The Exclusive Songwriter Agreement: Part 4

As featured in: Performing Songwriter Issues #8-11, September 1994 - April 1995.  Visit performingsongwriter.com to order back issues or subscribe.

By John Beiter

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Our fictional songwriter, Mandy Murphy, has now reviewed the basic provisions of an exclusive songwriter contract presented to her by Patoka Music. She is not comfortable with the idea of assigning, under that contract, all of the ownership in her previously written songs in the coming five years. By the same token, however, she wants to have a more formal relationship with the publisher than merely on a, song-by-song basis. She wonders whether there could be some arrangement allowing her to enter into a more formal “partnership” with the company without giving up all of her ownership in those songs. If she has enough bargaining power, she might be in a position to propose that she and Patoka Music enter into a “copublishing” agreement.

The general purpose of a copublishing agreement is to allow for the joint ownership of a group of songs by more than one publisher. In the most common copublishing arrangement, a songwriter (who, under the copyright law, is the initial owner of the tune) typically assigns only a portion of the ownership in the songs to the publishing company, retaining a portion of their ownership for himself or herself. Thus, both the songwriter and the publishing company are owners and “publishers” of the songs. Usually, the division of ownership will be half to the songwriter and half to the publishing company, permitting both to share equally in the “publisher’s” half of the songs’ income. (Note that the songwriter also will receive the “writer’s” half of the song’s income.)

If the ownership of the songs is divided between the songwriter and the publisher, do both have the right to control, or “administer,” the exploitation of the tunes? Usually not. A publisher entering a copublishing agreement with a songwriter typically will require that it have the sole right to administration of the songs, regardless of their ownership split. The right to administer the songs is extremely important to the publisher-it essentially gives the publisher the right to control the business decisions about the song, from the right to oversee licensing uses of the song to controlling the collection of royalties on them. Thus, in the typical copublishing agreement between a songwriter and a music publisher, although the songwriter retains an ownership interest, he or she essentially gives up the say-so about how the tunes will be exploited. It’s like having part ownership in a car for which you have given away the keys. (Thanks to personal manager/songwriter/attorney Dennis Lord for the analogy.)

Many songwriters entering such copublishing deals will lose little sleep over giving up the “business side” of their burgeoning careers as copublishers, content to spend their days concentrating on creating great songs and, hopefully, receiving substantial royalty checks for their efforts. No matter how disinterested Mandy may be in such mundane matters as song administration, however, she should at least be on the lookout for a provision in any proposed copublishing agreement under which the publishing company seeks--in addition to its 50% share of the publishing income--an additional fee for administering the song.

This additional proposed administration fee may range anywhere from 5% to 20% of the song’s gross royalties, although the industry standard is closer to 10%. Without getting into the math, suffice it to say that under such a provision the publishing half of the song’s income no longer would be equally divided between the publishing company and the songwriter. In negotiations for a copublishing agreement, the songwriter should attempt to delete any such provision for an additional administration fee, arguing that the publishing company’s compensation for such “business side” undertakings already is included within its 50% participation in the publisher’s share of the song’s income. At the least, the songwriter should attempt to minimize any such additional administration fee.

In determining whether an exclusive songwriter agreement or a copublishing agreement would be more attractive to her, Mandy must decide how important advance payments (usually in the form of monthly draw) are to her financial survival. All things being equal, when a publishing company is asked to make advance payments to the songwriter, it typically will be less inclined to accept anything other than all of the ownership in the songs under the contract. At minimum, the publishing company in that situation can be expected to hold out for the right to administration of the songs, to be in the best position to recoup its money by effectively exploiting the songs. By contrast, if the songwriter is financially able to forego advance payments, he or she will have a better negotiating position from which to retain some ownership in the songs. (Keep in mind that, theoretically, both the songwriter and the publishing company in a copublishing agreement could agree to exercise administration rights together, each having an equal say).

The specific provisions of the copublishing agreement generally are as follows:

(1) Concerning the publishing company’s administration of the songs, the agreement will spell out specifically the publishing company’s rights and obligations. Typically, the agreement will grant the publishing company the exclusive right to exploit the songs, to print, publish, sell, dramatize, use and license all uses of the songs, and to assign or license those rights to others. From the songwriter’s perspective, the copublishing agreement also should require the publishing company to register the copyrights in the songs, and print copies of any of the songs that are commercially released. Moreover, if the songwriter has substantial bargaining clout, he or she may obtain the right to require prior consent to any proposed exploitation of the given song.

(2) Among the publishing company’s administration duties, the agreement will provide that it be responsible for collecting all of the gross income derived from the songs (except for the performance royalties, which generally will come directly to the songwriter from the performing rights organization with which he or she is affiliated). Gross income generally is defined as all of the money received by the publishing company from exploitation of a given song (including mechanical royalties, dramatic use fees, synchronization fees, print income, and the publisher’s public performance income) after first deducting any collection fees.

(3) Getting down to the nitty gritty, the agreement generally will provide that, from this gross income, the songwriter will be paid his or her publisher’s percentage from the net income derived from the songs. What expenses are deducted from the gross income to arrive at the net income? For starters, the songwriter’s “writer’s share” of the gross income will be deducted from the gross to arrive at the net income. Additionally, such publishing company expenses as registration fees, advertising, promotion, transcription, and the publisher’s share of demo costs also will be deducted from gross income to arrive at net income. The publishing company may also attempt to include attorney’s fees among the expense items. Because such fees generally are considered a cost of doing business for the publishing company, they should not be included in this calculation. Finally, this is also where the songwriter should look to see whether the publishing company is seeking to take an additional administration fee “off the top”.

(4) The agreement generally will contain provisions for accounting, indemnification, and warranties similar to those contained in the standard single song or exclusive songwriter agreement discussed in previous issues.

(5) The publishing company also may seek a “right of first refusal,” under which, if the songwriter decides to sell his or her share of the publishing interest, it must first be offered to the publishing company before any other third party. Such a provision greatly limits the songwriter’s ability to deal with his or her ownership interest in the songs and should be avoided if possible.

As she falls asleep with single song, exclusive songwriter, and copublishing agreements swimming in her head, Mandy wonders for a brief moment what life would have been like if she had followed her parents’ admonition and applied to law school. The question remains unanswered, however, when suddenly, out of the blue, the beginnings of a beautiful lyric come floating into her head. She grabs the legal pad next to her bed but the legal matters, for the time being, are the last thing on her mind.

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