Monthly Archives: February 2014

The Music Royalty Guide

Every musician, independent or not, should understand music royalties. Sadly, most don’t. So I’m going to break it down so that you can understand how they effect you, regardless of where you are in your music career.

First, you need to understand the difference between the Songwriter, Publisher, and Recording Artist.

The Songwriter

The Songwriter is the person who actually writes the song – but that’s a loaded statement. Really it is whoever wrote the portion of the music that can be copyrighted. Here in the USA that boils down to the melody and lyrics. You’re not allowed to copyright rhythms (i.e. drum beats) or chords. So if you’re a drummer in a band, and your sole contribution to a song is the drum beat, then you aren’t technically the songwriter. That’s why if you look at the songwriting credits for the Beatles’ songs, you’ll rarely see Ringo or Harrison’s names pop up. But if you’re a drummer, bassist, or rhythm guitarist, you shouldn’t give up and quit. You can always make agreements (or preferably contracts) with your band mates that the band and its songs could not exist without ALL of you, and therefore everyone is credited as a songwriter. That’s what U2 did!

The Publisher

The Publisher is historically the person that pays for said song to be written or recorded. In olden times it was the person who would contract and pay Beethoven or Mozart to write a new piece. In current times the publisher is generally the Record Label, Music Publishing Company, or in the case of an independent artist – themselves.

The Recording Artist

The Recording Artist is the person that actually plays the music on the recording. The drummer, bassist, and rhythm guitarist would fall under this category, regardless of if they are songwriters or not. It’s important to make this distinction because not everyone writes their own music. If you record a cover, you will be the Recording Artist, but not the Songwriter. In the case of a lot of Pop stars, like Rihanna for example, a vast majority of songs are written by someone else. She is just the recording artist.

Now that you understand the 3 parties involved, let’s brief you on the different kinds of royalties.

  1. Mechanical Royalty – This is the royalty paid whenever music is turned into some form of media (CDs, Vinyl, Tape, etc). Whenever someone presses a CD with your song on it, they are required to pay you per CD printed. In the United States there is a compulsory rate of 9.1 cents per song under 5 minutes, or 1.75 cents per minute of songs over 5 minutes. (See the official documentation here) So, if someone presses 1 CD with 1 of your songs that is 3 minutes long, they will owe you 9.1 cents. If they press 1,000 CDs with that song they will owe you $91. If they were to press 1 CD with 1 song of yours that is 8 minutes long they would owe you 14 cents. If they printed 1000 CDs they would owe you $140. Keep in mind this has nothing to do with the sale of the CD. They have to pay this just to print it, it doesn’t matter if the CDs sell or not.
  2. Performance Royalty – This is the royalty paid whenever the recording is performed live or broadcasted. This is, for example, how a radio station pays the artists that they play on air. Often times this is done by paying a “blanket fee” to a Performance Rights Organization (PROs). This allows the radio station to play all the music they want without having to make contracts with every single artist they want to broadcast. In the US, the rate is determined by a one-to-one agreement between the PROs and the entity using the music.
  3. Synchronization Royalty – This is the royalty paid any time a song is synchronized to some other form of media. TV, movies, film, commercials, etc., are all examples of when this would come into play.
  4. Digital Rights Royalty – This is the royalty paid any time a song is used for simulcasting, webcasting, streaming, downloading, and online “on-demand services”. Ex. Pandora, Spotify, Sirius, XM Radio.
  5. Print Royalty – This is the royalty paid anytime a song is printed as sheet music.

Now that you have all of that down, let’s run through an example scenario so you can see how they all come into play.

Imagine a 4 piece band signs a record deal to record and release 1 album under a record label (I’m choosing this situation because it gives a better view of ALL of the parties involved. When you do it independently, you cut out a couple of the mouths being fed by your music). We’re going to imagine that this is an extremely simple contract (which is a rarity in the real world) just to simplify everything.

When the band signs, they will be making an agreement that the record label will act as Publisher on this record and that they will be the Songwriter on any original songs that are recorded. That means that the record label will get a percent of all the royalties you earn. In the music royalty world, royalties add up to 200%. I know it sounds strange, but it’s because the royalties are broken into 100% being the Songwriter share, and 100% being the Publisher share. In reality, each side will get 50% of whatever is made, so don’t let it confuse you.

Each side can break their 100% up however they see fit. If the singer in the band is greedy and doesn’t share, they may be the only credited songwriter, so they will get 100% of the Songwriter share. However, if the band decides to break it up even, each member can get 25% of the songwriter share. Same goes for the publisher side. If the record label has partnered up with someone to fund the recording, they may give a percent of the Publisher share.

