Monday, December 17, 2012

Dividing BMI Songwriting Royalties

Dear Rich  So we have a band and we've done most of the formalizing to make it a real company and make sure everyone is taken care of fairly. One of the things we've run into in trying to register our songs with BMI is that it wants the songwriter percentages. We are a four piece and plan to split everything equally once we are profitable (until then, the money we make from the band helps fund the band so we can keep doing band stuff) But as far as songwriters, that generally falls about 80% to one, 20% to another and all four contribute to the music composition. Lyrics are credited to the band name. Again, everyone agrees to this. But BMI wants people names and SS#'s, Tax ID #. You've said in some of your articles that the band can decide to split the royalties however they want, but how does that work from a practical standpoint if BMI wants to send checks to individual band members? Are the members supposed to sign the checks over to the band? Also, it doesn't seem to be an option to register a band as a songwriter. If BMI will only allow songwriters to be individuals, does that mean we have to have all members registered and credited 25% each so that it reflects our equal split band agreement? And then handle it internally (collecting from band members as specified in the band agreement until profitability is reached?) Performance royalties refers to the money collected by performance rights organizations like BMI and ASCAP and paid to songwriters and publishers. It's revenue derived from charging a license fee to businesses -- radio stations, stores, and taverns -- that publicly play your music. As we explain in our book -- Music Law: How to Run Your Band's Business -- even if you set up a system whereby everyone (songwriters and nonwriters) shares equally in song income, it’s still possible that a credited songwriter will receive more money from BMI. That’s because in the case of performance royalties, BMI and ASCAP split the revenue for each song and make separate payments to music publishers and songwriters. In other words, with performance royalties the songwriter’s portion is paid directly to the songwriter and does not pass through the band’s publishing company. Therefore, if a song is a big hit on the radio or in a TV show, a credited songwriter will probably receive more money than a nonsongwriter. It is possible, as you suggest, that your agreement among the band (or between the band and the publisher) could deal with this share. For example, you could create a music publisher, register that with BMI and the publisher would receive half the income. Then, the songwriters getting checks could kick those into the pot as well. Alternatively you could forget the publisher and just have the members contribute their BMI income. These alternatives require some diligence and bookkeeping which is why it's often overlooked in band situations.