By Justin Sanders
If you are a musician or a composer, you probably have a basic understanding of how one makes money in your profession. However, as one very successful professional musician once said, “The times they are a-changing.” The good news is that music revenue is rising again in the age of streaming, following years of recession in the wake of Napster. The bad news is that this fresh infusion of cash is splintered across a myriad of new and complicated music delivery systems that aspiring musicians must keep abreast of to be successful.
Fortunately, CreativeFuture is here to help with “How to Make Money with Music,” a two-part round-up of the different revenue streams available to the modern musician. What follows is Part 1, wherein we break down how musicians can earn a living by performing music. In Part 2, we’ll discuss where the money comes from for songwriting.
(Note that we are not covering adjacent earnings opportunities such as teaching and merchandising – even if selling swag can be quite lucrative – because we want to focus solely on the purest dream of every aspiring musician: simply creating and performing music!)
Before we get too deep into the specific revenue streams available to performers, let’s get familiar with a very important phrase: “master recording.”
The master recording, as you might expect, is the original recording of a track on which the performer has appeared. Whoever owns the master rights to the track receives the money owed when it is played out in the world.
If you are a performer who signed with a label to make your recordings, chances are they own the master rights. If you are an independent performer who has made your own recordings, you hopefully own the master rights yourself.
How Recordings Reap Revenue
Record Label Advances: If a recording artist signs a deal with their label, they receive an advance, which generally includes fees for the actual production of the album, as well as marketing and other expenses. The ensuing album(s) often must then earn this money back in sales before the artist can start collecting another extremely important revenue stream: royalties.
Record Sales Royalties: Along with advances, album sales royalties make up the classic money-making model for performers throughout the long, semi-illustrious history of the recording industry. Simply put, the artist’s songs or albums sell to audiences and the artist gets a portion of the proceeds.
These days, of course, music can be sold at retail stores as part of a physical CD or other product, or as a digital download on an online service like iTunes.
If the artist is signed to a music label, the percentage they receive from each digital song or physical album sold will vary based on their contract. In most contracts between an artist and a major label, the artist receives somewhere between 10% and 20% of all sales – the label keeps the rest because it must recoup what is has spent on producing and marketing the recording, as well as turn a profit.
If the artist is independent (unsigned), then their cut of sales will be greater, percentage-wise, because there is no label financing the creation and distribution of the recording. Independent artists must cover these costs themselves. Their sales may also be diminished because they do not benefit from a major label’s powerful marketing arm.
To that end, many independent artists funnel their sales through a distribution company such as CD Baby or Bandcamp, which help sell music in both the physical and digital realms. These direct-to-artist services will also take their cut from the proceeds, but it will be smaller than that of a label. Bandcamp, for instance, keeps 10-15% of all sales (plus a processing fee), with the remainder going to the artist.
Interactive Streaming Royalties: Now we head into the murkier waters of revenue in the digital age – starting with interactive streaming royalties.
Why did we just italicize “interactive”? Because it is important, so listen up.
When a listener on a streaming service such as Spotify or Apple Music can control their listening experience – by selecting a given track on demand, rewinding, fast-forwarding, and so on – it is considered “interactive.”
The money earned from each interactive stream of a track then goes to the given artist’s label, which takes its previously agreed-upon cut before paying the artist. If the artist is independent, they can, once again, register their music with a distribution company such as CD Baby or Bandcamp, which will handle collecting and paying interactive streaming royalties.
On the flipside of interactive streaming royalties, lies their counterpart…
Non-Interactive Streaming Royalties: Look there, we did it again with the italics.
“Non-interactive” is a very boring-sounding term made more obtuse by the fact you might also see this form of payment referred to as “digital performance royalties.” What both these phrases mean is that the listener streams, but does not control the listening experience, as on streaming radio services such as Pandora, Sirius XM, or others.
To collect non-interactive streaming royalties, the artist must have their music registered with yet another, different performing arts organization: SoundExchange– the only organization in the U.S. that collects artist royalties for non-interactive digital song play.
YouTube: The world’s largest streaming platform has a whole payment system unto itself – and one that is stupidly complicated and historically problematic for musicians.
