A Look At Co-Publishing, Sub-Publishing, and Administration Agreements
By Justin M. Jacobson, Esq.
In a prior installment, we examined the traditional songwriter and music publisher relationship, including reviewing some standard clauses that an artist would find in many publishing arrangements. We will now explore a few other contractual relationships that can exist between a music publisher and a songwriter, including an administration agreement, a co-publishing contract, and a sub-publishing agreement.
An administration “deal” is one of the more straight-forward relationships within the music publishing world. In this type of arrangement, the songwriter does not assign any of their publishing or ownership rights in their compositions to a music publisher or any other third-party. Instead, the writer retains these rights and merely contracts with the third-party for them to act as their “administrator” for a specified time period. The administrator is commissioned to handle the formalities related to the exploitation of the musician’s composition as well as to protect and enforce the rights in the song. Some matters that an administrator assists with can include registering of the compositions with the correct Performing Rights organizations, registering the finished pieces with the U.S. Copyright Office, maintaining the books and records, negotiating and issuing licenses to other parties for the work as well as collecting any and all royalties earned in the territories it is authorized to cover. Essentially, the administrator handles all the paper-work related to the licensing and monetization of the song in exchange for a specific fee or percentage of earnings. This fee is referred to as an “administration fee” and is usually 5-15% of the income generated from the musical compositions. However, in certain instances, the administration fee could be more or less, depending on the extent of services provided by the third-party to the songwriter. Sometimes, the company may make an advance payment to the owner in exchange for the administration right. This advance payment is then usually recouped from the amounts collected by the administrator.
Additionally, these kinds of administration arrangements are usually exclusive to that particular party. This means that the administrator will be the only entity with these types of rights; so, this effectively means that no other party may issue any licenses or collect any of the writer’s publishing royalties for the same compositions. The agreement can apply to a particular composition, several compositions, or an artist’s entire music catalogue.
In situations where the songwriter and music publisher desire a more elaborate relationship, a co-publishing arrangement might be suitable. One main difference between an administration “deal” and a co-publishing “deal” is that in a co-publishing agreement, the music publisher and the writer may co-own the copyrights in the compositions. In practice, this means that the music publisher acts as both a traditional publishing company as well as an administrator of the works.
This type of deal is different than most traditional publishing deals and is generally more beneficial to a songwriter. That is because the agreement provides the writer with their entire songwriter share as well as a percentage of the “publisher’s share” in the composition. This means that the writer could potentially have 100% of the songwriter share and 50% of the publishing share in one song. When looking at the entire song’s publishing split, this means the writer gets 100% of the “writer’s share” of publishing revenues, which is equivalent to 50% of the total song’s earned publishing revenues as well as 50% of the publisher’s share of publishing revenues, which constitutes the other 50% of the publishing revenues earned through the exploitation of the song. Consequently, the writer will earn 75% of the income instead of 50%.
In addition, a co-publishing agreement may be utilized when two or more songwriters collaborate to create a song. The copyright in the created “joint work” is initially co-owned by the authors of the copyright; however, when each writer transfers his or her share to their respective publishing company, the publishers then become the co-owners of the copyright in the song. Therefore, in many situations, especially where multiple established artists are involved, the composition is often owned and/or administrated by two or more publishers as each writer typically has their own music publishing arrangement in place.
Generally, each co-owner has the right to grant non-exclusive rights in the entire song to a third party, without the knowledge or consent of the other owner. This non-exclusive grant of rights is limited to exploitation in the United States; as in countries outside the United States, it may differ and instead may require consent from all co-owners of a work to issue any third-party licenses. When a non-exclusive license is issued by one party, this party must account and make payment to the other co-owners in their proportionate shares of the work.
In co-publishing agreements, a major decision between the various publishers that co-own one song could be which publisher will exclusively “administer” the song. That is because administration is a valuable right as if one publisher collects all of the income earned from a song that company may then earn interest on the amounts collected until the date on which it is required to pay royalties to the other publisher and the writers. The issuance of licenses is why an exclusive administrator is a good idea.
Generally, this administration arrangement is an exclusive or a joint one. In an exclusive administration agreement, one publisher exclusively administers all rights in the co-owned pieces. The other publisher is merely entitled to their portion of income received by the other publisher from exploitation of the song without the right to issue third-party licenses. This type of arrangement is often used when one publisher is far better equipped to handle worldwide exploitation and administration of a song than the other. This also enables the administering publisher to control the third-party uses of the composition due to its exclusive right to negotiate agreements and enter into licenses for itself and on behalf of the other publishers. This also permits the institution of a strategy for the exploitation and promotion of the composition.
