SONGWRITER DEALS: Part III, By Donald S. Passman is pleased to be able to offer excerpts from Donald S. Passman’s “All You Need To Know About The Music Business,” widely acknowledged as a “must read” for anyone thinking about starting a career in the music business.

Posted in Songwriter 101 on December 16, 2004

A term songwriter agreement is just like a record deal except that, instead of making records, you agree to give the publisher all the songs you write during the term. In a sense, it’s also like a bunch of single-song agreements hooked together, because it’s similar to signing a single-song agreement for each composition when it’s created. The difference is that there’s one overall contract which sets out the terms on which each song will be delivered, and of course the advances are recoupable from all of the songs on a cross collateralized basis (see page 83 for what cross collateralized means).

The term of the agreement (the period during which you have to sign over everything you write) is usually tied to delivery of songs (which we’ll discuss in more detail in a minute). Thus, it ends after delivery of the required songs (like record deal terms). Sometimes deals are for specific periods, such as one year, with the publisher having two to four additional one year options. And some deals are tied to your recording agreement (i.e., if it’s with a publisher affiliated with your record company), meaning is has the same term as the record deal (two or more deals with the same term are called co terminus). Note that the term only denotes the period during which you exclusively agree to deliver your songs the songs you deliver are owned by the publisher for the life of the copyright, which of course extends far beyond the term. (As we’ll see on page 259, however, this is sometimes negotiable.)

Term songwriter agreements almost always require the publisher to pay advances to the songwriter. Historically, “true songwriters” (meaning songwriters who don’t come with access to someone who uses their songs, as opposed to, for example, a writer who is also an artist or producer, or someone who writes regularly with well known performers) received weekly advances. This is still the practice in Nashville, but it’s not so easy for true songwriters to get these deals in rock ‘n’ roll. If you do get such a deal, new writers signing to a major publisher might get an advance in the range of $18,000 to $100,000 per year, and less if they sign to a smaller publisher. The advances are paid monthly, quarterly, or sometimes even annually, at the beginning of a contract year. (Don’t get discouraged if you’re a true songwriter there’s always a need for good talent. And there are true songwriters who make multimillions of dollars per year writing hits for other people.)

If you’re an established writer, the advances are based on a historical analysis of your earnings meaning they guess your future potential based on your past plus whatever additional gouge factor you can leverage. These advances can range from $500 to several thousand do!tars per week, and up. Some superstar writers get hundreds of thousands of dollars per year.

More common these days is a deal based on songs being recorded and released. In other words, the publishers have become less interested in what I called “true songwriters,” and more interested in people who have the ability to use songs or access someone who can use their songs. For example, if you’re an unsigned artist and songwriter, a typical deal might be $25,000 to $50,000 on signing, another $25,000 to $50,000 when you secure a record deal, and another $25,000 to $50,000 on release of the album. There are often further advances at certain U.S. sales levels, such as an additional $25,000 at sales of 150,000 albums, and another $25,000 at sales of 300,000.

Under this kind of deal, if you don’t get a record contract within a certain period of time (usually twelve to eighteen months), the publisher has the option to require you to deliver a minimum number of songs (around ten to twelve) over the coming year, and it pays advances for these (in the range of $15,000 to $25,000 for the year, paid quarterly). If you do get a record deal, the advance on release of the first album is the amount negotiated up front (which we just discussed).

Another scenario is for bands already signed, and is based on delivery of songs (we’ll talk about the specific delivery requirements in a minute). A typical payment schedule is 50% of the agreed advance on signing (or on the publisher’s exercise of its option for the next period of the term), 25% when you deliver half of that period’s commitment, and the remaining 25% on delivery of the balance. So if the deal was $400,000 and you promised to deliver ten songs, you’d get $200,000 on signing, $100,000 on delivery of the first five songs, and $100,000 on delivery of the second five songs.

If you ask, you can often get a formula for advances on release of future albums. The formula is similar to those used in record deals, but based on your earnings during the prior twelve months (as opposed to the prior album). (See page 95 for a discussion of formulas in record deals.) Here’s a recent deal where the advance for the second album was 2/3 of the earnings during the first year after the release of the first album, less the unrecouped balance, and with a floor and ceiling:

Formula: 2/3 of prior year’s earnings, less deficit, but not less than the floor or more than the ceiling.

