Why United States Music Creators Earn Fewer Royalty Streams
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(songs), such as the right to reproduce and distribute compositions in phonorecords, but thanks to a combination of outdated rules and tough opposition from lobbying organizations that represent broadcasters, the law does not include a performance right for sound recordings.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.
A Primer On Music Publishing, Rights Splits, And Royalties For Confused Artist Managers
I recently assisted an artist manager with a post-release dispute between his client (DJ/producer) and their guest artists on the track.
Here’s a quick primer for new managers who may not be 100% clear on how copyright & publishing work/relate:
1. There are two (2) separate copyrights: the composition (song) and the sound recording (master).
2. There are four (4) types of income participants: songwriter and publisher for songs (we call this “writer’s share” and “publisher’s share”) / artists and record companies for masters. In the event a writer is not signed to a publisher, he/she owns the publisher share of income. In the event an artist is not signed to a record label, he/she owns what would be the record company share of income (however, if you’re working with a production company, they could own these rights depending on your production agreement).
3. COMPOSITION: Generally, the songwriter and publisher split is 50-50 (this proportion is represented in percentages as 50%/50% (most of the publishing world) and 100%/100% (specific to BMI), but it is the same proportion). American Society of Composers, Authors & Publishers (ASCAP), Broadcast Music, Inc. (BMI), SESAC, and Global Music Rights (GMR) collect and pay out performance royalties to songwriters and publishers. Harry Fox Agency and Music Reports, Inc. collect and pay out mechanical royalties to publishers (if you rep a writer who does not have a publisher, you may be missing out on mechanical royalties in the U.S. and overseas). Synchronization (placing music in film & TV) is a license that is negotiated between content producer and publisher (or you as the manager repping a songwriter). The content producer pays an upfront synch fee and then the performance generates performance royalties on the backend once it is has been distributed/broadcast (unless it’s a movie in U.S. movie theaters or DVDs; in which case you should negotiate a higher upfront synch fee since the U.S. does not have a performance right for music performed in movie theaters). There are more royalties, but that’s a primer.
Also Read: Demystifying The Music Industry: What’s The Difference Between ASCAP/BMI/SESAC and SoundExchange?
4. MASTER: Generally, the artist and record company split income based on the terms of a recording contract. The exception is neighbouring rights, hometapping/private copy, and DART royalties. All of these royalties are collected and paid out by agencies directly to the artist and record company. SoundExchange pays out digital performance royalties for non-interactive Internet services (e.g. Pandora), satellite (e.g. SiriusXM), cable (e,g. Music Choice), and over 2,500 other webcasters (e.g. iHeart Radio and Slacker). SoundExchange is our only version of “neighbouring rights” in the U.S. SoundExchange pays 45% to the artist, 50% to the record company, and 5% to background vocalists and session musicians via AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund. Digital services pay master streaming royalties directly to your distributor/aggregator. There is a fund for hometapping/private copy and DART royalties paid out by Alliance of Artists and Recording Companies to artists (50%) and record companies (50%) because, among other reasons, in some countries (like Japan and Netherlands), music is rented much in the way we rent DVDs. Overseas, masters also earn neighbouring rights royalties (performance of masters on radio, TV, movies, etc.). The only way to capture these royalties is to sign up with a neighboring rights agency like Kobalt Music or Symphonic Distribution.
Now that you have a premier, what you need to make sure to do for EVERY song released is to spell out in the contract the COMPOSITION/SONG SPLITS and the MASTER OWNERSHIP SPLITS.
If you do a split sheet with guest artists on a song, you’re only covering the composition, unless you have some addendum agreement attached that says the splits will also be applied to the master sound recording. Otherwise, you can have two different sets of splits; one set of splits for the composition (the songwriters and publishers) and a second set of splits for the master (the featured performers and the record company/master owner(s)).
SCENARIO 1: EDM DJ/producer produces a track and invites a guest artist to lay down vocals. If producer composed the track and artist wrote the lyrics, then they’ll all have a percentage on the COMPOSITION/SONG split sheet. If producer wrote all of the lyrics, then he/she will own 100% of the COMPOSITION/SONG. Now, the master recording has a different split. The guest artist is effectively the featured performer on the MASTER, so he/she would be allocated the 45% featured artist share of SoundExchange royalties and the 50% artist share of AARC royalties. The copyright owner in the master (label or individual) would receive the 50% copyright owner share of SoundExchange royalties and 50% record company share of AARC royalties. In order for the producer to receive a piece of the SoundExchange royalties, you’d need to include the allocation in your agreement and have the ARTIST sign a Letter of Direction, which you’ll submit to SoundExchange (join the Creative Affiliate Program to expedite this). This LOD will split the “featured performer share” between the Artist and Producer. (Note: These splits have nothing to do with sales and master streaming royalties).
