Archive | Music Money RSS for this section

5 Royalty Streams Every Indie Artist Should Know

pexels-photo

This post was originally written for and published on Repost Network’s blog.

With the rise of music distributors and digital music aggregators, it has never been easier for an indie artist to release and monetize their music across the global digital music ecosystem. The Digital Music Era has significantly lowered the barriers to entry to the top outlets for music search and discovery; and startup entrepreneurs continue to develop and launch new platforms to innovate search, discovery, sharing, and access.

Today, music fans can easily access music from their favorite artists or discover new artists to fall in love with, pitting major established artists against their up-and-coming indie artist counterparts. And the music industry is changing for the better as a result (the Recording Academy now recognizes music released on free services for GRAMMY Award consideration and Billboard has accepted YouTube and SoundCloud streams for the purpose of charting).

Innovation in technology has made it possible for any indie artist with decent enough production tools and access to the Internet to record and release new music at any time. And with thousands of artists pumping out new music, it is no wonder that the industry has grown to over one million new tracks entering the global music market every month.

Each of these tracks begin earning royalties from its first play on any of the 400+ digital music services and 3,000+ webcasters operating around the world. And all of these royalties, billions of dollars of royalties, flow through a complex network of pipelines into various buckets of royalty collection with the ultimate goal of trickling down to the appropriate music creators and rightsholders. While this sounds straight-forward for a number of reasons this is far from a smooth process; and millions of dollars in royalties are in fact not making its way to the music creators and rightsholders to which they are due.

Part of the reason starts with you, the music creator. It is especially important for independent artists to understand the various income streams that your releases generate and the ways in which you must be setup to collect your royalties.

Here is an awesome infographic created by Future Music Coalition that visually breaks down how creators are compensated. Below it, I highlight five royalty streams that every indie artist should be setup to collect.

FMCmoneyflow

If you plan to release music digitally, you should be aware of and setup to collect all of the royalty streams that your music earns. Your music earns royalties for the use of two different copyrights. The first is the copyright for the composition (song). The second is the copyright for the sound recording (master). These two copyrights earn royalty streams that are collected and paid out by different sources to different income participants, as explained below.

Royalty Stream 1: Performance Royalties for Compositions

With few exceptions, virtually all uses of your composition earns performance royalties. Performance royalties are earned when your composition is played on digital radio-like services (e.g. Pandora), when your composition is accessed and played through on-demand streaming services (e.g. Spotify), and when your composition is performed in venues, bars, and restaurants. All of these companies have performance licenses from one or more performing rights organization (PRO). In the United States, ASCAP, BMI, SESAC, and Global Music Rights are the PROs who issue blanket licenses for the performance rights in compositions to digital music services. In return, these services pay royalties to these PROs. The PROs then pay 50% to the songwriter(s) of the composition and 50% to the publisher(s), in accordance with the publishing splits reported to the PRO by the copyright owners. In order to collect performance royalties, you must join a PRO and register your composition (your songs) and the associated ownership splits (for example, 4 Writers might have equal ownership (25% each) or varied ownership (Writer 1 – 25%, Writer 2 – 50%, Writers 3 – 12.5%, Writer 4 – 12.5%)) to the PRO in a timely manner. One of the reasons music creators and rightholders do not receive the performance royalties that their compositions earn is because they have not joined a PRO or have not registered their songs with their PRO.

Royalty Stream 2: Mechanical Royalties for Compositions

Mechanical royalties are earned when your composition is reproduced and distributed in phonorecords (a medium in which a sound recording is stored). This includes compositions embodied in sound recordings stored in physical formats (CDs, vinyl, cassette), MP3 permanent downloads (e.g. iTunes), and interactive streams (e.g. Spotify). In the digital music sector, streaming services secure mechanical licenses either directly from copyright owners or by utilizing the compulsory license as provided by copyright laws. Regardless of how they secure their mechanical license, the major services pay mechanical royalties to Harry Fox Agency (HFA) and Music Reports Inc. (MRI), who then pay the publishers of the composition. One of the reasons music creators and rightsholders do not receive the mechanical royalties that their compositions earn is because they have not registered their songs with HFA or MRI, who help digital music services secure the mechanical licenses. For unsigned indie artists, this can be much more difficult if you do not have a publisher because HFA only represents eligible publishers who’ve affiliated with them. MRI is a rights administrator and will issue notices to copyright owners if their digital music service clients intend to utilize the copyright owner’s composition in a manner that requires a mechanical license. Spotify pays HFA mechanical royalties for the compositions used in their platform. Amazon Music pays MRI mechanical royalties for the compositions used in their platform. (Note that in the United States, iTunes passes the mechanical royalty to the distributor, who then pays the label. If you’re an unsigned artist, then you receive the income since you are your own label. Outside of the United States, iTunes and on-demand services such as Spotify pay mechanical royalties to a mechanical licensing society in the territory represented by the society. In order to capture these foreign mechanical royalties, a publisher or administrator must affiliate with and register the compositions with the foreign mechanical collection society.)

