This One Cut's Gonna Change Everything...

...I can feel it.

In the studio with Evan, 2024

Sometimes it’s hard for me to get the tone right in my music business writing. I lose track of who I’m supposed to be, or who I’m trying to represent. In my heart I’m a musician and a songwriter, not a lawyer or executive. That’s why as a business person I feel most comfortable advocating for creative people - they are my people. In fact, I’m feeling more like a songwriter than usual because guess what? I got a cut.

What’s a cut? It’s songwriter jargon for when someone records your song. (Fair warning: there’s a lot of jargon in this essay…along with some math that’s fuzzier than a Furby.) Evan Dando has cut a song of mine that he and I recently co-wrote - for the new Lemonheads album. It will be out as a single in September, then on the new album, Love Chant, out in October. I’ll write about the actual song and process when it comes out. In the meantime, today I’ll be wearing my (orange) songwriter hat.

I know from my business life that songwriters and to an extent publishers have a raw deal right now. They’re feeling the pinch of the modern industry, all the technological disruption that’s changed everything so quickly. There’s a lot of money in publishing now, sure - especially at the catalogue level. Publishing assets that deliver long-tail streaming value are hot in the market for private capital due to the stability of the revenue stream. There’s money in synch (film, TV, etc.) licensing, broadcast radio, and SiriusXM, but that money doesn’t actually reach most writers, even in the pop genres. Most working commercial songwriters earn their money primarily from on-demand streaming. For most songs - even popular ones - the payouts are not great.

Imagine a working Nashville country songwriter with a “writer deal.” Their publisher keeps their calendar packed with co-writes, sometimes ten or more per week. Some of the songs are demo’d (which could mean a voice memo) and shopped to recording artists for potential cuts. If a song gets cut, there’s a far less than 50/50 chance it will be a single that’s worked to commercial radio. There’s an even smaller chance it will be licensed for a commercial or TV show, which is a shrinking market for independent music.

Back in the CD era, an “album cut,” meaning a song on an album that isn’t a radio single, could bring in some serious cash. To illustrate, imagine (I wish) I had an album cut on an early 90s Garth Brooks LP¹ The album would have sold around 10 million copies in the first couple years after release. If I had 1/3 interest that’s split 50/50 with the publisher, my take would be somewhere around $150,000. That’s in addition to the massive public performance payments for a radio hit.

The equivalent to a 90s Garth Brooks cut I suppose would be a Morgan Wallen cut. If I (just go with it please) had a 1/3 writer interest in a Wallen album cut, what would that look like?²An album cut would probably get to a couple hundred million streams, and the publishing net on the streams would be around $200,000 for the track in total. After I split my third with my publisher, I’m getting around $35,000. That $150K I’d have made in 1990? It’d be worth around $350,000 today. Add to that a huge reduction in broadcast radio performance money. That’s about 1/10 the money, which explains why there are far fewer full-time professional songwriters in Nashville now than there were in the 90s boom years. Even the biggest hits pay a fraction, and album cuts might pay next to nothing with most of the streaming money generated by the hits.

I saw a TiKTok recently by a very pissed-off songwriter with a beef about producers. In her screed, she demanded “master points” for songwriters. Producers are typically paid both an advance as well as back end from recording revenue, which represented as a pie would be about a 16” family-sized pie compared to the 4” kid-sized mini pie representing the publishing split. Master points are traditionally an allocation of the artist’s royalty.

The TikTokker made the point that a cut only really makes money if it goes to radio. The back-end interests show up many months later, usually in disappointing supply. Producers are doing great, shouldn’t they voluntarily hand some of it to the songwriters?

Believe me, I feel her frustration. I assume part of the reason she’s picking on the producer is because they created something together. It feels unfair because it is unfair. Most likely, however, it isn’t the producer who is being unfair - it’s the industry. It’s something we hear about all the time in this business - the “industry standard.”

I have a pet peeve about this so-called “industry standard.” Whenever a lawyer or manager tells me something is industry standard, I know we’re reaching an impasse. We don’t ever need to tell or remind each other what the industry standard is. I mean there is a standard about some things as we all know, but standards are changing in the consumption era. For example, the entire idea of “producer points” (i.e. master points) is nearly archaic. Deals are different, and changing in real time.

Master points assume there’s an artist royalty, pain on a percentage of the wholesale price of a piece of product. Royalties no longer make much sense in the streaming market, while profit sharing structures make ever more sense. Since the majority of record deals of all sorts are net profit splits, we almost always have to translate “points” from the royalty model to the profit share model. This means making up a royalty rate and doing actual math. The closest we have today to an industry standard seems to be that a 4-(master) point producer royalty is a 20% net participation based on a deemed 20% PPD royalty. How’s that for jargon? How’s that for fourth grade math? It’s jargon…and it’s also based a fiction. We agree on a fiction so that we can make the archaic numbers make sense. That’s dysfunction, a hangover from the old industry standard.

I don't know the specifics of the Tik-Tokker’s situation, nor will I reveal her identity (if I could even find the clip). The producer would have been hired and paid by the artist, probably from money advanced by the label. The writer may have worked side-by-side with the producer in building the track, which muddies the waters in regard to their roles. Especially in pop and R&B, there can be a fuzzy line between writer and producer. It’s a critical distinction, however, because while the producer may get 1/4 of the master profits, the songwriter might get 1/6 of the smaller publishing interest, net of their publisher’s interest and likely co-ownership. From the perspective of a topline writer,³ this can feel like a wild undervaluation of a contribution that often makes the difference between a hit and a miss.