Floor Ceiling
Album 1 $75,000 (Not applicable) Album 2 $100,000 $200,000 Album 3 $125,000 $250,000

Under this deal, if the writer earns $60,000 during the first year, meaning only $60,000 of the $75,000 is recouped (and she is thus 45,000 unrecouped), the advance for the second album would be 25,000: 2/3 of $60,000 (which is $40,000) less the unrecouped balance ($15,000) equals $25,000. However, there’s a floor of $100,000, o she gets a $100,000 advance (because the formula result is lower han the floor). If the earnings are $120,000 (and thus the writer re:oups) during the year, there’s no deficit to be deducted from the 2/3 of :arnings formula, and she gets 2/3 of the $120,000 earned, or $80,000. Lf she earns $600,000 in the year, she’d only get the ceiling of 200,000 for album two, because 2/3 of $600,000 ($400,000) exceeds he maximum ($200,000).

As we discussed in the record section, new artists for whom there is a )iddlng frenzy can get deals that used to be reserved only for artists with a sales history. The same is true for publishing. For example, whenwriter is the fox with a pack of hounds snapping at their tail, you can ;et bids of $150,000 to $700,000 per album, and sometimes even note. With that much heat, the deal won’t just be a songwriter deal, it will be a copublishing deal, or maybe even an administration deal none of which means anything to you, because we haven’t discussed hem yet. Hang on ‘til the next chapter).

Delivery Requirements
There are two aspects to delivery requirements:

1. What you must deliver to move the term of the deal forward. Since term deals require you to deliver a minimum number of songs during each period, you have to negotiate how many that is. Until you deliver them, you can’t move to the next period of the deal’s term.

2. What you must deliver to get your advance. When advances are based on your delivering a minimum number of songs, that number is not always the same as the number required to move past the current period of the term.

Let’s consider these separately:

Moving the Term Forward. Like record deals, the term of a songwriter contract continues until you deliver a minimum number of songs. If you’re a songwriter with a track record of hits, you may be able to simply say you’ll give the publisher ten or so songs during each period of the term. Of those ten, some minimum number (say at least three) might have to be commercially released on a major label.

You can sometimes (if you have clout) get the publisher to move the term forward if you’re recouped, even if you haven’t delivered all the songs you promised. Your argument is that they’ve gotten back their advance and should therefore be happy and shut up. They don’t always shut up.

If you’re a self contained artist, meaning you both write songs and record them, the term of your deal will usually be geared to the release of an album containing your songs. The publishers will want you to write 100% of the songs on each album, so those songs can be 100% owned by them. Which is fine if you always write all your own songs. But if you write with others, or might at some time in the future write with others, or if you ever want to record songs written by someone else, you have to scale that back. You can easily reduce the 100% to 90%, and with some pushing, you can sometimes get it down as low as 50%. In other words, if there were ten songs on your album, only five would have to be yours to move the term forward. However, if you routinely write your songs with someone who isn’t a party to your songwriting deal, then you have to cut those percentages by whatever the other person takes. For example, if you only expect to write 60% of the album (because co writers normally write the other 40%), then you should only agree to deliver half of that 60% (30%) in order to move the term forward.

If you deliver less than the agreed minimum, the publisher will thank you very kindly, gobble up what you’ve given them, then take the next songs without paying any additional advance (i.e., no more than what is due for the first album). That’s because the deal won’t move forward to the next period of the term (and therefore won’t entitle you to the next album’s advance) until you deliver what you’re supposed to for this period. So when you deliver the second album, you’ll only get the advance due for the first, which means the publisher will get two albums for the price of one. Have a look with numbers:

Suppose you had to deliver five songs on your first album to move the term, and were entitled to a $100,000 advance when the album was released. If the first album only contained four of your songs, the initial period of your songwriting deal would continue until you released one more song on one of your albums. Since that can’t happen until your next album comes out, the first term continues until you’ve released that fifth song on the second album. And even if that second album contains five of your songs, the publisher only owes you the $100,000 due on delivery of the first album, despite the fact that they got nine songs.

