Steams of Revenue: How Songwriters Make Money

Music is everywhere. You turn on your tv, see a youtube video or turn on the radio and hear a famous artist performing a song. But who makes money when the public hears or sees a performance?

It is a common misperception to think that the artist you see or hear is making all of the money from that song. In the pop world, especially, this is not true. Don’t get me wrong, the famous artist probably has more money than you or I could ever dream of. However, the main revenue streams come from songwriting. Oftentimes, pop stars do not write their own songs. Songwriting for bands or artists can bring in huge amounts of money. The main areas of revenue from songwriting come from mechanical royalties, performance royalties and synchronization licenses.

Suppose you write a song and a major artist (for this post let’s use Justin Timberlake) decides he wants to record your song and put in on his next album. If your song has never been released to the public his label will have to pay you a First Use Mechanical License. This gives Mr. Timberlake the right to be the first person to reproduce and distribute your song. The rate for a First Use is negotiable and varies widely. You have to weigh the exposure of being on Justin Timberlake’s next album vs. your leverage in getting paid. But, keep in mind; this will not be your only source of revenue. Let’s say you and Timberlake’s label settle on $15,000 for the First Use right (this could be and probably is higher or lower).

So, you now have $15,000 in your pocket but cannot be the first one to record and release your own song. That tradeoff is up to you. Let’s assume you think it is worth it. What other sources of revenue streams can you now expect from this song?

First off, for every copy of the song reproduced you should receive 9.1 cents. Usually, this is only paid on each copy sold (digital or physical). So, for every album sold you should received 9.1 cents. If your song happens to be the single or a hit, chances are your song will sell digitally as a single more than the entire album. So, for every 99 cent download you should receive 9.1 cents. If the single or single and album combined sell 1,000,000 you should receive $91,000. Not bad. Not bad at all. Keep in mind that label contracts and tricky accounting can lower these numbers. However, the 9.1 cent rate is set by the government.

Another lucrative source of revenue is from synchronization licenses. Every time a song is placed with a visual (think on a tv show, in a video game or in a movie) the writer and publisher must grant a synchronization license. This is a negotiated rate. A hit movie can pay in the hundreds of thousands of dollars for a theme song or a song that plays in the climax of a movie. A television show will pay less but this difference can be made up in performance royalties.

Did someone say performance royalties? Yes. In addition to getting paid to have your song in a movie or television show you will also receive money each time the tv show airs, the movie is shown outside the U.S. or shown on tv. Lastly, if your song is a single and receives radio airplay or is played on the internet you will receive performance royalties. All of these performance royalties are collected and distributed by performance rights organizations. In the U.S. we have three; ASCAP, BMI and SESAC.

As you can see being a songwriter can be a very lucrative business. You will have access to multiple revenue streams. Think of the writers of the song “Toxic” by Britney Spears. She did not write that song. However, every time it aired on MTV or radio the writers received performance royalties; every time her album sold or someone bought “Toxic” the writers received a mechanical royalty. If anyone wanted to use the song in a video game, movie or tv show , the writers would get paid multiple times. Also, if any cover versions are done the writers would receive mechanical royalties. I really wish I wrote that song.

Protecting yourself as a songwriter is not an easy proposition. Seek counsel if anyone wants to buy your song or if you are going start publishing your own material.

Source: http://lawyer4musicians.com/2010/08/22/steams-of-revenue-how-songwriters-make-money/

The Music Industry Sinks, While P.R.O.s Are Sittin' Pretty

Ever wonder why P.R.O.s (performing rights' organizations) like BMI and ASCAP have steadily rising profits, while the rest of the music industry has lost some 60 percent of its income in recent years? One reason: They embrace new technologies where others scoff or tremble. The same technologies that make it easier to listen to and distribute music often also make it easier to collect royalties on it. So when Napster shows up, BMI cuts a deal with them. Same with Rhapsody. According to BMI President Del Bryant, the deal needn't be all that binding or even all that heavily monetized. They just want in on the ground floor.

The New York Times Sunday mag has a pretty interesting story this week on all that, told from the vantage point of how they track down and (inevitably) collect licensing fees from every hole-in-the-wall bar, venue or beauty parlor that plays their artists' music. But this isn't a tale about labels suing grandmothers and college kids who download illegally. It's about tracking down the lady who runs the Coyote Flats Cafe and Bar in Aguila, Texas, so she'll cough up the $16 a week in fees for the music she pipes in through a karaoke machine, TVs, and CD players.

The story follows Devon Baker, a woman who works out of BMI's Nashville HQ and travels the country trying to get people to pay anywhere from $300 to $9,000 a year to play tunes. (If you know anyone who's come out of the recording industry program at MTSU, you probably know someone who's worked at BMI or in publishing at Sony, scanning in copyright info or tracking down licensing violators on the phone.)

And surprisingly, she isn't as aggressive as you'd imagine: Because BMI has never lost a case they've tried in 51 years, they're able to approach the whole thing more like a chess game in the mail. They'll call, and call back. They'll send letters, maybe drop by. The reason? It's easier to rest easy when you're a little bit ahead of the game. They're like the Netflix of the music industry:

“We’re not about shutting things down,” [Richard Conlon, V.P. of new media at BMI] told me. “We’re about nurturing markets. We don’t want people NOT to use it. We know the market is fractionalizing. You wanna take our music and stream it and have electronic whatevers that play when you stick a chip into something or somebody? Go ahead! Do it! Just pay us!”

http://www.nashvillescene.com/nashvillecream/archives/2010/08/09/the-music-industry-sinks-while-pros-are-sittin-pretty

iSound: Pandora for Up-and-Coming Artists...

The world doesn't need two Pandoras. But just maybe, some room exists for a variation on a theme. That is the thinking behind iSound, a beta-phased newcomer that is creating a Pandora-style service for up-and-coming artists.

Pandora does play deeper tracks and obscure artists, but the emphasis is typically on more familiar content. At New Music Seminar last week, Pandora CEO Joe Kennedy revealed that 90,000 different artists are being played during a typical week, and that just 30 percent of DIY submissions are accepted into the system.

So, does a niche exist for a niche alternative? Currently, iSound is preparing a total relaunch of the concept next week, according to early details shared with Digital Music News. And, the approach means fewer restrictions - including the freedom to endlessly skip through songs. It also opens the ability play the same song over and over again, interactively.

On top of that, iSound encourages artists to upload their content and boasts a catalog of more than 288,000 artists. Registered users stand at 250,000, just a fraction of the 60 million recently disclosed by Pandora. The somewhat rough beta is at iSound.com, for those that want an early peek.

Source: http://www.digitalmusicnews.com/stories/072610isound#23E2J67ZZVZzUl9mjga9pw

Radio Facts Podcast – Interview with Bill Cosby

Mr. Cosby talks about the entertainment business a, his new positive rap project The Cosnarati, and his goals with the group and to create awareness of the issues concerning the black community.

http://radiofacts.com/podcast/2009/11/radio-facts-podast-interview-with-bill-cosby/