The world of music publishing has gone through a myriad of changes during the modern pop & rock era (from the 1950s to the present). The biggest change has probably been the gradual evolution towards putting the power (and most of the money) in the hands of the songwriters rather than the publishing companies, which used to have the most power and control.
Back in the ’50s, there were rock and R&B artists who would sell their entire copyrights to their respective labels for about $250 per song. For this amount of cash, they would not only assign their publishing share, but all of their writer’s share! At one of the major companies I worked for, the company owned the classic hit songs of a big-name ’50s star, and would lawfully keep 100% of the royalties, without having to pay the hit writer any royalties at all.
In the ’60s, at least songwriters would keep their songwriter’s share, splitting the royalties equally with the publisher. The mechanical royalty rate (for records sold) was only two cents per unit sold, so it was easy to figure out the earnings: one penny for the songwriter, and one penny for the publisher.
But starting in the ’70s, songwriters (and their attorneys) became much more assertive, and gradually established a new standard for the publishing deal–a 50/50 co-publishing agreement, whereby the songwriter would not only receive the writer’s share, but half of the publisher’s share. From this point on, royalties received would be split 75/25 in favor of the songwriter.
This 75/25 standard has basically remained the same up to the present time. But often, other stipulations are agreed upon that favor the writer even more. If a writer/artist or band has any bargaining leverage or “buzz,” then they can easily negotiate a “reversion clause,” whereby all of the copyrights revert back to the writer after a certain number of years if the deal has been profitable for both parties. What is alarming to the publisher is that these deals now clearly favor the writer, yet the publisher usually still pays a hefty advance to acquire these rights. It is not uncommon for a writer/artist to receive a $100,000 advance for signing with a record company (with no chance to buy back the master recordings), and then proceed to negotiate a $200,000 advance or more for a co-publishing deal, where all the rights could revert back to the writer.
So why do publishing companies pay such large advances to writers for only half the publishing? First off, mechanical royalty rates have almost quadrupled, from the original two cents to the current 8.00 cents per unit sold. Secondly, the earnings potential derived from retail sales and broadcast performances worldwide has steadily grown. Thirdly, the major music conglomerates, (Sony, Universal, Time-Warner etc.) are all extremely intent on acquiring as many valuable music properties as possible, to create a greater synergy between their respective entertainment divisions, and also to build tremendous equity in the event they ever sell their music divisions (i.e. Polygram’s sale to Universal).
For those reasons and others, it creates an environment highly beneficial to the current hot-selling artists/writers, or those perceived by labels/publishers to be the “hitmakers” of the future. Of course, there’s a flip side to this wonderful scenario. For every hit writer the publishing companies are desperate to sign, there are thousands of aspiring writers who are just trying to get their songs heard. Even if a writer signs a co-publishing deal and earns a substantial advance, you are now under heavy pressure to deliver the “hits,” so that the writer doesn’t get dropped as soon as the option period comes up. In addition, the same pressure faced by the writer may also be felt by the publishing exec(s) who signed them. They may have put their own jobs at risk by giving that writer a large advance.
All in all, a publishing deal is a terrific thing, if all parties can happily make money from the songs involved. Of course, a writer can always hold on to the publishing, and refuse to sign a deal. That could work out the best for the writer, since the value of song copyrights is likely to increase. But the “publishing deal saga” will always continue, with the writer deciding what it’s worth to give up publishing, and what a publisher is willing to invest in a writer. The balance of power now rests with the songwriter, but it takes both parties to work out a successful deal.