music publishing agreement

Passive Income In Artist’s Revenue Generation

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In an ideal situation the artist’s distribution network and prevailing popularity match. Each measure transpires effectively towards the goal and allows the public make positive purchasing decisions. When the artist give interviews, perform live, or otherwise appear in public, the public have immediate access to the artist’s products, but they also have a prior information where to find them. If the artist or management neglects this, the artist cannot take advantage of passive income, at least to its fullest extent.

When the artist’s distribution network is setup, it takes care of bringing the products to dealers – in both physical and electronic forms. It is completely up to the artist’s management to decide how this task is taken care of. Many artists, because of the small size of their activities, do most of these things themselves – however this is not always an ideal setting. The goal of many artists is to achieve such revenue that they are able to outsource these activities to the record company or some other relevant player – depending on the business area in question. Here we come to what was meant by the prevailing popularity and efficiency of the distribution network. The more familiar, the more popular, or the more promising the artist is, the greater is the likelihood of industrial cooperation with the artist. Here we come to what the another article here meant about footwork. It is the main task of artists to make their activities interesting – it’s about pop music.

Passive income doesn’t mean the goal is to desire a state of affairs in which the money should come without doing anything. Not at all – it is the complete opposite. The job has to be done, but in advance. Music business earning logic has been arranged so that it possible to enjoy passive results. The clearest manifestation is found in music publishing. Song-writers get remuneration for the use of their songs whenever their music is publicly performed, or music recorded to a phonogram – as it is simply expressed. Copyright collecting societies and collective management organizations monitor the use of copyrighted music and collects royalties of their use. These organizations pass on royalties to the artists, provided they have affiliated with the organization as a clients or members. Copyright collecting societies, for example, grant licenses to radio stations or TV-stations when they play music in their programs. They also grant mechanical reproduction licenses when music is recorded on a phonogram. In this way it is perfectly possible that after writing a song an author of such piece can enjoy the copyright revenue only by joining such an organization. After that moment, he or she may no longer need to do anything, as the organization takes care of the monitoring of use and distributing royalties from the users to its authors. This is the passive income referred to in this article. The money doesn’t come from nothing but requires a prior work.

Here we come to the need of external help and the justification of its cost. In order to make passive income, the artist usually delegates powers to those who make the production available to the public. It is also about acquiring strategic know-how making that happen. Many record companies and music publishers are able to gain more revenue to the artist, even though they take part of the revenue. The question here is the price an artist should sensibly accept – as well as how much it is wise to give up decision-making power.

No one can find a song unless they know of its existence or various playlists or other industrial mechanism push it through. In the industrial sense, music producers and/recording artists don’t go looking for music they want to use from the massive registers of copyright organizations. To this end, the area has its own operator – music publishers. On a professional scale, their job is to do the footwork on behalf of the song-writers they represent. In this context, we do not take a stand in the legitimacy of music publishing. No – we want to demonstrate passive income and the meaning of its accumulation. If the author and music publisher end up in a music publishing agreement, the publisher will participate in the ownership of the catalog, yes. Consequently, the publisher gets the other half of the artist’s catalog insofar when it is associated with the publisher’s share. At this point, it is good to point out that 50/50 is not the only method of calculation used. There are also other kind of arrangements. It’s common practice that the artist gets to keep the writer’s share in full, but the artist and publisher share the publisher’s share equally. However, you cannot rely for this main principle – read the contract carefully. It may well be that with some income types, the split is something completely else. If this income generates a main income for you, even a small deviation can be meaningful.

When it comes to rehashing old songs, we find ourselves at the heart of the passive income. Previously released piece starts to generate additional revenue for its rights-holders. Kate Bush’s Running Up That Hill is a perfect example. When it got connected to Stranger Things in its Season Four, the song skyrocketed to multiple charts. For such songs, the footwork has already been done and its authors are in the ‘public domain’. Not to mention that for younger viewers, this song is completely new.