Royalty Stream 3: Permanent Download Royalties for Masters

A permanent download is generally a sales transaction through a digital retail store (e.g. iTunes). This income is passed along to the distributor, who then pays the label (less any applicable commissions). If you’re unsigned artist, then you receive the income since you are your own label.

Royalty Stream 4: Interactive/On-demand Streaming Royalties for Masters

Just like a permanent download, interactive/on-demand streams (e.g. Spotify) of sound recordings generates master use royalties that is passed along to the distributor, who then pays the label (less any applicable commissions). If you’re unsigned artist, then you receive the royalties since you are your own label.

Royalty Stream 5: Non-Interactive Streaming Royalties for Masters

Unlike a permanent download or interactive/on-demand streams of sound recordings, non-interactive streams are not paid to your distributor. Webcasters and digital services that broadcast recordings over the Internet (e.g. Pandora, iHeart Radio), cable (e.g. Music Choice), and satellite (e.g. SiriusXM) in radio-style programming where the end users/listeners have limited to no control over the selection of music (non-interactive) pay a royalty for the digital performance of sound recordings to SoundExchange. SoundExchange then pays out 45% of the royalties to the featured performers on the recording, 50% to the copyright owner of the master recording, and 5% to a fund for background vocalists and session musicians maintained by AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund. One of the reasons music creators and rightholders do not receive the non-interactive royalties that their masters earn is because they have not joined SoundExchange or have not registered their tracks with their SoundExchange.

When you release music digitally, you should be aware of the various royalty streams that your music earns, where those royalties are collected, and how to claim your earnings. Your distributor is one source of income for two of the royalty streams mentioned. To unlock the rest of your royalties, you’d need a capable publisher and a record company or you’d need to stay on top of the administration yourself.

A great way to keep track of all of these royalties is a service we recommend called TuneRegistry.

TuneRegistry is an all-in-one music rights and metadata management platform for the independent music community. Easily organize and store your song details, recording metadata, credits and ownership splits, and release information in your TuneRegistry account. It’s your robust music catalog manager that’s accessible online, so you don’t have to worry about tracking down emails, storing through documents in various desktop and cloud folders, losing collaborator contact information, or any of the other messy issues that most indie artists face.

TuneRegistry is your one-stop source for keeping your music catalog in check.

The advantage of TuneRegistry over other catalog management systems is that we’ve integrated the registrations process directly to ASCAP, BMI, SESAC, Music Reports, SoundExchange, and many more. Save time, reduce errors, and unlock royalties with our integrated registrations module. We make it super easy to get your music registrations to the organizations and data services who need it.

Why United States Music Creators Earn Fewer Royalty Streams

guitar-classical-guitar-acoustic-guitar-electric-guitar

This post was originally written for and published on Tradiio’s blog.

Did you know that music creators in the United States earn fewer royalty streams than their international counterparts?

In the United States, there is no national performance right in sound recordings. The US Copyright Act sets out several rights for compositions (songs), such as the right to reproduce and distribute compositions in phonorecords, but thanks to a combination of outdated rules and tough opposition from lobbying organizations that represent broadcasters, the law does not include a performance right for sound recordings.

This means that whenever a recording is performed on AM/FM radio in the US, broadcasters are not required to pay artists or record companies any royalties from the advertisements revenue that they earn on the back of those performances. Considering that there are over 15,000 radio stations across the US performing hundreds of thousands of plays of music each week, US music creators and labels are potentially missing out on millions of dollars in royalties.

Virtually all other developed nations outside of the US have a performance right in sound recordings, which is known as neighbouring rights. When a US artist’s recording is performed on BBC in the UK, it earns neighbouring rights royalties for the US artist.

The fact that recordings earn royalties outside of the US is good news, right? Not so much.

