Music Business Is Now Licensing Business

Music Publishing For Today's Market

By: Allen Johnston, The Music Specialist (Contributor)


Before the invention of the phonograph, songwriters earned income by relying on music publishers to sell sheet music and piano rolls of their songs. Even as radio and television replaced the piano in the parlor, music publishers continued to play an important role as popular singers continued to rely upon established songwriters to provide their material. (Tin Pan Alley) However, with the advent of R&B (and especially the Motown era) popular recording artists began to write more of their own songs. Since that time, the music publishing industry has taken on a less important role for singers and a much more important role for revenue growth.

Publishers traditionally acquired revenue through several different means.

Performance Rights: A copyright owner has the exclusive right to authorize the "public performance" of that work. This is why radio and television broadcasters must enter into licenses with performance rights organizations such as BMI, ASCAP and SESAC. These performance rights organizations collect income on behalf of songwriters and music publishers whenever a song is publicly broadcast.

Synchronization Rights: Whenever a song is used with a visual image, it is necessary to obtain a "synchronization" (or "synch") license permitting the use of that song. Music publishers issue synch licenses to television advertisers, motion picture companies, video manufacturers and CD-Rom companies. A portion of this money (usually 1/2 the net proceeds) is paid to the songwriter.

Mechanical Rights: Mechanical royalties" refers to royalties paid for the reproduction of songs on CD, DVD, jump drives, DAT, audiocassette, flexi-discs, musical greeting cards, and other devices sold on a "per unit" basis.

However in today’s new music business model publishers have begun to adjust their business practices to the new digital paradigm. The two main areas that are seeing significant growth are:

1. Wireless Broadband which is allowing the acceleration of device convergence. Now the iPhone has the capabilities of a computer, a PDA can be a music player and video game consoles can now access the Internet.

2. Mobile phones have become basic mini-PC’s and there are over 3 Billion mobile phone users in comparison to only 1 Billion internet users.

What is happening worldwide is that the idea of “selling copies” of music (mechanical license) has become secondary to having access to music. The Internet has become a huge machine that is allowing individuals to have access to and copy music, movies and other forms of entertainment instead of buying physical copies. Wireless Broadband access is opening up huge international markets in South East Asia and Latin America and this new access is creating shifts in how publishers must do business.

Publishers can no longer wait for companies to pay them for mechanical rights or even synchronization rights. This is a model based on consumer usage and this model is dying. Publishers must act quickly to license their catalogs to emerging technologies first; in fact recorded music and publishing licensing should now MARRY and be marketed together.

A good publisher must be able to license his catalog for internet and live music performances, background music, printed and digital sheet music, ringtones, lyric services, on-demand services, flat rate revenue sharing and ALL types of synchronization deals.

Physical sales of CD’s are declining quickly while more and more music users see music as a “free service” to be traded among other users. Couple this idea with an emerging international high economic growth, a young population and massive mobile phone usage and you have a perfect case for conceiving a new publishing model.

Gerd Leonhard has spent over twenty-five years in the technology and entertainment industries, both in the U.S. as well as in Europe, and recently, in Asia. In 2005, Gerd co-authored the critically acclaimed book "The Future of Music" which has become a must-read for music industry professionals around the globe, and which is now available in German, Italian, and Japanese. Recently he presented the following statistics.

a. In the past 12 months over 300 MILLION people joined online communities that use music
b. About 75,000 different devices can play MP3 files

c. In 12 – 18 months, digital broadcasting with “drag & drop” TV and radio stations will be widely available.

d. In the next 12 months high-capacity wireless devices such as the iPhone will be widely available.


The music business has changed into the licensing business; will you be a part of the new paradigm?