Music publishing is perhaps the most complex and little understood sectors in the music business. Most folks grasp that record labels own so-called “master recordings,” but many don’t realize there’s a whole ‘nother copyright in music.

Here’s an easy way to think of it: the sound copyright (p) is music captured on tape or hard drive, which belongs to the performer until those rights are transferred to a label. You can think of the publishing copyright (c) as the underlying composition and lyrics — this belongs to the songwriter until they transfer those rights to a publisher. Artists historically have transferred copyrights in exchange for “advance” cash or to manufacture, distribute, promote, license and otherwise “exploit” their creations. (Although now, there are far more options to do any of the above independently.)

Today, we’re focusing on the publishing copyright. When a piece of music is exploited with permission, it creates revenue that (hopefully) goes back to the songwriter. (For more information on the different streams, check out our Artist Revenue Streams site.)

Historically, publishing has offered many different ways to exploit a song. One that doesn’t get talked about much is covers. Under US copyright law, you are allowed to record your own version of a tune provided you get a mechanical license. This license allows you to record and distribute a song for which you don’t control the underlying composition. Getting permission isn’t all that difficult: there is a “compulsory mechanical license” that will allow you to cover pretty much any song, provided you pay the rate established by the government. This is currently 9.1 cents for physical pressings as well as digital. One way to do this is through the Harry Fox Agency; newer online services like Limelight make the process relatively inexpensive and hassle-free.

But that doesn’t mean that every cover you come across is licensed. The arrival of user-generated video platforms like YouTube initially presented a problem for publishers and songwriters who saw their works being performed without a means of compensation. Over time, deals were struck between publishers and parent company Google, and now everything’s legit. Right?

Well, we’re getting there. YouTube’s massive growth has attracted new businesses, such as “Multichannel Networks” (MCNs), who act sort of like middlemen between advertisers, user-generated content creators and the platform. Problem is, when MCNs “broadcast” cover songs, they aren’t necessarily “covered” by existing YouTube mechanical license agreements with publishers.

Entertainment attorney Chris Castle just ran an interview with David Kokakis, Senior Vice President, Legal Affairs/Business Development, Universal Music Publishing Group, which just entered a deal with two MCNs. Here’s a snippet of the conversation:

MTP: Universal Music Publishing has deals with YouTube and now also a deal with two MCNs for plays on YouTube. What’s the difference between licensing songs to YouTube and licensing songs to an MCN?

David Kokakis: I will explain the context in which the deals arose in order to highlight the difference. Our deal with YouTube covers certain types of user-generated content (UGC) uploaded to the platform. This UGC, when claimed and monetized by MCNs, fell outside the scope of our YouTube deal (videos created by or in partnership with MCNs were also unlicensed). This presented a unique problem because content that was previously licensed by us under our YouTube deal was suddenly unauthorized when that same content was curated by an MCN. We recognized that certain MCNs, such as Maker and Fullscreen, had established themselves as influential players within YouTube’s ecosystem and that they could help promote our catalog and generate higher advertising revenue for our writers. Consequently, instead of pulling back rights and forcing our content out of the networks controlled by the MCNs, we worked with them to create a new licensing model that protects and fairly compensates our writers, but also gives the MCNs and their artists freedom to create. We believe that collaborating with the MCNs and their artists will prove to be the best way to maximize growth for all involved.

It’s important to note that the deal between Universal Publishing and two of the bigger MCNs, Maker Studios and Fullscreen, is NOT an agreement between all publishers and all multichannels on YouTube. Still, we see it as an example of how rights and compensation on contemporary platforms are getting sorted. These deals sometimes take a while to hammer out, but we’d far rather see a licensing solution than a lawsuit — especially considering how significant YouTube and other UGC services are becoming in breaking new acts.

We’ll be tracking.