A Guide on How to Set up a Music Publishing Company!
One of the four jewels of the music industry - Music Publishing!
Let's look at ONE of the jewels in the crown for the music industry and how you can set up and be a successful music publisher today!
OK, let’s imagine you have a band where everyone plays together, but not everyone in the band writes the music, which is a fair point.
Or, maybe you’ve got a six-person team: one writes the lyrics, one writes the musical composition, and all six get together to play at shows and record the album/single/EP under that band name— X
While all six play together and tour together, the two writers have a different type of ownership and financial rights than the others in the band!
These rights come into play through what is called copyright.
Copyright law splits copyright ownership for music into two sets of rights:
- Rights to the sound recording (the finished product you listen to on Spotify & Apple),
- Rights to the underlying musical composition (the words/beats/chords which are written on paper).
When the songwriter creates a song and ‘fixes it in a tangible medium,’ like for example writing it down, they get immediate copyright in that song.
But when musicians record that song in a recording studio, the musicians receive different copyright for the sound recording.
This split exists for many reasons, but it comes down to the fact that musicians and songwriters have historically been different people.
When the songwriters create songs they receive the second right in addition to the copyright: they also become the song’s publisher.
The copyright owner is the only one that can decide how their/songs/album gets used, and a music publisher’s job is to get other people to use a song for a fee (like in a film, TV, and Gaming).
Because the songwriters are the only ones that can give others a license to use the song, they automatically become the publisher for their own songs, makes sense!
Songwriters could possibly handle publishing administration for their song/catalog, but in reality, the logistics would be so intensive that the writers wouldn’t have much time to make ANY music whatsoever, just too time-consuming.
This is where a music publishing company comes into play.
A music publishing company makes sure songwriters and composers get paid when their compositions are used for commercial use-Film, TV & Gaming.
But to be more specific, the publishing company has the songwriter assign their copyright in a song over to the music publishing company, so that the publishing company can “administer” those copyrights.
The publisher provides song licenses to users, and they make sure that everyone gets paid for different types of royalties, for example, performance rights, mechanicals, and synchronization rights -(Film, TV & Gaming).
Each of these is a source of funds, although performance rights are the most important for any NEW artist they allow the songwriter and composers to get paid every time their music is played on, on television, radio, and live venues, etc.
Money comes in from the various songwriter and performance royalty outlets the publishing company splits revenues with the songwriters accordingly.
With royalties, the whole band might receive income on an album, royalties, and payments from the publisher are on a per-song basis, basically because each song can and does sometimes have several writers to deal with, which can be a BIG headache.
Each writer or composer of a song can have their own publisher, and that publisher can either administer an individual song, or all of the songs that a writer(s) creates overtime…
Deciding on your name for a music publishing company?
The name you use is very important for these reasons:
The state in which you will create your company/Organisation.
The Performing Rights Organisation you will register with.
I would recommend doing a search for any name you decide on because the state and the PRO, while they are completely unrelated, will only let one entity use a specific name.
A tip, you want to use something that isn’t common — add some flair to the name because you need to make it unique.
Creating your business entity!
Every business that operates will need to be registered in that state, there are two reasons to create the business earlier:
- The registration pages of the PROs require your business name and employer tax ID number
- Having a registered business in place for your operations can help shield you from liability. (but I would check this with your attorney — to look at the right structure for you)
In the worst-case scenario, your business name gets taken in the PRO while registering your company within that state, you can set up a trading name or doing-business-as name with the state for a different name.
On creating the business you’ll need to get an EIN number here, and you’ll also need to use this paperwork to open a business bank account.
Affiliate with a PRO
A Performance Rights Organization collects performance royalties on behalf of songwriters and publishers by making agreements with commercial venues that play music.
The PRO makes sure that restaurants, radio stations, and clubs pay for their use of someone else’s music, and then they pay the publisher and songwriter their %/.
The major performing rights organizations in the United States are Broadcast Music, Incorporated (BMI), the American Society of Composers, Authors and Publishers (ASCAP).
To recive payment by the PRO, the writer and the publisher need to register with the PRO.
While publishers can register with all of the PROs, writers can only affiliate with one.
As an example, if the writers above are with ASCAP, then you only need to register with ASCAP for now.
Note, writers can only become members of SESAC by invitation, so unless you’ve got a deep connection with a big-name writer before you start your publishing company, you’ll probably be with ASCAP or BMI in the very early days.
ASCAP, you can register at www.ascap.com.
BMI, you can register at www.bmi.com.
If you only take one piece of advice from this post: please create a company for this process, don’t proceed as an individual.
There are NO limitation to your liability as an individual, remember this point!
Make sure you know exactly who owns each song & album right from the START!
While a songwriter may claim that they wrote a song and have full ownership, it always makes sense to ask many questions.
Did anyone help write the lyrics? Is there a manager, agent, publicist?
Did the songwriter make an agreement with any other writers?
US Copyright law assumes that everyone who helped create a song owns an equal share in that song!
You need to really determine what kind of relationship the writer you represent is looking for. Do they want an exclusive agreement?
Do they just want you to handle this one song?
You will need an entertainment attorney to create an agreement between you and the songwriter(s) clarifying all the rights, responsibilities, and royalty shares, with another agreement that assigns their copyright over to you as the publishing company so you can administer the songs properly.
Before you start worrying about the publishing company stealing ownership of the music, the reason for this transfer of ownership is so that the publisher can build a large catalog of music.
Register the songs with the Copyright Office
Once the songs have been assigned to you, you’ll need to register the songs with the United States Copyright Office in your publishing company’s name.
Certainly, a lot to take in with the setup and ownership of a music publishing company, take it, step, by step and seek advice, so you are fully prepared for your entertainment journey!
By Pete Moore
