The current statutory rate for mechanical royalties is 9.1 cents per song per record for recordings of up to 5 minutes in length.  For recordings over 5 minutes in length, the rate is 1.75 cents per minute, or portion thereof.  The statutory mechanical rate is subject to change, and should be checked before any project.  So far, it has only gone up, so it is beneficial to the song's copyright holder to negotiate a provision that the rate will be calculated as late as possible, i.e., the date of a commercial release, rather than the date of a contract.

        Record companies routinely ask their recording artists who write their own songs for a mechanical license at 75% of the statutory rate on self-penned songs ("controlled compositions").        Ideally, the  record company and the song's publisher work out the details of the mechanical license before the song is recorded and placed on a compact disc or other mechanical reproduction.  Even then, it is a monumental task to keep up with the number of copies sold and the calculation and collection of the mechanical royalties due.  Many US publishers use the Harry Fox Agency to monitor and collect mechanical royalties in return for a commission of up to 5% of the mechanical royalties collected.  The revenues from mechanical royalties, or "mechanicals," are generally divided equally between the publisher and the songwriter.

PUBLIC PERFORMANCE

       Public performance income is the second largest source of income to a song's copyright holder.  Almost every time any version of a song is performed publicly, whether live or on record, in concert or over radio or television, the copyright holder is entitled to public performance royalties.   There are a few narrow exceptions, (for example, educational use in a classroom setting).  Songwriters and publishers affiliate with a performing rights society to keep track of air play and other public performances of their songs, and to collect and distribute the resulting license revenue. ASCAP, BMI, and SESAC are the major performing rights societies. They issue blanket licenses to radio and television stations, nightclubs, restaurants, and even retail stores, which allow those users to play songs of their affiliated writers and publishers.  The license fees vary, depending on the revenue of the user.  The societies then monitor airplay and public performances and, using various formulae, distribute the money from the license fees, (less a commission), to their affiliated publishers and songwriters, separately.  Both the publisher and writer should be members of the same society, although cowriters may be members of different societies.

        As to which organization is best for you, there is no single answer.  They use different formulae in arriving at payments to their affiliated writers and publishers.  As to which organization pays more, the common wisdom is that it evens out in the long run.    I traveled to Nashville recently with two songwriters, one ASCAP and one BMI.  From their experiences and from conversations with  several Nashville-based songwriters, I discerned some very definite preferences.  Talk to your friends.  A payment formula that is best for the writer of a platinum smash may result in no payments at all to the writer of a song with only minor air play. It's probably more important to affiliate with the organization that has better personal contacts for you.  While they can put songwriters in touch with publishers and vice-versa, their strengths and weaknesses in this area seem to vary with the genre of music and the particular regional office of the society.

        When filling out your ASCAP, BMI, or SESAC paperwork, or signing an Exclusive Songwriter, Co-Publishing, or Administration Agreement, you may come across the terms "grand rights" and "small rights".  Grand rights and small rights are different types of performance rights.

        The music industry makes a distinction between two different types of performance rights:  grand rights and small rights.  To help distinguish between the two, grand rights are sometimes called "dramatic performance rights", while small rights are called "nondramatic performance rights."   A song, in and of itself, is a nondramatic work.  Dramatic works include both musical and dramatic plays.

        Grand rights and small rights differ not only in the type of use involved, but in the way the rights to those uses are administered and licensed.  The standard ASCAP, BMI, and SESAC contracts cover only nondramatic performances (small rights) or limit the society's right to license dramatic performances.  Dramatic performances (grand rights) are usually licensed directly from the writer or publisher of the play.  Writers often reserve dramatic rights, or the right to dramatize their songs,  in their publishing agreements.

        The Copyright Act's compulsory licenses for phonograph records and broadcast performances on public broadcasting systems do not apply to dramatic works.  So, if you are writing a rock opera, be advised that the public performance of the songs may involve more than the typical BMI/ASCAP/SESAC license.  Industry custom is that copyright owners do not object to the unlimited playing of up to two vocals and one instrumental, in sequence, from original cast albums.   Anything more than that will require the copyright holder's permission.  If a record company can obtain a clearance from the copyright owner for more unrestricted playing of a cast album, it will notify radio stations accordingly.

        There are gray areas.  What if you write a song that tells a story?  A "story-song", in and of itself, is still a nondramatic work, covered by the standard licenses.  But what if your song is later picked up by Hollywood and the story of the song is dramatized in a motion picture?  The law is unclear on this point.  The Copyright Act does not define dramatic songs.  The song itself probably remains a nondramatic work, but if it is played in sequence with other songs from the movie, which is a dramatic work, there may be infringement.

        I am not suggesting that you switch to instrumentals.  Just beware that as you mix uses, i.e. a song for a record and as part of a musical play, you get to visit with someone like me just a little longer!

SYNCHRONIZATION

        A synchronization license is a permit to use a song in a movie or television show.  The producer must obtain a "synch license" from the copyright holder, often for a one time fee.  The publisher usually splits that income with the writer 50-50.  These one time fees vary tremendously- anywhere from free, (for the exposure), to a few hundred dollars for a television show, to tens of thousands of dollars for a movie, to a hundred thousand dollars or more for a commercial. It depends on how much of a song is used, how important the song is to the show, whether it is merely background, etc.  The first broadcast of a "live" show does not require a synch license, but re-runs would.  The live broadcast would require the public performance license described above.

PRINT

       Print revenues come from sales of sheet music.  The relative importance of print revenue has decreased over the years as consumers have come to prefer records to sheet music.  However, it is still a source of serious money and many industry watchers predict an increase in its importance with the growing popularity of detailed transcriptions (or "tabs") of heavy metal guitar licks, synthesizer programming, and the renewed popularity of acoustic music.

       Print royalties vary.  Copyright holders typically earn 20% of the retail price of single song sheet music and 10-12.5% on songbooks, pro-rated to reflect the number of songs in the songbook owned by that copyright holder.  For example, if there are 40 songs in a songbook, or "folio", and you wrote 10, you, (or your publisher), would get 1/4 of the 10-12.5% royalty.  Historically, publishers and writers don't split print income equally. For single song sheet music the writer only gets 5-10 cents per copy and only about 10% of the wholesale price on folios.  I am beginning to see publishing contracts which call for a 50-50 split on all income, perhaps in an effort to keep things simple.  This is great for you as a songwriter, because it results in higher print income.