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Small Business

Take a Chance

Diane Warren, a Grammy-winning songwriter who has composed dozens of top-ten tunes, maximized her earning potential by forgoing a salary and striking out on her own.

You may not have heard of Diane Warren, but you have probably hummed a few of her tunes. About 90 of Warren's songs have climbed the charts to the top ten, including "If I Could Turn Back Time" (performed by Cher), "How Do I Live" (LeAnn Rimes), "Un-break My Heart (Toni Braxton) and, fittingly, "I Could Not Ask for More" (Sara Evans). Warren, 49, collects royalty checks averaging about $10 million a year.

Warren whistles a happy tune now because she protected her right to maximum royalties. To understand her story, you need to understand how the music business works. Publishers buy pop tunes from writers for a song and then sell them to record companies for a lot more. In 1983, after publishers had rejected her pieces for a decade, Warren landed a gig as a writer with publisher Jack White Productions, which paid her a salary in exchange for the royalties on her melodies and lyrics.


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When a few of her ballads, such as "Rhythm of the Night," became hits, it was Jack White Productions that profited. Says Warren, "It was the difference between earning $350 a week and making millions of dollars a year."

In 1986 Warren severed her relationship with Jack White and launched her own publishing company to cut out the middleman and collect full publishing royalties. She ponied up several thousand dollars for an office and an assistant, taking a risk because she wasn't yet established as a hit songwriter and Grammy winner. But her company, Realsongs, received a payment each time someone bought one of her songs, a radio station played one of her songs and a movie included her music on its soundtrack. So her earnings potential became much greater than that of a salaried employee.


Within a year, Warren knew she had made the right decision -- when she framed a copy of her first $1-million check from royalties on the overseas sale of several of her songs. "Before that, the largest check I had received for my music was $500," she says.

Warren has splurged on a home in the Hollywood Hills area of Los Angeles, a beach house and an Aston Martin. But she socks away much of her money in an array of stock-market and real estate investments. Her main retirement strategy is to live on the future income from the roughly 1,600 songs she has composed. Says Warren, "Music is like real estate in that its sales value goes up over time."

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