Sources of Income: A Sound Guide for Songwriters and Copyright Owners

Posted: April 2, 2014 in Artist Corner, Marketing Tips, Social Media Tips
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Once you start earning an income from music, it can become quite difficult to keep up to date with all the different revenue streams you are either entitled to or can take advantage of. This guide seeks to highlight the different ways a musician / songwriter can maximise their financial situation.

It’s difficult to give actual figures on what it is you are entitled to as all agreements are thrashed out in contract negotiation and one agreement will be completely different from the next. The idea is to make you realise that original music has many sources of income for you to earn a living from. One song can set you up for life and you, your publisher or your manager will need to exploit all of the following to ensure that you are getting the best return possible from your work.

Advances

If you sign a recording or publishing contract, (and in some cases a management contract), you might be paid some money upfront. This is called an advance as it is based on your potential future earnings. The company have decided that you will make a certain amount of money in a certain amount of time and have given you something in consideration of this. Initially advances can be a few thousand pounds, but if you’re signing an extension or new contract, they can be worth a lot of money.

Normal, Regular or Standard Royalties

The ones most musicians with some knowledge of the industry tend to think of straight away include, Mechanical Royalties from sales, Performance Royalties, for writers and performers that come from sales and airplay. These are collected on your behalf by MCPS (Mechanical Copyright Protection Society), PPL (Phonographic Performance Limited) and PRS (The Performing Right Society). If you’re a musician and have performed on a song that has been played on the radio or video channel, you are likely to be entitled to something from PPL (Phonographic Performance Limited). If you want to know more about royalties, see the Sound Guide “What about Royalties?”for further details.

Live Gigs

Possibly the simplest of all income streams on the whole as a fee is normally paid in cash and agreed well in advance. Agreements can include guaranteed amounts or a percentage of the overall take. It only becomes difficult if you have decided not to be paid in money. Fees can vary from £10 if you’re lucky, to agreements made in coffee beans, oil or gold. These tend to occur when you’ve become very successful in a country that has a currency with very little value in the UK. You might agree to do the gig and have the goods exported before you play. It can be very difficult to get things out of some places otherwise.

Merchandise

The sale of T-shirts, posters and the like can often be the main source of income whilst on tour or throughout the year from retail outlets. However, the amount you sell will depend on your fan base and the type of music you play. Some genres of music have fans that will buy anything. T-shirts by the dozen, keyrings, coasters, posters, badges, caps stickers, postcards, pens, dolls, mugs, and other goods that bear an artist’s name and often his or her likeness.

Ring Tones

At a recent BPI event, one of the speakers told industry members that of all the money being made in ring-tones in the last couple of years, very little of it actually went back to the music industry. Big deal! Your reasons for getting into the industry were not all altruistic. Whether or not you think this is selling out, ring-tones can be a nifty and lucrative way of selling your music.

Ring tone royalties are normally split like this; retailers pay 10% of the sale price for each tune to MCPS (minimum 10p each). This 10% is divided between MCPS, the publisher and the composers. MCPS take 12.5%, publisher takes approx 20% and the rest is split between the composers.

CD Compilations

Usually money is paid on a pro-rata basis. That is there will be a standard royalty for each song and that will be divided by the amount of tracks. In other words, if the standard royalty is 14% and there are 20 songs on the CD, your song would receive 0.7% of the mechanical royalty. You would also get your publishing and performance royalties on top of this. There are also special agreements made for ‘high profile’ or premium tracks. These would negotiate a lion share, as they are more likely to sell the CD.

Songbook and Sheet Music Sales

Although sheet music sales have diminished over the years, many songs are still available in print form. These include books of songs by specific artists, instruction books or compilations of hits within a given genre (i.e., “100 Greatest Country Hits of All Time”). The music publisher issues print licenses and collects this income from the sheet music company, while the songwriter receives a small royalty derived from the sale of his or her song in print form.

Transcription Licences

Because radio is not a visual medium, the use of a song as part of a radio commercial requires a separate license. Sometimes songwriters are able to negotiate provisions in their publishing contract preventing their songs from use in certain contexts, such as ads for alcohol, tobacco, political campaigns or other uses the songwriter does not wish to be associated with or may find offensive.

