Music publishers chase celebrities with huge upfront fees

(From today's Wall Street Journal...

$6,000,000 UPFRONT to sign Harry Styles to a publishing contract? )

Another Reason to Court Celebrity
Songwriters score big publishing advances—if they are already well known


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Harry Styles, left, a singer in the British boy-band One Direction, has been discussing deals for his songwriting with music publishing companies with an upfront fee in excess of $6 million. PHOTO: JOEL RYAN/ASSOCIATED PRESS
By
HANNAH KARP
Aug. 28, 2016 5:30 a.m. ET


The price of signing big-name artists to music publishing deals is skyrocketing—even for those more famous for singing than for songwriting.

Harry Styles, a singer in the British boy-band One Direction, has been discussing deals with an upfront fee in excess of $6 million while aiming to retain majority ownership of his songs, according to people familiar with the matter. Ex-bandmate Zayn Malik got several million dollars for a publishing deal with Kobalt Music Group Ltd. in June, according to Sas Metcalfe, who oversees Kobalt’s deals.

The cost to sign such household names to songwriting contracts have increased about threefold over the past two years, some publishers say, so long as the stars take credit for at least co-writing their tunes. Mr. Styles and Mr. Malik earned co-writing credits on many of One Direction’s hits while Mr. Styles also helped write songs for stars such as pop singer Ariana Grande.

The industrywide scramble for marquee talent, said Ms. Metcalfe, “feels a bit desperate sometimes.” She added that Kobalt competes not just by dangling big advances but by offering its own royalty-collection technology and letting songwriters retain 100% of their copyrights for an administration fee—an arrangement that major music publishers tend to avoid.

Meanwhile, rates to sign lesser-known writers have softened over the past decade, some publishers said. Music publishers represent songwriters and earn money by collecting licensing fees on their catalogs of song lyrics and melodies. They are distinct from record labels, which represent musical performers and sell recordings of their music.

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Zayn Malik, shown performing on May 14 Carson, Calif., got several million dollars for a publishing deal with Kobalt Music Group.PHOTO: RICH FURY/INVISION/ASSOCIATED PRESS
Veteran songwriters say their business is drying up. Jack Tempchin, a 69-year-old songwriter who penned Eagles hits including “Peaceful Easy Feeling,” says his radio-play earnings have shrunk, he is collecting “pennies” from streaming services and he isn’t expecting much from his new album coming out next month. Luckily, he said, “I was fortunate enough to be successful in a golden time and I didn’t spend a lot of money on boats and airplanes.”

Driving the competition for well-known names is a risk-averse attitude among publishers in a period of uncertainty for the music industry, with music sales falling and subscription streaming services such as Spotify and Apple Music growing fast but still counting fewer than 100 million paying subscribers among them world-wide. Many well-funded, tech-focused independent music publishers that have cropped up over the past decade also are pushing prices up for the biggest stars. Kobalt’s stakeholders include the private investment firm of Michael Dell, chief executive of Dell Inc.

The continuing decline in album sales, which used to account for a good chunk of revenue for music publishers and their songwriters, has made the radio-performance royalties ever more important—even as radio’s narrowing playlists favor current hits by recognizable stars. Performance royalties accounted for 57% of publishers’ revenue in 2015, up from 47% five years ago, according to the National Music Publishers Association. Mechanical royalties, which come from paid streaming services, CD and download sales, amounted to 18% of revenues, down from 28% five years ago.

But even as the recorded music industry has shed 60% of its annual revenue since 2000, music publishing has remained an attractive business for investors due to the many ways to exploit publishing copyrights beyond music sales. Unlike record labels, publishers collect royalties from terrestrial radio stations, bars, restaurants and other public venues that play their works. Publishers also tend to generate more royalties than labels from placement in film, TV and commercials since they collect on any artist’s recording of their compositions, said NMPA’s president and chief executive, David Israelite.

After years of raking in these revenues from old catalogs with very little work, publishers now are being forced to take a more active role and focus on current hits, he said. When publishers sign name artists likely to have the best chance at dominating radio, they must work to pair them with the right songwriting partners and to land the songs in movies and ads.

Major publishers’ results have been mixed lately: Sony Corp.’s Sony/ATV Music Publishing, the world’s biggest music publisher, posted flat revenue in the most recent quarter over a year ago, said people familiar with the matter. Revenue at Warner Music Group, owned by Access Industries Inc., rose 9% in the same period and was up 2.5% in the first half at Vivendi SA’s Universal Music Group.

Zach Katz, president of BMG Rights Management LLC, said another factor creating high premiums for known stars is the “sea of mediocrity” that has resulted as it becomes ever easier for anyone with a laptop to make and distribute their own music. “There is more ‘pretty good’ out there than there has ever been, but there’s very, very few that are exceptional,” he said.

Still, he said he has chosen not to bid for some big names such as rapper Fetty Wap, who he said was seeking “millions and millions of dollars” for a co-publishing deal that “didn’t make sense financially” as it would likely have cost four times what he estimated it would have generated in royalties from radio play.

‘There is more ‘pretty good’ [music] out there than there has ever been...’

—Zach Katz, BMG Rights Management
“You could never recoup that,” he said.

A representative for Fetty Wap said he wasn't available to comment.

 

AKA "Change a word, take a third." Madonna is the queen of this technique.

Reading between the lines, it is apparent that, with songwriters able to create and distribute their own work, and as a result being forced to take a much more active role in the management of their own careers, it become harder to get them to sign bad deals.

 

Typical stuff that people talk about if I sit down and talk about music. I look at my watch and suddenly remember that I have a bus to catch...

 

SESAC went after a bunch of writers in the 90's, they picked up Neil Diamond, Dylan and some others by paying upfront bonuses against future earning. If you can lock up a steady earner, with a big catalog, it could be a smart move. Are One Direction songs gonna be worth anything in the future, 8-10 years out? I'm sure they're gonna license those compositions as much as possible as soon as possible.