Because the US does not have a national performance right in sound recordings (no neighbouring right), no recording earns these royalties. This includes recordings by artists from countries that do recognize neighbouring rights. So yeah, insert your favorite European band who gets high rotation on US radio.

As a result, the countries who do recognize neighbouring rights do not send the neighbouring rights royalties generated from the performance of recordings by US artists in their territory back to any of the US music rights organizations. They keep it or distribute it to the artists and labels in their territory.

Generally speaking, most indie artists who earn neighbouring rights royalties outside of the US will never see this royalty stream unless the US government makes a change to copyright law. Although there are some small companies who try to capture neighbouring rights royalties on behalf of US music creators, they tend to focus on a select roster of more established artists, leaving up-and-coming indie artists with no support.

So what now?

Well, now that you know US artists earn less royalty streams from their music than their international counterparts, it is really important to maximize the royalty streams that they do earn.

Many independent artists miss out on royalties that their music does earn because they do not properly register their songs, recordings, and releases with the various music rights organizations and licensing agencies who collect and distribute royalties. This is understandable, as it can be a pain to keep up with the many different registration processes across a number of organizations (ASCAP, BMI, SESAC, Music Reports, Harry Fox Agency, SoundExchange, the Alliance for Artists and Record Companies, and more). It can be burdensome, time consuming, and often confusing to properly register a complete album. However, missing just one registration or filing registrations late can result in lost royalties, or even disputes over ownership.

This is where TuneRegistry steps in to help.

TuneRegistry is an all-in-one music rights and metadata management platform for the independent music community. Easily organize and store your song details, recording metadata, credits and ownership splits, and release information in your TuneRegistry account. It’s your robust music catalog manager that’s accessible online, so you don’t have to worry about tracking down emails, storing through documents in various desktop and cloud folders, losing collaborator contact information, or any of the other messy issues that most indie artists face.

TuneRegistry is your one-stop source for keeping your music catalog in check.

The advantage of TuneRegistry over other catalog management systems is that we’ve integrated the registrations process directly to ASCAP, BMI, SESAC, Music Reports, SoundExchange, and many more. Save time, reduce errors, and unlock royalties with our integrated registrations module. We make it super easy to get your music registrations to the organizations and data services who need it.

ETLA, The Research Institute Of The Finnish Economy, Publishes Report On State Of Digital Music Infrastructure – Calls For Transparency And Addresses “Black Box” Issues

etla-digital-music-industry-background-synthesis

I had the honor of being interviewed by researcher and author, Derek Sellin, for his industry report “Digital Music Industry – Background Synthesis” for ETLA Working Papers No. 48, published by Elinkeinoelaman Tutkimuslaitos – The Research Institute of the Finnish Economy.

Black boxes materialize for many reasons, including but not limited to: the inability to identify rights holders despite payments made for the use of their compositions; the lengthy time required for filing domestic and ultimately international copyrights, often begun only when a recording is actually released; multiple claims for the same rights exceeding 100% of ownership, resulting in indefinite disputes; international collaborations with less than all creators asserting their rights; international legal inconsistencies regarding what type of performances result in payments (most visible in the fact that radio play does not generate royalties for recording artists in the United States); and the slow and often manual processes to report usage and clear payments under international reciprocal agreements. – Dae Bogan

You can download the report at https://www.etla.fi/en/publications/digital-music-industry-background-synthesis/.

About ETLA
The Research Institute of the Finnish Economy (Etla) is engaged in applied economic research with emphasis on topics that are important from the Finnish point of view. The main focus is on issues that relate to productivity and drivers of its growth, to the functioning of the labour market, as well as to challenges in maintaining a balanced macro economy including sound public finances. Etla monitors economic development, compiles forecasts as well as assesses economic policy and comments on it.

Etla is a private non-profit organisation. Its operations are backed by the supporting association, the members of which comprise the Confederation of Finnish Industries and the Confederation of Finnish Industry and Employers (TT) Fund. The funding from the background organisations covers more than a third of the institute’s budget and forms a solid base for its operations. Read more.

The Elephant In The Room: Unclaimed / Undistributed Royalties

bn-bx232_0313bi_p_20140313163924

In the United States, there are several “unclaimed / undistributed royalties” funds held by music rights organizations. These funds collectively consist of tens of millions of dollars in undistributed earnings generated by the use of music within the greater music industry, from legislative appropriations imposed on manufacturers of audio home recording media, and from agreements with foreign entities.