If a video gets uploaded to YouTube that features a master recording of a song, the owner of the recording is eligible to receive a portion of the ad revenue generated whenever that video gets played. It doesn’t matter if the video was uploaded by the owner themselves or someone else, or whether the song in question accompanies a music video, a clip from a movie, or footage of a man falling off a horse onto a pile of kittens.
YouTube’s Content ID system tracks these plays and pays out accordingly. If you are an unsigned artist, there is a good chance your master recordings are not in the Content ID database. To get them there, you will need to register your songs with a collection agency such as AdRev, Exploration, or Songtrust, which will track and collect your YouTube performing royalties. They will, of course, take a cut for this service – sometimes as much as 50%.
You might not feel like putting your music on YouTube at all, and you would be far from alone. Many artists feel similarly because revenue generated from plays on the site is, for most musicians, not only pitiful, but can actually undercut the money they might have been able to make from more lucrative opportunities such as traditional album sales.
Don’t forget that keeping your music off of YouTube doesn’t prevent others from uploading it to the site anyway. In addition to offering next to nothing in terms of payment, YouTube also does next to nothing in terms of preventing its users from putting up content they don’t own the copyright to.
And, once the infringing content is up there, guess who is responsible for finding it and requesting to have it taken down? That’s right – it’s YOU, you lucky devil.
Fun fact! YouTube, along with its parent company Google (which in turn is owned by Alphabet), receives 900 million takedown notices a year from creators who don’t want their copyrighted materials on the site, and who aren’t profiting from it being there. (Guess who is profiting from it being there, though… Here’s a hint – it begins with a “G” and ends with an “oogle”.)
Licensing: If a television show, commercial, trailer, or video game production decides to include a song in its production, it must pay for what’s known as a “synchronization license.” A sync deal actually covers two separate licenses: one for the composition of the song (the written music and lyrics), and one for the master license associated with the master recording.
As a performer/recording artist, your cut of the proceeds, as per usual, will come from the master license (the composition license mostly applies to songwriters). The ensuing upfront licensing payment can range from a thousand dollars for background music on a cable series all the way up to hundreds of thousands of dollars for commercials and films.
If the commercial, television show, or movie has staying power, performers can receive additional residuals as well. Artists who perform vocally, whether singing, rapping, or even performing comedy, will be classified as a voice actor, and receive their residuals from SAG-AFTRA. (The artist does not have to be a member of the SAG-AFTRA union to collect residuals for sound recordings.) Artists whose music is purely instrumental collect residuals from the AFM & SAG-AFTRA Fund.
Session Playing: Playing heroically behind many a featured artist on many a master recording is a squad of session musicians, AKA “sidemen” or “sidewomen.”
These hard-working behind-the-scenes contributors receive a flat fee for their work in the recording studio and can also earn royalties through the AFM & SAG-AFTRA Fund when playing on albums, movie and television soundtracks, and symphonic recordings. At 5% of the total money earned for a given recording, these royalty payments are small, but it’s another way to make a buck for performing – and every little bit helps.
Paying Out for Playing Out
Gigs: Whether tooting a French horn in a symphony hall or noodling on a guitar at a rock venue, live shows are the performing musician’s bread and butter. Classical players can find decent salaried positions in orchestras or ensembles, with the best performers making good money on the solo circuit. Meanwhile, contemporary musicians and bands tend to become road warriors, constantly touring to earn performance fees paid by promoters, presenters, and venues.
Busking: You don’t have to receive any artist categorization to put a coffee can out on the street, start singing a tune, and hope the change starts dropping from the hands of passers-by. However, even the deceptively simple act of busking has a strategic system of its own for maximizing profits.
Does your song repertoire appeal to a broad audience? Have you chosen a busking location that enjoys high foot traffic with minimal noise from other venues and musicians? Oh, and most important of all – are you talented?
For those who combine winning performance chops with a well-executed plan, busking can offer much more than just beer money.
For creative people who just want to share their musical gifts with the world, it can be overwhelming to keep track of all these different revenue streams, and if you have read this far, we salute you – you are serious about becoming a professional performer of music!
Be sure to check out Part 2 of this series to learn about songwriting-related income for musicians. And keep your chin up! – with knowledge comes empowerment. Knowing where your money comes from and how to go about getting it puts you in the driver’s seat of your own career.
Stay informed, stay vigilant, and stay creative, and you might just make this music thing work after all.