Music publishing agreements series; (part 11) What advances will be paid?

How long is a piece of rope? It depends on the parties and their circumstances. For a new composer signing to a major publisher, the advance for the initial period is typically anything from as little as R15 000 to as much as R1,5 million, possibly more in exceptional cases. Quite how much a particular composer will be offered depends on a variety of factors, such as:

1. The publisher’s assessment of what a particular composer is currently worth, as well as the purpose of signing him if not to record albums (e.g. film-scores, production music, writing for a particular recording artist or project or a combination);

2. Whether there is more than one publisher interested in the composer (allowing the forces of competition to push the price up);

3. What the composer needs to survive (obviously a four member group requires more than an individual);

4. The composer’s track record;

5. The quality, experience and ability of the composer’s management;

6. The negotiating abilities of the composer’s advisers;

7. The publishers business practices (some publishers are more generous than others);

8. The economic and/or business climate at the time, and in particular the state of the music publishing business;

9. Whether the publisher is a local company or a foreign company: American publishers, for example, are reputed to be not as generous as their European and UK counterparts;

10. Whether the composer is signing to an independent or a major, and whether his music can easily be sold to retailers, download sites and ring-tone companies;

11. Whether the composer has a recording agreement already in place;

12. Whether some records have already been released; and

13. Whether those records have been commercially successful or have a real chance of achieving commercial success.

Publishing advances are usually paid in instalments, on two or three of the following occurrences:

1. X% either on the signature of the agreement (in respect of the initial period) or on the exercise of any option (in respect of the later periods);

2. Y% on the commencement of recording the relevant album;

3. Z% on the completion of recording the relevant album;

4. A% on the local release of the relevant album; and

5. B% on the overseas (UK and USA) release of the relevant album.

The publisher may also agree to pay additional advances as so-called “chart bonuses” for example, if a single or an album achieves Top 20 status in a particular market or on iTunes.

Advances for subsequent (option) periods will either be fixed or may be calculated under a so-called “mini-max” or “royalty earnings” formula. Typically, such a formula will provide that the advance for the second period will equal a percentage (often two-thirds) of the royalties earned from the exploitation of the songs on the first album with a minimum (“floor”) advance to the composer of X Rands and a maximum (“ceiling”) preserving some basic protection for the composer (via the “floor”) and for the publisher (via the “ceiling”). In this way, the mini-max formula rewards good performance with increased future advances.

Alternatively, the publisher may structure advances in such a way that he covers the recoupment of previous advances. This is a type of cross-collateralisation. On this model, future advances may be structured as being RX less the un-recouped balance on the composer’s royalty account (which protects the publisher from becoming too exposed in financial terms) and with a minimum advance to the composer of Y Rands (which ensures that the composer will always receive something). It’s not a great clause, but at least the advances being cross-collateralised are not generally for production costs, as in the record contract, but for the songwriter’s personal living expenses, therefore it is far more palatable.