1. Copyright and Contracts in UK Music Publishing Ruth Towse Professor of Economics of Creative Industries, Bournemouth University, UK CREATE Fellow in Cultural Economics (University of Glasgow), UK. Article with Kenny Barr, University of Glasgow.

2. About music publishing Intermediary role between composer/songwriter and final user. Until advent of sound recording, printed music necessary for reaching audience via performance. Now a very small part of music publishing business. Sound recording and radio changed role of music publisher to manager of rights instead promoter of sales of sheet music. Copyright law changed to accommodate new technologies and collecting societies developed following 1911 Copyright Act. Contracts for song-writers changed from buy-out to royalty early 20 C. Royalty splits to writer seem to have increased over time Music publishers promote songs with performers, record labels, promoters, etc. Little change With digital technologies, song-writers often expected to have a recording and track record before being offered a contract with a publisher.

3. Copyright in musical works Copyright is a bundle of rights which may be contracted separately. Rights in a song exist in both the music and in the lyrics. A song may be co- authored or have separate contracts for each work. Singer-songwriters also have rights in performance (not dealt with in publishing contract). Rights = reproduction, distribution, performance, making available, etc. All rights apply by territory – collecting societies are national. International music publishers have offices in major centres. Smaller use sub-publishers (take a percent for roylaties) Music publishing contract includes some or all of these rights. Copyright lasts 70 years + life (in EU, USA etc). Berne min = 50 years.

4. Sources of revenue to UK Music Publishing, 2012. £m. and percent Collecting Society* 247 (27%) Affiliates (Overseas**) 334 (37%) Printed Music Sales & Hires 76 ( 8%) Direct Licensing*** 239 (36%) Other: 8 <1%) Total 904 *PRS, MCPS, PPL. **Overseas = collection of overseas revenues by foreign collecting societies and publisher affiliates (national office or sub-publisher). ***Direct = Sync £48m, Grand Rights £171m, Permissions £2m Other £12m Source: Music Publishers’ Association.

5. Economics of contracts A contract offers incentives and rewards to each party that benefits them both. Principal agent problems with asymmetric information and moral hazard Caves – publisher requires decision rights to cover investment in sunk costs. Avoid hold-ups in long term projects. Contracts inevitably incomplete – uncertainty and problems of enforcing terms in unforeseen circumstances (post contract fealty) Both drafting and enforcing contracts carry transaction costs : disincentive In creative industries, the creator typically has to sign away all rights in copyright. Only superstars can dictate terms (and they may have signed a poor deal early on in their career).

6. Copyright contracts Royalty contract – exchange of rights for services of developing and exploiting the song. Developed in UK in 1920s (previously bought-out) Royalty contracts are primarily risk-sharing devices (contrast buy-outs). Royalty is an ex post reward depending on revenues Royalty is a % of revenues that is negotiated in the deal. ‘Primary’ market eg sales of CDs, hires of cores. Performing right is registered with PRS and split 50:50 between writers and publisher. Mechanical right registered with MCPS. PPL (record labels) ex gratia payment. ‘Secondary’ markets eg radio play, shops. Royalty on foreign sales depends on publishers deal with sub-publisher.

7. Key Elements of Publishing Contracts (author Kenny Barr ) Advance RoyaltyExclusivity Term Term of the contract and retention of copyright varies considerably. From single use to ‘life of copyright’ Advance against future royalties Inducement to sign the deal Instalments incentivise the writer to remain productive Reflects the level of risk borne by each party Typically >50% for the writer. Rate varies according to type of use Contracts display varying degrees of exclusivity The more the publisher invests the more exclusivity they are likely to seek

8. Types of contracts in UK music publishing Several types of contract are adopted in music publishing, each with different incentives, rewards and transaction costs that vary with the deal. Exclusive writer contract Single song assignment Co-publishing agreement Administration agreement Sub-publishing contract Collection agreement Synchronisation agreement (See: Ann Harrison Music Business: the essential guide to the law and to deals, 2008: 96 )

9. Examples of contracts (research and presentation by Kenny Barr) TypeCommitmentReward Major Publisher: Exclusive Writer Agreement Term: 4 x 1 year options, Post- term retention: 15 years, exclusive writer deal Advance £20k paid in instalments International collection at source 70/30 Split Independent Publisher: Administration Agreement Term: 3 years with mutually agreeable renewal 1-year option. No post-term retention Exclusivity limited collective activities of a band No advance 80/20 Split Freedom for individual writers to publish elsewhere

10. Different deals: commitment (incentive) Differing levels of commitment by the writer and investment by the publisher (often forgotten that writer has already invested time and opportunity cost). Term of the contract and ‘post-term’ retention of copyright varies considerably. Exclusive contract: lengthy commitment in terms of options. Copyright is assigned to the publisher for 15 years after the end of the contract term. Exclusive tie to that publisher. Publisher decides whether or not to renew the option. The writer must wait to find out if the option is picked up or if they are dropped. Administration deal: commitment: 3 year term: options mutually renewable. Each party can terminate. Writer retains ownership of the copyright throughout. Reversion : a t end of the term control of copyright immediately reverts to the writer.

11. Differing deals on reward Exclusive deal: considerable advance paid in instalments over the term of the deal. Each option comes with an advance which escalates in increments with each option. Major publisher - can offer collection ‘at source’ – no sub publishing agreements. Royalty rate is 70/30 in the writer’s favour though this varies depending on the use. Administration deal: No advance but a more favourable royalty split = 80/20 for most uses Lower degree of exclusivity.

12. Conclusion Both music publishing and contracts in the creative industries are under- researched areas in both cultural economics and economics of copyright. Difficult to get data on music publishing and especially on contracts. Contracts have evolved over time to become more favourable to writers: from buyout -> 50/50 share for the ‘life of copyright’ -> higher share/shorter retention period) e.g. 75/25 with 15 year retention period. There is considerable variety of contracts seemingly offering writers significant choice and reflecting the anticipated commitment/reward of each party… …but creative industries norms still apply: oversupply of creative labour, information asymmetry : ‘nobody knows’. Songwriters still require the services of a publisher for exploitation and royalty income. Questions… Can we explain evolution of contracts in favour of writers? Does structure/health of the industry affect type of contract?