In addition to the number of songs, there may also be a requirement that you deliver a minimum percentage of statutory rate for each one. If your record deal isn’t done when you make your publishing deal, the publisher will want you to deliver 100% of statutory rate, with a cap of say ten or eleven songs, and payment on 50% of free goods (see page 211 for what all that means). With some pushing, you can get them down to 75% of statutory (with the same cap and free goods). If your record deal is already made, the publisher will want whatever is in your deal (which may be better than 75%). The higher the rate you deliver, the bigger advance you’ll get. That’s because the more mechanicals a publisher can collect, the more they’re willing to guarantee you up front.

The problem with song delivery deals is that they can go on forever, because you might never satisfy the delivery requirements. For example, if you committed to deliver songs that you’ve recorded and released, and your record deal comes to an end, you’re hosed. Or if you’re not an artist, but agreed that a certain number of your songs must be released on a major label, you could be stuck in the first period despite giving the publisher hundreds of un recorded songs.

You should try for some way to move the term under these circumstances. For example, some publishers will agree you can move the term forward if you’re recouped (as we discussed above). Or if the deal is based on your recording the songs as an artist, some publishers will agree that if you’re out of a record deal for two years, you can split.

If there’s nothing in your contract to cover this, you’ll have to come begging. However, the publishers aren’t always that sympathetic, particularly if you got a lot of money when you signed the deal.

Advance Delivery Requirements. A similar requirement is that you must deliver a certain number of songs in order to get your advance. If you’re self contained, they’ll want whatever maximum percentage of the album you normally write (in other words, without the cushion we just discussed to allow the term to move forward). So if you normally write all of your own material, you’ll only get your advance if you deliver 100% of the songs on your album, even if the term moves forward when you deliver 50%. (If the deal was made knowing that you normally write less than 100%, that smaller percentage would be the criteria.)

You should build in protections for falling short. Otherwise, your advance will be “all or nothing” if you don’t hit the target. For example, if you’re supposed to deliver 100% of the album, and you only deliver 75%, you should get 75% of the advance, not zero. The publishers will normally agree to this, but they’ll insist on a minimum delivery requirement (usually 50% of the target) below which they won’t pay anything. So if you normally write 75% of your albums, you’ll get all your advance if you deliver 75%. If you deliver 37.5%, you’d get half. But if you only wrote 30%, you’d get nothing until you delivered more songs. (If you got money on signing, or at the beginning of the term, you would keep that. You just wouldn’t get any more.)

As with the term delivery requirements, the advance may also be based on your delivering a minimum percentage of the statutory rate. For example, you not only have to deliver five songs, but they must be licensed for at least 75% of the statutory rate. A new wrinkle in this area is the New and Developing Artist Pricing we discussed earlier (see page 169). This is the practice of releasing new artists at mid price or even budget levels. As we discussed in the controlled composition section (see page 209), you only get 50% of your mechanical rate for these lowpriced records. So putting these concepts together, if your songwriting deal has a 75% of statutory requirement, and your company only pays 50% of that because your new artist priced album is released at a budget price, publishers sometimes say they don’t have to pay the advance, or move the term forward, for delivery of those songs. Not so cool.

The publishers will of course count the songs against your advance and delivery requirement when the album is raised to full price. But the problem is, if it doesn’t sell very well at the introductory price, the record company may never raise it to full price, and you’ll end up stuck in the first period of your publishing deal (meaning they’ll get another album for the same advance).

In all these deals, be sure to add a formula saying that fractional compositions count toward the delivery requirement in proportion to your ownership. For example, if you deliver half the publishing of a composition (because you only wrote half the song; see page 253 for an in depth discussion of this), it should count as one half of a song for your delivery requirements. Most forms don’t provide this, and the net effect is that you get no credit whatsoever for fractional songs. Since these little guys earn money just like the others, there’s no reason you shouldn’t.