The foundation of the industry standard for writers, producers, and artists came about long before the reality of on-demand digital music consumption. It also pre-dates the current creative process of producing tracks for topline. While recording compensation has long been determined by private contract, including for on-demand streaming, publishing compensation has long been determined by the copyright act and governmental rate-setting guidelines. That’s right, we rely on the federal government to determine how songwriters are paid. Today publishing money from on-demand streaming is paid by performing rights organizations (PROs) such as BMI for “public performance,” and by the Mechanical Licensing Collective, an entity created by the Music Modernization Act, for “mechanical fees.”

Performance and mechanicals, along with private licensing, have been the primary revenue streams for songs going back a century. Why have we carried these concepts into the streaming era? Beats me, honestly. Seems like it could all be simplified into a unified publishing payout to create transparency and efficiency. Although there’s precedent for a one-to-one “public performance” (I dunno, hold music I guess?), it’s an unconventional use of the concept. And a “mechanical reproduction” implies the right to make a copy (as in “copyright”). But any copy made in the streaming process is ephemeral. The state of things is so confusing that many songwriters releasing music on streaming platforms with no publishing administrator don’t know how to collect what’s owed to them.

Since on-demand streaming is the majority of consumption and therefore revenue, it would be nice to have an easy, transparent insight into how the streaming money is divided between master and publishing.

Here’s a very rough breakdown of how a dollar breaks out for a streaming track:

Streaming service retention: $0.30
Master owner (split between label, distributor, artist, producer): +/- $0.50
Publishing (paid for performance and mechanical, more on this below): +/- $0.20

It’s an estimate because it’s hard to know exactly what the publishing percentage is. The current mechanical rate is a little over $0.15. Performance is around $0.04 and $0.05. They aggregate to around $0.20. Since the Spotify split is always $0.30, it’s zero sum between publishing and master. If the publishing payments go up, the master payments go down.

The current mechanical rate for sales of files and physical goods is $0.127. If a download costs a dollar, the rate is 12.7% - meaning the streaming mechanical rate is actually a small improvement. Consider, however, that the longstanding industry standard for sync licensing is 50/50 between the song and the master. If you ask the National Music Publisher’s Association (NMPA) I expect they’d say the 50/50 split should be the model, and perhaps it should. If you ask the RIAA I expect they’d say the streaming mechanical rate should be consistent with the per unit rate.

I’m citing no sources for this, but my understanding has always been that the record label share of sales revenue are larger because it’s a higher-risk business with greater development costs. Record labels and - to an even greater extent - recording artists have to stand behind the costs of making, manufacturing, distributing, and selling the record. The publisher is paid from the first sale. This is still largely the case; however, in many cases the costs are very low - especially compared to the CD era before we had project studios and digital commerce.

Considering the long tail, I don’t find these arguments very compelling. I personally believe the formula should be 50/50 between songs and records across the board as a matter of policy. It’s like AI training - without good data, their music-making algorithms would be useless. Similarly, without a great song, your record is a waste of time. It’s worth paying half the money for a great song. Which would mean it’s worth paying half the money for an average or even bad song. You can’t condition the payments on the substantive creative merit of contributions. Remember that most songs and recordings on streaming services have no market value whatsoever, while a small handful of assets are extremely valuable.

As for me, I accept that I won’t make much money from my Lemonheads cut. It isn’t why I pitched the song and it isn’t why I’m excited. Who knows? Maybe there’s a big sync or it ends up getting radio airplay. That would be a windfall - the expectation is that my half of the publishing money will be primarily from streaming. If it absolutely crushes, I could do OK. But please know it’s the cut itself, being part of a great project, that’s valuable to me. Because I’m not actually a working songwriter; I’m a hobbyist.

I remember a conversation I had with a client around 2012. My client, an iconic, literal hall of fame songwriter in his 60s, complained that illegal streaming was cutting deeply into his earnings. I told him I thought streaming would scale and bring in enough money in a decade to get us back to CD boom numbers. A couple years later, as streaming indeed began to scale, he let me know his statements weren’t getting any better. It turned out the payouts were so low they barely had an impact.

The payouts are better now due to the Music Modernization Act and the rate setting procedures. Better, but still not great. Streaming revenue has gotten the recording business back more or less to CD boom revenue levels, but songwriters aren’t celebrating. It’s a tougher business with less upside when a song blows up. You see more writers per track in mainstream genres with less money flowing through, so that a songwriting credit on a major hit isn’t necessarily life changing.

Now that we’ve seemingly reached a plateau in streaming growth and songwriters have to compete with computers for their cuts, it isn’t the appealing market for creative talent that it used to be. That needs to change. In Nashville there’s a saying: It All Begins with a Song. I’d take it a step further and say it all ends without a song. Without great songs that speak to us on a personal level, music is far less interesting or valuable.

Whatever we need to do to incentivize the best and brightest songwriters to spend lean years honing their craft is worth it. If the industry undervalues and underpays songwriters, potential writers do something more lucrative (like become lawyers) and let the machines writer the li’l ditties for the kids. Screw that. Let the stories be told, in rhyme and melody. This isn’t on the producers, artists, or any other creative individuals. It’s on our business community, advocates, and elected officials to properly value the contributions that are the backbone of the industry.

1. That’s more jargon - you don’t say “I got a cut by Evan Dando.” You say “I got a cut on Evan Dando,” In the songwriter and publishing world, we still say some things like it’s 1962.

2. I’m sticking with the same formula but NOTE that a writer today with a Wallen cut would likely have a way better publishing split than 50/50

3. “Topline” writers write melody and lyrics over an existing track.