If the authors themselves intend to find performers for their songs, this footwork becomes their responsibility, in which the existence of the songs and their elements are brought to the attention of potential artists and producers. If the authors want someone else to do it, they will likely have to convince music publishers of the excellence of their songs. In a nut shell, in order to enjoy passive results, you must first succeed in footwork.

Passive income occurs also in record sales and streaming. All royalties received by the artist can be classified as passive income. When the artist has recorded the music and made it available to the public, the artist no longer needs to do anything. The operation is over. The popularity of the album determines the amount of revenue. If the artist succeeds in the promotion and gains popularity, this usually results in additional revenue. At this stage it is good to point out that communicating music to the public via radio and television or online is also a subject to copyright remuneration, not just album sales and streaming. Both the artist and the financial producer of a phonogram are entitled to earnings when the recording is played public. Just as it is the case for song-writers and music publishers, the recording artists also have their own copyright collecting societies. All the revenue gathered here is also classified as a passive income.

It is possible for an artist to become involved in passive income through other contexts than recording or music publishing. For example when their merchandise is sold on the internet by authorized dealers, or their music is associated with the film or other moving images. Passive income therefore concerns all activities that no longer require the artist’s physical presence.

As a comparison, live performances usually require a full show. Active income requires a physical presence and real-time performances by the artist before it becomes topical. It should be noted that passive income does not exclude income from active sources. Consequently an artist, acting as a performer of their own music, not only receive compensation for the show, but also as a copyright remuneration when their music gets performed publicly. The set information of the show, especially in festivals, can be a valuable thing. If the artist performs music created by others, then the authors of the musical piece will acquire passive income from that same public performance – and the performer will obtain direct premiums for the show. 

Passive income has a meaningful plug-in to the artist’s business plan. The artist must be able to organize their activities so that it matches the prevailing popularity and physical presence of the artist. Otherwise there is a risk the artist’s promotion is done in vain. However, at the beginning of a career, when still making name for themselves, this is not always possible.

The meaning of passive income is explained in this The Art of Music Business Management - For Artists & Managers book

Navigating Transferred Rights: Understanding the Artist’s Position

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Here is the article discussing transferred rights and various contract types, as I had promised. Without any more delay, let’s get straight to the point and dive into the subject.

Frequently, artists find themselves in a situation where they must relinquish certain original rights in order to pursue their business objectives. In the execution and management of their business affairs, the responsibility lies with the artist’s management (whether outsourced or not) when it comes to granting or licensing these rights.

This article delves into the processes of assigning, granting, or transferring rights—depending on the terminology employed—and examines their implications for the artist’s personal life, decision-making authority, and economic circumstances. Each instance of rights transfer imposes certain limitations on the artist’s standing. A fundamental prerequisite for exercising these rights should be a corresponding compensation, typically in the form of royalties. Undoubtedly, copyright stands out as the paramount commodity in this industry.

The objective of artist management is to construct and cultivate the artist’s enterprise in a manner that aligns with their requirements and aspirations. The artist’s merchandise encompasses their persona, live and recorded performances, and, naturally, the music that forms the core of their acts. All of these endeavors are intertwined with distinct copyright considerations. Consequently, obtaining the artist’s explicit consent is typically imperative.

Given the unpredictable nature of success, caution is advised when considering rights assignment. The substance, potency, duration, and extent of these granted rights hold significance in evaluating the intentions and dedication underlying each transaction, as well as the potential partner the artist seeks to engage with. To counterbalance the transfer of rights, it is prudent to ensure reciprocity or compensation. Hence, the transfer of rights should never be devoid of remuneration. The artist’s business strategy and current level of popularity serve as indicators for identifying pertinent rights and determining exclusions.