SCENARIO 2: A five member band put out a new song. Only two members wrote the song, but all five members performed on the recording. The two writers would split the COMPOSITION/SONG ownership, and each of the five members will receive a share of the featured artist share of SoundExchange royalties. Master sales/streaming royalties will have a different split.
I can go on and on.
The point is, there are 4 buckets in the music industry when it comes to copyright/publishing:
- Bucket 1: Writer/Composer/Lyricist
- Bucket 2: Publisher
- Bucket 3: Artist
- Bucket 4: Master Owner/Record Company
Each of these buckets receive their OWN income streams, and most music rights organizations and royalty collection agencies will pay one or two of these buckets DIRECTLY based on the splits that you provide when you register the songs/tracks to the entities.
This is why it is imperative to #1 have these splits spelled out and agreed upon on paper prior to release and #2 register the songs/tracks with ALL entities BEFORE release.
Obviously, TuneRegistry is the only product on the market designed to help you with this at an indie artist price point.
TuneRegistry presents “Rights & Metadata in the Evolving Digital Music Space” #SXTuneRegistry #SXMetadata #SXSW
TuneRegistry presents “Rights & Metadata in the Evolving Digital Music Space” http://schedule.sxsw.com/events/PP62361
#SXTuneRegistry #SXMetadata #SXSW
ETLA, The Research Institute Of The Finnish Economy, Publishes Report On State Of Digital Music Infrastructure – Calls For Transparency And Addresses “Black Box” Issues
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.
[VIDEO] Independent Music Industry Conference Panel Live Video
If you missed the inaugural Independent Music Industry Conference, produced by Mike Ziemer, producer of the So What Music Festival, you missed a very cool and informative boutique event. But, don’t worry! Below are the live videos from the Record Label panel and the Music + Technology panel, both moderated by me.
Record Label Panel
Music + Technology Panel
If you can’t view this video, click here.
The Elephant In The Room: Unclaimed / Undistributed Royalties
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.
Breaking Bread, Giving Bread Crumbs: The Challenge Facing Beyoncé, Drake, And 150 Other People
Between Beyoncé’s “Lemonade” and Drake’s “Views” albums, there are over 150 writers and producers credited across their combined 32 tracks.
I can only imagine the music compensation nightmare that will ensue over the next 12 months as streaming, DPD, and airplay royalty checks start to go out to the multi-national team of creators and rights holders.
Who is responsible for ensuring the accuracy of rights holder information across all tracks? Who is checking that digital music services have complete metadata to match sound recordings to their underlying compositions? Who is accounting to the background vocalists and session musicians?
Did every producer and engineer secure letter of directions from Beyoncé and Drake to properly claim a portion of Pandora payouts? Who is looking after the contributors who do not have multinational publishers? Will they capture their piece of neighboring rights, DART royalties, or Spotify mechanicals?
Who will lose out due to inefficiencies? Who will have money left on the table due to an inability to properly claim and collect?
These are the questions that we ask ourselves at TuneRegistry and why we’ve built the next-generation music rights & metadata management platform to empower creators and rights holders.
Dae Bogan’s Music Business Lecture Slides
I am slowly, but surely, adding more content to my SlideShare page. Check it out for lecture slides on music marketing & music publishing.
Music Tech Startups Must Deal With United State’s Broken Music Licensing System
On behalf of my client, I spent the week conducting conference calls and long email exchanges with ASCAP, BMI, SESAC, The Harry Fox Agency, National Music Publishers Association, Association of Independent Music Publishers, Crunch Digital, We Are The Hits, Tresona Music, and Audible Magic securing public performance licenses, obtaining synchronization licensing information, obtaining copyright identification service & royalty administration information for their UGC video hosting platform.
I Saw Great Startups @SFMusicTech, But They Have A Lot To Learn About The Music Business
What I learned (or confirmed, rather) is that there is a HUGE need to streamline and make efficient the process of securing synch licenses, a HUGE need to standardized/equalize deal structures between labels and digital service providers vs. publishers and digital service providers, and a HUGE opportunity for a collective-bargaining startup to secure pass-through licenses on behalf of many music tech startups, and we should consider making some forms of synch licensing compulsory.
Nevertheless, as long as the music industry is slow to innovate in how it deals with digital startups, there will continue to be confusion and frustration among all stakeholders and work for me to do as a consultant.
[Via Hypebot] I Saw Great Startups @SFMusicTech, But They Have A Lot To Learn About The Music Business
I had the pleasure of attending this year’s SF Music Tech Summit and met several smart, creative, and big-thinking founders of a wide variety of music tech startups. Everyone I met with seemed excited and energetic about what their teams are working on and fully committed to making some noise at the summit and beyond.
I set down with about a dozen founders to gain insight into what they’re gearing up to present to the world (or at least the music industry) and what, if any, trends I could uncover. What I learned about their products/services was interesting, cool, and amazing even; but there was a more important theme that manifested at the summit that every music tech startup founder should know. Read about it on Hypebot.
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