Prior Songs
Most “standard” term agreements have an innocuous looking provision that quietly picks up all of the songs you have written before the term of the deal. Language like, all songs “written during or prior to the term hereof.” Unless this is something the publisher specifically negotiated for, resist such a clause, or at least get paid for these songs with an additional advance.

The other way to handle pre term songs is to say that the publisher can administer them during the term of your deal (we’ll discuss “administration” in the next chapter, but basically it means the publisher can control the rights for a period of time without owning them). You should also argue that the prior songs’ earnings should not be cross-collateralized with the newly written songs, and that the prior songs come back to you at the end of the deal if they’re not recorded during the term.

Record Deal Tie ins
As noted on page 84, independent production entities like to grab your publishing when they sign you to a record deal. If there’s any possible way to resist this, I strongly urge you to lash yourself to the mast and hang on. Most of the time these entities aren’t real publishers, but are rather just looking for another way to make money from you. If you’re going to give up your publishing, it should ideally be to a fully staffed publisher (see page 205). These folks can add real value to your songs, by teaming you up with creative co writers, helping you write for existing artists, and otherwise forwarding your career as a songwriter. In fact, they can even help you get a record deal. On the other hand, the independent label publisher often just makes a deal with a major publisher, under which the major administers your songs (something you could do directly, and for which the independent takes a nice chunk of change by being in the middle), or worse yet, they sometimes do nothing but sloppily collect your money. This scenario isn’t always the case. Sometimes the independent advances you its own money, helps you creatively, professionally administers your songs, and thus brings a real benefit to the party. But unfortunately this is the exception.

If you must give your publishing to an independent, then, in addition to the normal publishing deal points we’re discussing in this chapter, ask for these:

1. Try to keep control of your publishing, and merely pay them a piece of the income. (You’ll lose this; they won’t trust you to pay them. Also, publishing isn’t as valuable for them to sell if they haven’t got the administration rights.)

2. Try to limit their participation to mechanical royalties from your recordings. This means they wouldn’t share in performance monies, print, etc., and they wouldn’t share in any money (even mechanicals) from recordings of your songs by other artists. Your argument is that they’re getting publishing only because they’re the record company, and are thus involved only in generating mechanicals. This is very hard to get.

3. If you lose point 2, agree to let them share in all earnings (not just mechanicals), but only of those songs recorded by you as an artist. Ideally, you should also limit them to the earnings ofyour recordings of the songs. In other words, if you record a song that becomes a hit, and it’s then recorded by three other artists, they would share in the earnings from your version but not the other artists. (There are some allocation problems connected with this, as we’ll discuss on page 272.) If you can’t get this, at least try to exclude the earnings of songs not recorded by you.

4. No matter how you do with the above, try for all the points in paragraphs 1 through 4 of the next section.

Sometimes you may make a deal with a major and at the same time make a deal with its affiliated publisher. The majors almost never require you to do this, so you make the deal only because you think it’s good for your writing career. The following points deal with these kinds of arrangements, but they’re applicable to independent record/publishing situations as well:

1. Try to get advances for your publishing in addition to your record advances.

2. Since they share in publishing, ask them not to reduce the mechanical rate they pay you (as a record company) for your songs (see page 209). You should get this from a major, but the independents will argue that the distributing record company forces this reduced rate on them, and they want the maximum mechanicals just like you. Both of these arguments are true, but try it anyway.

3. Be sure they can’t exercise an option under your publishing deal without also picking you up as an artist. The argument is that you’re only giving them publishing because they’re making you a record deal, and if that’s no longer true, they should get their hands off your songs. (Unless you’re getting fat advances under the publishing deal, you probably don’t care if they pick up your record option and drop the publishing deal.)

4. Never let them cross collateralize your record and publishing deals (see page 83 for what cross collateralization is). This is not customary, but it’s done. Remember the language about cross collateralizing “this or any other agreement” between you and the record company (see page 84)? It could pick up a publishing deal as well, because often it’s the same parties to both contracts.

Bluntly, if you’re dealing with independents who can muscle your publishing, it means your bargaining power is close to zip. So there’s not a lot of room. But at least give ‘em a good fight, and never give up points 3 and 4. NEVER.

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