The percents can never be moved from one side to the other though. The Songwriter can’t take 150% of the entire 200%. The only way to do this is for someone to be both the Songwriter and Publisher. In the case of most independent bands that do everything themselves, they would actually act as both, so in reality the band would take 100% of the Songwriter royalties and 100% of the Publisher royalties since they are one and the same.

Now, let’s say that the band records an 11-track album in which 10 of the songs are originals, and 1 of the songs is a cover. What this means is that for the 10 original tracks, the band will take home 100% of the Songwriter share and the record label will take 100% of the Publisher share. As for the 1 cover song, if a Beatles song is covered, all the songwriter royalties go to McCartney & Lennon. All the publisher royalties go to whoever was credited as publisher on the original recording.

When the recording is completed, the first step is to print the CDs. In order to print the records, the Mechanical Royalty will have to be paid for the Beatles song that was covered. That’s 9.1 cents per print. It’s also 9.1 cents per digital download of the song/album as well. But let’s say the band were lands a distribution deal with a 3rd party company. The distributor would be required to pay the royalties for the Beatles song plus $0.091 x 10 (the number of originals) x # of printed CDs to the band and record label. If they printed 1,000 CDs, $970 would be paid to the band and record label just for the right to print the CDs. Huzzah!

 

Now the the album is printed, it’s time to start promoting the album. That means some radio airtime. There are 2 different kinds of radio to consider – terrestrial and digital.

 

Terrestrial Radio are your AM/FM stations. As mentioned earlier, all of these stations pay a flat-rate in order to broadcast music all the time. Instead of each radio station having to make an agreement with each and every artist they play on their station, they actually pay the fees to Performance Rights Organizations (PROs). In the US there are 3 – BMI, ASCAP, and SESAC. These 3 PROs collect all the money from all the radio stations and then split it up according to who was played how often, on what station, and at what time. These are Performance Royalties. In order for the band and record label to get paid, they have to register the songs with one of thePROs.

Something to consider about terrestrial radio Performance Royalties – they are ONLY paid to the publisher and songwriter. The record label will get their share every time the song is played. However, if only one member of the band is the Songwriter, he will be the ONLY one that receives money from the airplay. Or let’s say the only song that received any air play on terrestrial stations was the Beatles cover. The band won’t actually receive any money since the Songwriters are McCartney and Lennon!

Digital Radio are things like Pandora, XM, Spotify, YouTube, etc. They function very similar to terrestrial radio in the sense that they have to pay a Performance Royalty to the PROs for all the music they play. All the same rules will apply as before. But in addition to that, they also pay the Digital Rights Royalty. They pay this to organizations like SoundExchange who collect these royalties for the artists. And in this case, there are royalties paid to the Songwriter, Publisher, AND Recording Artist. So no matter who is credited as the songwriter (whether it’s just the singer, the entire band, or Paul McCartney) ANYONE who performed on the song will be entitled to some money every time the song is played on a digital radio station.

If the band has really been making a name for themselves, they may land some movie or TV spots.

Regardless of if the music featured in a TV show or a movie, the songwriter and publisher will receive both Performance and Synchronization royalties. The Performance Royalties function just like with radio – they are negotiated with and paid to PROs who then administer it to the publisher and songwriter every time the song is performed publically. On the other hand, the Synchronization Royalty will be a direct negotiation with the Songwriter/Publisher and the entity using the song. There are a couple of situations where there is a “standard” paid, usually for TV, but there are far too many options to cover. For the sake of not overloading our brains, we’ll just say that the Synchronization Royalty can range from a nominal fee to a massive fee that you could retire on.

Now that the band has become a household name and sold so many albums, someone might decided that they would like to print all the music into a book for fans to read through and learn. Similar to how the Mechanical Royalty works, whoever is printing the book would have to pay a Print Royalty to the Publisher and Songwriter. Typically the rate is somewhere between 8-20& of the suggested retail price, but it can be negotiated since there is no legal standard.

It needs to be known that this is an EXTREMELY brief and concise rundown of the royalties available. There are a lot of factors involved in how you actually get paid, and the reality of a real record contract being as clear and simple as a 100%/100% split is virtually unheard of. But that’s a story for another time.

There is also one more thing I want to point out before concluding. All of the royalties paid here, and all of the potential money that can be earned from them, have NOTHING to do with the actual sale of the albums. Theoretically not a single album could be sold, and all of these royalties could still be earned for the songwriter and publisher. The money made from selling albums has very little to do with royalties, and more to do with the agreement made between the record label and band about how to split the money. And in the case of independent musicians, you just keep it all yourself, no matter how much you sell it for!

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