Chapter 5: Record Labels and Music Publishing for Dummies

In 1887, a man started a company selling a new invention called the phonograph. This invention, created and patented by Thomas Edison, allowed music to be reproduced and replayed anywhere at anytime. This company was called the Columbia Phonograph Company. They began producing their own phonograph recordings and had a catalog of 10 phonographs. After the relationship with Edison dissolved this company continued to produce phonographs independently and teamed up with another massive company, Sears, to distribute these records. What this “new” technology allowed for the first time was for musicians to perform like magicians all over the world with out ever being there. Once these recordings began to sell, the technology evolved, and so did the revenue. It was not a new business. Sheet music had been reproduced and sold for probably hundreds of years before this revolution but the changing times made recorded music available for consumers who could never visit an orchestra. So understand exactly what is happening here. You the musician/songwriter/producer create music. It is recorded, duplicated then distributed to outlets that allow that music to create revenue. Once that revenue is created it was collected and fortunes were made.

By 1914, music professionals realized that they needed to protect their copyrights. Composers, songwriters, publishers, and lyricists realized they needed to organize to insure they were getting their fair share of the profits. This is when they formed ASCAP. This organization was designed to protect the rights of its members and collect on their behalf. Technology continued to evolve and the medium of radio began to take shape. This allowed one single recording to be broadcast to thousands and became a huge source of revenue. The performers wanted to be paid for their services so ASCAP began to charge licensing fees for performances on the radio. The radio industry boycotted ASCAP for charging outrageous rates, stopped working with their artists, and decided to create their own organization with rates that were more reasonable. They called themselves Broadcast Music Incorporated (BMI) and were to be an alternative to the monopolistic giant that ASCAP had become. This ladies and gentleman is the foundation of the music publishing, as we know it today.

As a creator of content, you create intellectual property that is protected by something called a copyright. A copyright is defended as

“the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.”

Look at this definition long and hard. Understand where the value is and why it is important to you. You have an idea and create content. You have the EXCLUSIVE right to decide what you want to do with that content. You can keep this content to yourself or you can assign someone the right to exploit that copyright. This is where artists get things all FUCKED UP! The value is in the content that is protected by a copyright. Somewhere along the line the artist realizes that they may need help creating and collecting revenue from their property so they seek out help. Others may agree to help in exchange for a percentage of ownership of the copyright. The more of a percentage of your property you grant to this second party the less power you have when it comes to your ideas. Record labels and publishing companies are in the business of making music make money. They work like salesmen, pitch ideas, and products to a vast network of revenue producing avenues. It can happen in two ways. This can be in the form of physical reproduction (Vinyl, CD’s, ring tones, digital downloads, streams) or when a song is performed (radio, television, live, or in public places).  Mechanical royalties are paid when a copyright is reproduced. Performance royalties are paid when a copyright is performed. Understanding these revenue streams is how you are able to create income streams and where it becomes complicated. Artists may not understand the value in their property and grant the right to someone else to market their ideas. We have had horror stories about songwriters/producers/composers signing their rights away to another party only to find out later that they have given a multi-million dollar asset away. Other examples include artists who sign away 50% of their publishing rights away hoping to have their work sold around the world only to find out they have given up their exclusive right to ownership and can no longer decide how or when that can happen. That is why it is extremely important that you not be a dummy. You have to decide what you want to do and what you are good at. Record labels and publishing companies are not all bad. They have the tremendous task of taking your idea and creating revenue. If you ask me, I think what they do is incredible and a lot of them deserve to make money doing it. My problem is when they EXPLOIT the ignorance of artists and manipulate them into selling out for their own personal gains. Your ignorance can cost you millions.

So how do you protect yourself? First you have to realize what you are good at. I know several musicians that are genius level when it comes to writing and performing but SUCK at business. I know several hustlers that can sell water to a whale but could not write a song, set foot on stage, or find a beat to save their life. If you are a songwriter, producer, or composer it may be to your advantage to find someone with the skill set and network to do this for you. If you are entrepreneurial it may be to your advantage to team up with artists and help them get in to the market. Whatever you decide to do you will need to come up with an arrangement with each other to make that happen from the start so that you both understand what is expected. Every time you create a new idea with others you have to be clear who owns what. I am not an attorney so I will not give you legal advise but this may be the best time in the world to go have a meeting with one. Entertainment attorneys can be expensive but they can give you advice, write a contract, and offer you protection when dealing in this shady world. You can also go online and find basic split sheets. A split sheet is an agreement that identifies ownership of a song between all the parties involved. I also recommend joining a performance rights organization (ASCAP, BMI, SESAC) as a songwriter, publisher, or both. Performance rights organizations are non-profit and function as accountants to collect on the copyrights owner’s behalf. In other words, they go find your money and send it to who has the right to collect.

I am skimming across the surface of a deep subject but I want to make my point clear. The value is in the copyright. As a creator you must understand that every thing you create has the potential to generate revenue as an asset. That asset can be leased, sold, and exploited in many ways. Your right to decide who, where, and how this asset is exploited can be negotiated. Your rights can be protected and you can also grant those rights away. You can be the publisher or you can allow someone else to do this work for you. The choice is yours. Choose wisely.