MP3 Downloads

Royalties from MP3 downloads can vary from nothing when the download is for free or being done without your knowledge, or up to 70% of the fee paid depending on which site it is that your song came from and the agreement you have made.

iTunes and MSN Music

iTunes represents the biggest consumer leap to digital music in years. The launch of the iTunes store by Apple Computers was an event of huge magnitude, resulting in the sale of millions of songs at 79p each. If Apple maintains its current run rate, it should notch up annual European downloads of over 41.6m songs. Assuming a roughly 50:50 sale ration between the UK and everyone else, that amounts to roughly £30.1m. If the European stores see the kind of growth the US has seen, that figure is likely to rise considerably. Revenue is one thing, of course, income another. Music industry insiders claim that Apple’s 79p per track in the UK sets a bar other services will find hard to match, not least because Apple is believed to be deliberately losing money on some songs. It can do so because, unlike Napster and the others, iPod sales can subsidise iTMS (the iTunes Music Store).

MSN Music was launched as part of the new Windows Media Player 10 software, which is now available in 10 European countries with 15 digital music stores, including Napster and Tiscali in the UK.

One of the distinctive features of Windows Media Player 10 is the first Digital Media Mall, which enables users to download, rent, or stream music and video within the player from a choice of online stores.

Film Scores

Getting the chance to even be in contention for writing film scores is a very rare occurrence, but somebody does it and it’s an art in itself. Alternatively you can get a song you have written on the sound track. Money is earned in two ways: the licensing fee, paid up front to the writer/artist, and the performance royalty, which is distributed to the writer by PPL.

The license fee is determined by the overall music budget and the negotiating power of the artist. Unknown artists get far less license money than superstars, for example. TV shows and small films pay less than major studio feature films.

Performance income is determined by the number of people estimated to have seen the show and therefore heard the music. The more popular the show – the more money you make on performance royalties. You make new royalties every time the show is re-run, which is particularly good news if you’ve got music on a show that goes into syndication and airs frequently in markets around the world. Cable broadcasts generally pay less than broadcast networks because there are a reduced amount of viewers. You may also make money when videos or DVDs are sold. This will ultimately depend on the original license agreement.

Sync Rights

Whenever a song is used with a visual image, it is necessary to obtain a “synchronisation” license permitting the use of that song. Music publishers issue synch licenses to television advertisers, motion picture companies, video manufacturers and CD-Rom companies. A portion of this money is paid to the songwriter.

Translations

Quite often, a hit in one country becomes a hit in another country by another artist. Publishers may authorise “translations” in order to generate further income from cover versions of a particular song in foreign countries as the local artist will have a better chance of having a hit singing in their own language.

Commercials/Jingles Income

If a campaign requires new music, the advertising agency consults with its client the theme and direction of the campaign as well as the outlines of the budget. Here again the fees payable to a writer for the writing of a radio or television jingle can range from minimum compensation to anything you or your representative has negotiated. The amount will always be dependent on the type of campaign being planned e.g., national, local, or test.

Video Sales

The sale of videos, DVDs and videodiscs can be a significant source of income for the songwriter. Different negotiating approaches may be used: a one time only buy out for all sales; a set royalty for each sale; and a modified buy out for a stated number of units, with additional monies for additional sales (referred to as a ‘rollover advance’). The one time buy out is when the music publisher or writer accepts a fee for all rights regardless of the actual number of units that may be sold in the future. Under the modified buy out or rollover advance, the production company pays the music publisher a certain upfront fee for a set number of videos, with additional predetermined fees paid as additional sales plateaus are reached.

Multimedia Product Sales

See Sync Rights.

TV Ads

See Sync Rights.

MusicPay

MusicPay is a new online payment system tailored for the requirements of the music industry. The Music Engine launched in September 2004. MusicPay is available in more than 80 countries worldwide in multiple currencies. They handle all the foreign exchange so that consumers pay at local rates only. There are several ways of crediting a MusicPay account that don’t require having a credit card. This opens up online sales opportunities, for example, to Under-18s who are not allowed a credit card, as well as economies where most people don’t use a credit card. MusicPay is ideal for micro-payments. Music fans can therefore buy MP3s and ring-tones from your website. Music businesses will also be interested to know that MusicPay can be used in a ‘business-to-business’ environment. If you have money transferring between various parties, MusicPay enables the paying of commissions or royalties internationally.

Further Reading

Higgs, Simon (2004) The Guide To Selling Your Music In The iTunes Music Store.

Spellman, Peter (2002) The Musician’s Internet: On-Line Strategies for Success in the Music Industry. Berklee Press Publications

Harrison, Ann (2000) Music: The Business – The Essential Guide to the Law and the Deals. Virgin Books

Evans Bill, Randle Quint (2002) Making Money Making Music Backbeat UK

Bruce Pollock (2003) Working Musicians. HarperCollins

www.electricbluesclub.co.uk/earnit.html

www.musicpay.net

Musicians Union – Making Money from Music www.taxi.com/faq/makemoney/

Make money from your records. www.pithrecords.com/

How To Sell Your Music on the Internet http://musicians.about.com/

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