The royalties, which would be payable to the Musician in the absence of the Agreement, are split between the Publisher and the Musician. However, the manner of splitting royalties is rarely an unsophisticated “x” : “y” ratio. It is, instead, a ratio specific to the manner of exploitation which states:
“x” : “y” in respect of “z” manner of exploitation
In this formula, “x” represents the musician’s share, “y” represents the publisher’s share and “z” represents royalties generated through any of the following categories some of which may overlap:
- Sheet music
- Mechanical royalties
- Online and Mobile including on-demand entertainment, ringtones, podcasts, streaming
- Miscellaneous e.g. exploitation of the work in magazines, greeting cards, custom/limited edition/retail/premium products
A publisher may either publish sheet music itself or sub-contract such publishing. If the publisher publishes sheet music itself, it would pay a percentage of its income made “at source” to the musician. This is generally means that the musician would receive a percentage, say 75 per cent, of [gross income - taxes]. However, if it were to sub-contract such publishing (thus outsourcing the risk involved in publishing), it would pay the musician a percentage of its net receipts which would normally work out to less than what the musician would have received had there been no sub-publisher involved. This is because in such a case, the musician would receive [gross income - (taxes + sub-publisher’s share)]. Therefore, even if, say, a musician were entitled to 75% in both cases, in monetary terms, his receipts could be quite different.
More pertinently, if one were to consider the performing right — the right includes the right to perform a work in public and the right to communicate the work to the public, under the rules of the PRS (UK). Rule 2(f) of these Rules states that the share of the publisher and / or proprietor of the performing right shall not exceed one half of the net fee. However, in the case of any work specially written for a film, the share of the publisher shall not exceed 16.66% of the net fee, ‘unless in the agreement between the publisher and the writer(s) of the work, the publisher has undertaken to use all reasonable endeavours to exploit the work for the benefit of the writer(s) by means additional to the inclusion of the work in the soundtrack of the film for which it was commissioned and the public performance or communication to the public of the film in question’.
Thus, not only is there no standard formula, it would also not be accurate to state that the Publisher and Musician are each always entitled to 50% of the royalties. At any rate, under the PRS Rules, in respect of the performing right, it appears that 50% is the highest amount which a Publisher may negotiate to be paid. It is not the amount a Publisher is required to be paid. Neither is it the standard amount which the Publisher is invariably paid.
- PRS Rules
- Music Business Agreements by Bagehot and Kanaar, Sweet and Maxwell, Third Ed., pp. 225-226
(This post is by Nandita Saikia and was first published at LawMatters.in.)