Music Publishing Exposé: Part II — The Royalty Labyrinth

I. The Publishing Machine

Music publishing is the “hidden half” of the industry. If the record label controls the sound recording (the master), the publisher controls the song itself (the composition). Every time a song is streamed, sold, covered, played in a restaurant, or licensed for a commercial, publishing royalties are generated.

The “Big Three” publishers — Sony Music Publishing, Universal Music Publishing, and Warner Chappell — dominate the landscape, controlling the rights to millions of songs. Even many “independent” publishers are tied to, or outright distributed by, these giants. This means control is not fragmented — it is centralized into a corporate triopoly.

II. The Royalty Maze

There are multiple types of royalties, each governed by different laws and collection societies:

• Mechanical royalties: Paid when a song is reproduced (streamed, downloaded, physical sale).
• Performance royalties: Paid when a song is performed publicly (radio, TV, venues, streaming).
• Synchronization (sync) royalties: Paid when music is used in film, TV, ads, or video games.

These royalties are tracked and collected by organizations like ASCAP, BMI, SESAC (performance) and SoundExchange (digital performance). But the system is intentionally slow and opaque. Artists often wait 12–24 months for payment.

Then there’s the black box problem: royalties that cannot be matched to the correct songwriter or publisher are pooled, and then redistributed to the largest publishers. This means independent and emerging artists’ money is literally handed to the Big Three. The black box is estimated to hold hundreds of millions of dollars annually.

III. The Contract Trap

Publishing deals are structured to favor the publisher, not the artist. Standard splits are 70/30 or 80/20 in favor of the publisher.

Worse, contracts include recoupment clauses: if a publisher gives an artist a $50,000 advance, the artist must earn that back before seeing a dime of future royalties. But because publishing splits are so unfavorable and royalties so delayed, many artists never escape recoupment.

Cross-collateralization makes it worse. If an artist signs multiple deals (or has multiple works under one deal), revenue from a successful project can be used to pay off the debt from a flop. This keeps artists trapped in cycles of debt even when they have hits.

Case studies are brutal:
– TLC, one of the best-selling girl groups of all time, filed for bankruptcy while selling millions of records.
– Countless songwriters for Top 10 hits have had to work second jobs because their royalties never arrived.

IV. Fans Pay, Artists Don’t Get Paid

Streaming has supercharged the problem. Platforms like Spotify and Apple Music pay fractions of a cent per stream. But before it reaches the artist, that money flows through labels and publishers, who take their cuts first.

Breakdown of $1 in streaming revenue (approximate):

• $0.30 → Streaming platform (Spotify/Apple)
• $0.55 → Label and publisher cuts
• $0.15 → Artist, if they are lucky — and only if they’ve recouped their advance

This means fans believe they are supporting artists, but most of that support is captured by intermediaries.

V. Toward a New Publishing House (Teaser for Part III)

The system is not broken by accident — it is designed to extract. But alternatives are emerging:

• Smart contracts that split royalties instantly and transparently.
• Direct-to-fan publishing houses where artists own their rights and fans can invest directly.
• Blockchain-based royalty tracking to eliminate the black box.

The old system was designed for delay, debt, and opacity. A new system could be designed for immediacy, ownership, and transparency. That’s where we head next.