The cardinal rule remains that no rights should be bestowed gratuitously

The rights subject to transfer fall into categories of fixed-term, indefinite, or permanent. The most comprehensive relinquishments occur in instances of perpetual transfers. The music publisher’s entitlement can mirror that of the author (songwriter), where their copyright claim endures for the entirety of the copyright’s lifespan. However, the publisher’s right diverges from the author’s in being derivative rather than original. This right comes into effect upon a duly executed music publishing contract.

This agreement bestows upon the music publisher substantial rights originally belonging to the authors themselves. The contract not only constrains the artist for the agreement’s duration but extends its impact beyond. To warrant this arrangement, the artist must ensure the publisher fulfills their role; otherwise, justifying the music publishing agreement becomes challenging. The music publishing agreement affords the publisher up to 50 percent of the copyright-related revenue from the songs.

It’s important to note that the termination of a music publishing contract doesn’t always nullify the publisher’s rights to songs encompassed by the contract during its term. Even if the active phase of the parties’ agreement concludes, the pertinent rights of the publisher remain in effect.

A parallel permanent entitlement can be linked to recording agreements. In such scenarios, permanent rights pertain to the phonograms and additional recorded content that the artist has produced for the company during the contract’s duration. According to the agreement’s terms, the record company acquires the role of the financial producer, granting them the producer’s right for the valid span of protection.

Typically, the record company gains authority over decision-making regarding the phonogram, similar to how the music publisher obtains control over the catalog they manage through the music publishing agreement.

This, for instance, has an impact on the artist’s standing through the potential inclusion of a non-competition clause within the agreement. Broadly speaking, the artist is prohibited from recording any songs for other labels during the duration of the recording contract. The standard practice designates this protection period as five years. Consequently, the artist is free to re-record the same songs once five years have elapsed since the contract’s conclusion. This restriction is intended to provide the company with an incentive for their investment, or at least that’s its purpose.

Hence, the fundamental principle is to avoid granting these rights more extensively than necessary.

We are dealing with two fundamental concepts: a musical composition and its recording. It’s crucial never to conflate these two concepts. This forms the crux of this article as well. The duration of a music publishing contract does not equate to the terminology of a recording contract, even though these two aspects are closely interconnected. While the music publishing agreement pertains to the song itself, the recording contract is associated with its performance captured in a recording. Consequently, the subject of protection differs despite involving the same content. This division holds particular significance for artists who both create and perform their music.

To implement their business strategy, an artist can also employ fixed-term grants. This approach has gained traction among contemporary artists. It ensures that the artist does not relinquish their rights beyond necessity.

For instance, a booking agreement grants the agency the right to arrange performances within the bounds specified by the contract. As previously highlighted, the transfer of rights in these cases is frequently long-term, spanning wide geographical regions, and exclusive in nature. This implies that artists must navigate through contracts across numerous interconnected business domains simultaneously. This intricate situation often leads to complications when dealing with contractual relationships.

The artist’s various business facets are closely interlinked. If certain sub-areas encounter difficulties, the impact ripples through other spheres of activity. To address this uncertainty, it’s prudent to incorporate contingency measures. The artist would certainly not be content if performances are planned, streaming arrangements are in place, yet no follow-through is ensured for some unforeseen reason. If the artist cannot meet existing demands, or if there’s a mismatch in agendas, being tied to an exclusive contract that hinders progress in other avenues becomes undesirable.

Each agreement should include an exit strategy in case the collaboration becomes unviable due to escalated issues between the parties, or if the partnership simply proves unproductive. This underscores why each rights transfer should ideally carry conditional terms, if feasible.

When crafting the artist’s business plan, effective risk management assumes paramount importance. While the business plan primarily centers on upholding and enhancing the artist’s financial prospects, the agreements should factor in the possibility of unforeseen deviations. Consequently, hybrid contracts should be avoided. It’s not uncommon for enthusiasm to dominate the negotiation phase. The artist’s stakeholders (record companies, music publishers, booking agencies, external investors, merchandise holders, etc.) might express interest in participating across domains beyond their core expertise.