Some of the organizations (SoundExchange, AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund, Film Musicians Secondary Markets Fund, Live Television Videotape Supplemental Market Fund, and although this is not royalties per say, the US Copyright Office has a Section 115 NOIs Filing database that can be used to track down missing mechanical royalties) have created public databases so that music creators can search to see if they have royalties sitting in these funds. However, the biggest funds do not have public databases and often music creators can not be reached by any of these funds to be notified that they have unclaimed royalties.

I am working on a side project called RoyaltyClaim.com to address this issue of unclaimed / undistributed royalties. The goal is to get each of these funds to join the RoyaltyClaim.com Disclosure Program and to encourage them to submit very basic information to us on a periodic basis regarding the income participants who are due royalties. We will then aggregate these disclosures and maintain one searchable public database accessible for free by music creators and income participants.

By aggregating these lists of unclaimed / undistributed royalties information, we can aid income participants — including songwriters, recording artists, publishers, labels, musicians, background vocalists, composers, and beneficiaries (in the event of musician parents or spousals who passed away, but their music still generates royalties) — in locating and claiming their monies.

If you are a music creator, you should signup at RoyaltyClaim.com to be notified of our launch. We are currently in conversations with the various funds to get them to cooperate and help creators and their families.

Major Labels Sue Music Tech Startup Aurous In First Week Of Launch

AUROUS

Here we go again. Music Business Worldwide reports that “The RIAA — on behalf of UMG, Sony Music Entertainment, Warner Bros. Records, Atlantic and Capitol Records — has today filed a lawsuit against Aurous and its founder Andrew Sampson for what it calls ‘willful and egregious copyright infringement’.”

The music app, being called the “the new Grooveshark” (Grooveshark shut down earlier this year after similar lawsuits was filed against the company), just launched in public Alpha this week.

Aurous’ founder, Andrew Sampson, maintains that the website is a search engine that enables Internet users to search BitTorrent networks to find and stream content. However, the RIAA argues that the website directly targets recorded music from overseas pirate sites, effectively enabling consumers to infringe on the copyrights of record labels.

Whether Sampson intended on his platform to illegally access and stream recorded music or if he truly believed he built a legitimate consumer app detached from piracy, like many other uninformed tech developers out there, he has been caught in what could be a very expensive and crushing legal battle informed by copyright law.

I spend a great deal of time consulting with entrepreneurs who have cool ideas to develop new music apps, services, and platforms. However, the challenge that many of them face is having a limited understanding of the music publishing and recording landscape, from the perspective of a music tech startup. With the help of a music industry professional, founders gain insight on where products and services may infringe on the intellectual property rights of others. I’ve helped numerous startup entrepreneurs create products, formulate business models, and deliver value, all while respecting and complying with the intellectual property rights of third-party rights owners.

Read more about this story at Music Business Worldwide.

On Katy Perry’s ‘Prism’ Lackluster Sales And The Luxury Commodity That Is The Album

“The album is dying in front of our eyes,” says music analyst and critic Bob Lefsetz. He asks, “what kind of screwed up world do we live in where Katy Perry’s new album Prism sells only 287,000 copies in its debut?” and answers, “One in which everybody’s interested in the single, and no one’s got time to sit and hear your hour-plus statement.”  Read More…

Digital Music: Can Streaming Save Music Sales?

In Sweden, South Korea, Norway, and Finland, more music is streamed than downloaded. In fact, 91% of music income in Sweden comes from streaming (that’s because Spotify is a Swedish company that was founded in Sweden). With the launch of iTunes Radio and the anticipated launch of a YouTube streaming service, we wonder, “can streaming save music sales?” See what this piece by Maddy Savage of BBC News has to say about that.

Demystifying The Music Industry: What’s The Difference Between ASCAP/BMI/SESAC and SoundExchange?

I received an email this morning from a reader who had read my piece, “Demystifying The Music Industry: What’s This About Public Performance Rights?.” He asked, “If SoundExchange was designated by the Library of Congress as the sole PRO to administer public performance licenses and also collect public performances fees for Sound Recording Company Owners, then why do artists still utilize the services provided by the other 3 US PROs (ASCAP / BMI / SESAC) – is [SoundExchange] not sufficient by itself?”

A lot of indie artists are confused about the difference between ASCAP, BMI, SESAC and SoundExchange. I’ll attempt to break down the most important differences between these groups and elaborate towards the end about other considerations and other royalty collection entities. Feel free to comment with any questions (or corrections).  Read More…

%d bloggers like this: