For a long time, many traditional music industry revenue sources were closed off to the independent artists, but these channels are starting to open up, providing some exciting new income sources for the DIY artists out there - as long as you know how to get them.
Guest post by Randy Chertkow and Jason Feehanof the Disc Makers Blog
Music revenue streams that were once only available to the traditional music industry are now available to independent musicians — if you know how to collect them.
The classic music roles of songwriter, publisher, artist, producer, and record label — as defined by the traditional music industry — still drive the income streams you can make from your music today. What’s confusing for most artists is that each of these roles and the income coming from them used to be handled by separate people (or organizations). But today, so many active musicians are independent, so while the music world continues to talk about these as separate roles, each one is likely handled by the same person: you.
The good news is each role — songwriter, publisher, artist, producer, and label — has different revenue streams associated with it. So, to the extent that you fill most of the roles, you have more money coming your way. The goal of this two-part series is to make you aware of the revenue streams each role generates so you can get everything you’re entitled to. In part one, covered here, we’re going to dive into the roles (and revenue) that most musicians are familiar with: songwriter and artist.
Here are the first two key roles and the revenue streams you’re entitled to if you tap them:
1. Songwriter revenue streams
As a songwriter, you own the copyright for the composition which entitles you to many rights, fees, and income streams. Whenever you can, you should take advantage of the following:
First use rights
Copyright law gives you the right to decide who will be the first person or organization who’ll license your composition and publish it for the first time. If you do it yourself, this doesn’t generate any fees, but if you work with a label or other organization, you can require that they pay you, the songwriter, a fee to get the exclusive first use right to publish your songs on an album. Plus, you have the right to refuse if you’re not satisfied with their offer. You can charge whatever the market will bear, but of course, the label or organization will try to negotiate as low of a fee as possible or even ask you to give this right away for free, which we don’t advise.
Once you’ve released the song officially to the public, it’s considered “published” and the law gives anyone the ability to cover, broadcast, or stream your composition without your permission as long as they pay you a “compulsory” mechanical and performance license. Although they do generate royalties for you, it’s usually not as much as a first-use fee for your composition. Unlike royalties, this fee is paid directly by labels and music organizations.
Composition mechanical royalties
In the United States, as a songwriter, you can’t stop other artists from covering your published music, but you are entitled to a royalty each time they make a copy of a sound recording with your composition on it. This means that every CD, DVD, vinyl record, digital download, or any other recording of your song generates a royalty set by a US standards board — currently at $0.091 for a song that’s five minutes or less. You can collect this yourself, or have your publisher do it (more on that in the next article), or you can use mechanical royalty agencies like Harry Fox to collect this on your behalf.
Composition performance royalties
You’re owed royalties every time your song is played on the radio, TV, in live performances at music venues, or streamed. These are paid to you by the users and venues of your music, but instead of paying you directly, they pay Performance Rights Organizations (“PRO”) like ASCAP, BMI, or SESAC. These PROs then pay you a share of the royalties based on the number of performances of your music. This is determined by surveying these venues, radio stations, and other users to see when and how often your music is played. You can also submit set lists of your own live performances of your music at venues since that counts as a performance as well.
Sheet music, print, and publication royalties
Any time your song is made into sheet music or if any of your lyrics are published in print or online, you’re owed money by whoever is publishing your lyrics. This is usually paid by sheet music publishers, which are increasingly digital in today’s world; however, this can also be paid by your label if they include lyrics in any physical or digital product.
Composition synchronization fees
You can license your music for synchronization fees for audio-visual works such as TV, video, advertisements, movie trailers, or films. This also includes when these works are pressed to DVD, Blu-Ray, or interactive video streaming services such as Netflix, Hulu, or Amazon Prime. Note that these organizations still need to pay for a composition synchronization license even if they have another artist cover the song. There is no upper limit on what you can charge, and if you don’t grant them a license, they have no right to use the music like the law allows for performing cover songs. To boost your chances of getting your sound recording placed, get to know music supervisors and offer your music to them, or work with services like CD Baby Licensing, which make your music available to music supervisors. This synchronization fee is paid by whoever is producing the audiovisual work.
Composition transcription fee
Any time your song is used in a terrestrial radio commercial or advertisement, you are owed money. This is usually paid to you by whoever is producing the commercial.
Any time someone wants to use your composition in some way use not listed above, such as for a toy, greeting card, app, singing fish, etc., you are owed money. This is paid to you by the company or manufacturer of the product using your composition.
2. Artist revenue streams
As the artist who performs the songwriter’s composition, you can tap these revenue streams:
Sound recording performance royalties
When a song you performed is streamed on a non-interactive streaming service, such as Pandora or Spotify Radio, you’re owed money. This is paid to you by a special PRO called SoundExchange, but only if you’re registered with them as a “Featured Performer” and you’ve registered the song so they know which songs to look out for and who to pay.
Fees for playing live or recording
Any time you perform live or record in the studio, you can make money. This revenue stream is based on the time and skill you bring to record or play live. When playing live, you can get paid to be a backing musician for a band, and you’d usually be paid on a per-performance basis. If you book your own shows, the venue usually pays you — either a set fee or a percentage based on ticket sales or the take at the door.
For a recording, if a label is involved, you may get paid by the recording artist who may have received an advance from the label to pay studio musicians. When a band, artist, or music organization hires you to record in the studio, you are usually paid a fixed fee and the recording is a work-for-hire (meaning you don’t get any copyright ownership in the composition or recording.) But some artists will ask you to work for free or for very low fees and offer to add you to the songwriting credits for a percentage of the royalties. Head here for free songwriter and sound recording split sheets.
In part two of this series, we’ll tackle the composition and sound recording revenue streams that labels, producers, and publishers can tap. Many artists make the mistake of skipping these. But they’re just as easy to register for, which is good since if you’re the label, producer, and publisher, you can be collecting this income as well. Stay tuned.
To get these income streams, you need to register with each collection organization associated with the royalties that are mentioned here. We cover the 14 registrations and all the steps you should take before you release your music into the world in our book, Making Money With Music.
Authors of the critically-acclaimed modern classic, The Indie Band Survival Guide, Billboard Magazine called Randy Chertkow and Jason Feehan “the ideal mentors for aspiring indie musicians who want to navigate an ever-changing music industry.” Their latest book, Making Money With Music (Macmillan) and free Making Money With Music Newsletter, help all musicians — from startups to pros — build a sustainable music business so you can make money in today’s tech-driven music environment.