In an ideal scenario, everything would remain under the purview of a competent, dedicated, and trustworthy group, with disagreements unlikely to arise over time. Unfortunately, such ideals rarely align with reality. All it takes is a single key player’s departure, an industry shift, or a shift in priorities to completely alter the trajectory of operations.

Amidst all these complexities, it’s easy to lose sight of the core objective. Driven by the copyright dimension and its alignment with the business plan, the focus remains on the transfer of rights and the value attributed to this process. Each business segment necessitates distinct organization, even if managed by the same entities. Each sector should be treated as an independent entity, not reliant on others in case of contingencies. This approach facilitates the efficient elimination of non-functional aspects, retaining only the effective components.

The boundaries delineated by contract types become evident in the ensuing example. Parties often find themselves engaged in an extensive collaboration that spans multiple aspects of an artist’s business. In such circumstances, the parties are likely to resort to contract types familiar within the industry. If any of these agreements resemble a recording contract, it might inadvertently suggest the presence of an exclusive right across all agreements. If this isn’t the case, clarifications become essential.

When granting rights that are inherently yours, exercise caution in ensuring they aren’t extended beyond the parameters essential to your business plan. Never surrender rights unconditionally. Should the promised performance of the counterparty fall short, you must retain the ability to respond. Particular prudence is advised concerning music publishing contracts, given their potentially perpetual nature. Every song incorporated within the music publishing agreement grants the publisher a standing that confers the right to administer the songs and secure up to 50 percent of the revenue generated through copyright.

Irrespective of your enthusiasm for a new partner, it’s crucial to maintain a clear distinction between plans and agreements. Terminology that ventures beyond the intended scope should be subjected to critical scrutiny. This is to avoid any interpretation that might suggest an expansion of rights beyond the original purpose. The same caution applies to options. For them to be valid, their realization should be reasonably feasible. If an artist embraces an option that surpasses the partner’s resources or willingness, their entire career could be jeopardized.

Mixed-type contracts can introduce challenges, even within functional relationships. A well-functioning management agreement between parties might coexist, but issues could arise in the realm of production collaboration. If the agreement is predominantly exclusive, the productive components might also be deemed exclusive. In such an asymmetrical scenario, the management side might readily step back from the production aspect. However, if disputes were to emerge for any reason, the contract and its contents would undoubtedly require interpretation.

While some of the examples in this article might seem extreme, it remains prudent to maintain a clear demarcation between contracts – even for your own peace of mind. By easily excising obsolete elements from any collaboration, it becomes simpler to strategize for the future.

The purpose of this article is not to provide guidance on how artists should organize their background operations and business. Instead, its aim is to underscore the significance of copyright. It’s crucial to recognize that copyright doesn’t have a uniform impact across all areas of activity. The artist’s business plan is dynamic and ever-evolving. Collaborative business plans and related agreements should be structured to safeguard the interests of all involved parties, enabling them to concentrate on the essentials.

When parties opt for a collaborative model where one contract partner handles both artist management and booking, each function needs to be addressed through distinct agreements. If, for instance, the management or booking aspects are discontinued, the relevant part can be terminated while the remaining collaboration continues. In cases where the artist’s record company and music publisher are the same entity, these matters shouldn’t be consolidated into a single agreement. In the unlikely event of such an arrangement, special attention must be directed towards publishing rights. Particular care should be taken to ensure the artist retains the capacity to change the record company or terminate the agreement if necessary.

If publishing rights are intertwined with the recording agreement, any termination must extend to the publishing segment as well. Consequently, only the songs recorded by the artist during the agreement’s term would fall under the publisher’s purview. Newly composed songs wouldn’t be incorporated into the catalog.

If the topic piques your interest further, consider reading this book. It provides more examples of contemporary methods to safeguard your rights.

Navigating Transferred Rights: Understanding The Artist's Position