The Three Entities Involved in a Song
This is you. Once you finish the musical and the lyrical aspect of a piece, and make a secured private copy of it, you automatically have a copyright for that song.
After you write the song, the next best thing to do is to find an “Attorney-in-fact” who will administer the rights of the song for you, exclusively, over a period of time.
During this period, the publisher will be able to grant licenses, in your behalf, to other entities, to be able to finally produce your song into a Commercial Sound Recording, secure deals for your song to be made available for TV and Radio Advertisements, and grant permission to just about anything that can be done with your song.
The publisher will be the one to collect royalties in your behalf, from licensees, and Collective Management Organizations (Such as FILSCAP).
The Record Label secures the licenses from the Publisher to be able to produce the song into a Commercial Sound Recording. This sound recording, unlike the song, will become owned by the Record Label.
The Record Label will be the one to finance the production of the song including the actual recording with the different artists, mixing, mastering, and post production. It will also be the one to do the marketing to promote the Sound Recording and tap different distributors to make the sound recording available to different stores.
Music Publisher is to the song, where Record Label is to the sound recording.
For the Commercial Sound Recording, the Record Label gets the chunk of the share, usually 70% of the Net Profit, after all production and marketing expenses incurred for the sound recording.
The remaining 30% shall then be remitted back to the Music Publisher. The Music Publisher then gives 30-50% back to the Songwriter, net of all administrative costs, as the Songwriter’s share of the royalty.
In effect, the songwriter gets less than 10% of the Gross Sales, primarily because of the various recouping of costs incurred along the way.
Managing the administrative, production, and promotional side of things can often get a toll on the songwriters. Oftentimes, upon learning about the bottomline net figure that goes to the songwriters can discourage them to assign their rights to Music Publishers and would tend to do everything themselves. That is in fact, highly encouraged, especially when the songwriter is capable of doing all the auxiliary activities on top of writing more songs.
But then again, 100% of 0, is still 0; as compared to 10% of 1,000,000 = 100,000. The objective is to be able to find the right entities to maximize the overall net profit of the songs.