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 Part 2 of “Making Money Making Music,” our two-part round-up of the different revenue streams available to the modern musician. In Part 1, we broke down how musicians can earn a living by performing music. Now, we discuss from whence that sweet, sweet cash flows for songwriters.
(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!)
IT’S ALL ABOUT THE COMPOSITION
When we were discussing performing-related income in Part 1, the phrase of the day was “master recording.” Now, for songwriting-related income, the word to pay attention to is “composition.”
A song’s copyright is divided into those two parts, the master recording and the composition. The composition covers the part of the song that is written – i.e., the music and the lyrics. Many successful songwriters are signed with a publishing company, which will work to get your songs placed in return for licensing fees and generally own the rights to your compositions.
To fully capitalize on composition-based royalties, it is vital for songwriters to register their songs with a performing rights organization (PRO). If you sign with a publishing company, they will take care of this, but if you are an independent songwriter, you must take care of it yourself.
The three PROs in the United States are ASCAP, BMI, and SESAC, and a songwriter can only be registered with one at a time. Each PRO’s primary function is to collect licensing fees from the myriad venues of the world that play copyrighted music (radio stations, television stations, department stores, bars, etc.) and pay it out (after collecting their fees, of course) at a rate of 50% to the songwriters and 50% to the publishing companies that own the music.
Pro tip: Songwriters who own their own publishing rights get the full 100%.
WRITING REVENUE STREAMS
Mechanical Royalties: In music royalty parlance, “mechanical” refers to a situation in which a song has been reproduced or copied in some way. That could be via inclusion on a physical product such as a CD or a vinyl record (or even a toy or a greeting card), via download through a company such as iTunes or Amazon, or via an interactive streaming subscription.
As with artists, the label that produced the song will take care of collecting and paying these royalties. Or, if the songwriter is unsigned, they can register the work with a publishing administrator such as Tunecore or CD Baby which will collect mechanical royalties while leaving ownership of the composition with you
Public Performance Royalties: If a songwriter’s song is streamed non-interactively (on services like satellite radio or cable television music channels), they are entitled to what is called a “public performance” royalty. The PRO with whom the songwriter is registered will collect and distribute these royalties.
In a bit of good news for songwriters, the Copyright Royalty Board recently ruled to increase royalty payments to songwriters and music publishers from music streaming companies by nearly 44 percent, the biggest rate increase granted in CRB history.
Going forward, this will boost revenue from both subscription-based and non-interactive streaming royalties on platforms such as Apple, Spotify, and Pandora – which have been frequently criticized for unfair payments to recording artists and songwriters.
Of course, this news still doesn’t address royalty payments from the other elephant in the streaming room…
YouTube: Many people do not realize that songwriting royalties are available on YouTube at all.
Fun fact! Not one, but TWO songwriter royalties get generated with each YouTube video that uses music: 1) a performance royalty for the public broadcast of the song, and 2) a mechanical royalty for the interactive stream of the song. Both are collected, via YouTube’s Content ID service, by the PRO you are registered with – or, you can also register your songs with independent publishing administrators such as Songtrust or Audiam, which do the same thing.
Not-so-fun-fact! Even with two types of royalties, YouTube screws over songwriters just as it does recording artists. Thanks to outdated safe harbor provisions in the Digital Millennium Copyright Act, it is required to do very little in terms of preventing rampant piracy on its platform.
Content ID is supposed to be YouTube’s safeguard to piracy, processing payments and also finding songs that have been illegally uploaded and removing them. However, many, many working songwriters do not have their works included in the Content ID database – either by choice or because they don’t qualify – and can do nothing to prevent the pirating of their works other than try to find them on their own and send a takedown request to YouTube.
Indeed, 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: Just like with performers, songwriters can receive a nice payout when their song is included in a commercial, television show, video game, film, or other production. Inclusion results in a one-time, negotiated payment sent to the songwriter directly from the studio, production company, ad agency, or game company that is using the song.
This payment can add up to anywhere from a few hundred dollars to a few hundred thousand dollars. Unlike artists, however, songwriters are not eligible for residuals from their licensed works.
Ringtones: With billions upon billions of cell phones floating around in the world, ring tones are big business. As of now, songwriters in the United States get $.24 every time one of their songs is purchased in ringtone form, paid out by the telecom that sells it, such as Verizon or AT&T.
Songwriters can also get performance royalties for ringtones, which means if your mother buys your song and assigns it to your phone number, then you can make a little money just by calling her more often. If that is not an incentive to phone home, then nothing is.
Live Performance: Concerts are generally thought to be the revenue domain of performers, who receive fees for live shows. Well, it turns out that performers who double as songwriters can also collect royalties for playing their own compositions at live shows.
Once again, you need to be registered with one of the PROs (are you sensing a theme here?) to earn live performance royalties, at which time you can start submitting your concerts and set lists for consideration.
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 songwriter!
Be sure to check out Part 1 of this series, if you haven’t already, to learn about performing-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.