While, the non-administering publisher does not have the power to issue licenses, there are some instances that may require this publisher’s approval. Some may include any advertising and promotion expenses incurred by the administering publishing company on behalf of the track, the usage of the song in a radio or television commercial, any foreign lyric adaptations or translations of the original composition, any film synchronization uses of it, any mechanical licenses issued at less than the full statutory rate, and any use of the song as a sample by another party.
In a joint administration arrangement, each publisher has the right to administer the full musical composition and to issue non-exclusive licenses for the composition. Under this type of agreement, each publisher has the right to negotiate agreements as well as collect and account for revenues earned from the entire song. Generally, this situation is only feasible if both publishing companies are equally capable of administering and exploiting the song globally. These situations are typically easier to navigate, as a licensee does not need to enter into two separate license agreements with two different publishers to secure the right to use one song for one specified use. Instead, they can just engage one of the co-owners of the work for a non-exclusive license for the entire piece subject to this publishing company accounting to the other for the earned funds.
Another variation of this arrangement is a limited joint administration. In that instance, each publisher has the right to administer only its interest in the song and to issue exclusive or non-exclusive licenses only for its interest in the song as opposed to being able to issue a non-exclusive license for the entire composition. That could mean that if a publisher only owns a 50% interest in a song, it could issue a license only for its 50% interest. Also, neither publisher needs to account to the other one unless one receives the other’s share of income in error as each party is only able to license and earn income from their share. This means that the third-party must secure a separate license from all of the other publishers to acquire the full rights to the entire song for a particular use.
Whether a songwriter enters into an administration agreement or a co-publishing “deal,” the writer may also enter into a sub-publishing arrangement. Such arrangement can exist with its current exclusive administering party, one of the co-publishers, or with an entirely different entity unrelated to the other parties.
A sub-publishing arrangement exists where a writer and/or a publishing or administrating entity enters into an agreement with a foreign publishing company, the sub-publisher, to exploit their compositions in a different country or countries. This means that the sub-publishing company has the right to administer, license and exploit the owner’s songs in countries where the other parties generally do not conduct business. This agreement may apply to one or more separate songs, or a writer’s entire catalog.
The territory that a sub-publishing agreement encompasses is an important consideration. Some deals limit the sub-publisher to a particular territory, such as one country and some deals may provide a block of countries that the sub-publisher is permitted to administer the work in.
A sub-publisher usually charges an administration fee, which is generally between 10-50% of monies earned. In addition, a sub-publisher may also pay the owner an advance payment which is recoupable against the royalties earned. The amount of the advance payment depends upon the size and importance of the catalog and whether a song is currently a hit in the United States or some other territory.
Generally, a multinational company, such as Warner Music Group, can often pay a larger advance payment than a group of separate independent companies. This is due to the multinational company cross-collateralizing the income streams and recouping the advanced amount against all royalties generated from all the licensed countries as well as lowering their operational overhead by dealing with all foreign exploitation and accounting in a central office. This helps the larger publisher reduce the time and expense of auditing and servicing the catalog and communicating with various different, independent foreign sub-publishers.
Additionally, one of the rights typically granted to the foreign sub-publisher is the ability to create foreign lyric adaptations or translations of the original song. This enables the sub-publisher to create “cover” records with the original composition recorded in the licensed territory’s native language. In these situations, the sub-publisher is usually entitled to receive a greater share of mechanical royalties for sales of the translated “cover” record in the licensed territory.
One last consideration when entering into a sub-publishing deal is how payments are calculated. Generally, an artist should aim to have all their payments made “at source.” This means that royalties earned through the sub-publishing agreement are computed at the source, which is having the percentage based on earnings in the country it was earned; otherwise, the songwriter’s U.S. publisher will take a percentage of the foreign royalties earned in addition to the foreign sub-publisher receiving their owed compensation.
Overall, while many songwriters and producers enter into the standard songwriter-publishing agreement that enables the publishing company to only collect publishing royalties in the United States, there are other arrangements that may be more appropriate or more beneficial to the artist, such as an administration deal or a sub-publishing agreement. These contractual relationships enable the songwriter to earn royalties from territories outside its traditional business channel as well as potentially entering into an administration relationship whereby the songwriter has complete control over the licensing of its work and the administrator merely handles the paperwork and accounting associated with the recordings. Each individual has different requirements, so it is best to consult with a qualified attorney or professional when determining the best course of action for a particular musician.
This article is not intended as legal advice, as an attorney specializing in the field should be consulted.
© 2018 The Jacobson Firm, P.C.