30th Anniversary Special: The State of Music Earnings - EMusician

30th Anniversary Special: The State of Music Earnings

How Musicians, Producers, and Engineers Make Money in the Digital Landscape
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This article is part of Electronic Musician's special 30th Anniversary issue. To read more commemorative content, visit www.emusician.com/30thAnniversary.

If you choose any point in the 30-year history of Electronic Musician, it’s a safe bet that the way musicians, engineers, producers, and performers make money from music was in a stage of flux. This evolution of music earnings has essentially been dictated by two forces: the law—legislation and a long series of court cases—and technology.

The sheer number of ways to monetize music today is incredible. These opportunities are within reach of most music creators—especially when they realize that today, they’re the music label. If they spend a weekend or two registering their music in all of the places that generate royalties and revenue like music labels do, they can participate in the same income streams.

This is also an important time for music makers to pay close attention to the future state of income. A major piece of legislation currently making its way through Congress has the potential to shake up royalty structures that have been in place for more than 60 years.

We’ll survey today’s income streams—some of which didn’t even exist a few years ago—examining how they’ve changed and how music creators can take advantage of them today. And then we’ll look at proposed legislation that could change the lives of musicians, producers, and engineers in the near future.

MUSIC DISTRIBUTION AND SALES

In 1999, music sales hit their highest peak. Then came the internet and Napster: Music fans found themselves in a world of nearly unlimited music that they could explore, share, and download from their home computers. The music industry was slow to adapt, partly because they weren’t nimble compared to the speed of change in the computer world (where companies like Apple were able to step in). Plus, they were encumbered by the contracts of previous business models, which limited their options. In the intervening time, digital distribution platforms such as Apple’s iTunes took hold and became a key way that fans bought and experienced music.

Today any musician can inexpensively and easily put their music up for sale worldwide on digital music platforms. Some services are even free, since the distributor takes their cut from the sales on the back end rather than charge an upfront fee. Major digital aggregators include CD Baby, TuneCore, Nimbit, ReverbNation, and DistroKid. (Free options include RouteNote or Loudr.)

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MUSIC STREAMING

Streaming services such as Spotify have remained controversial because of their small payments to artists. Though music streaming revenue tends to be very low—it takes many streams to equal one sale of a single on digital music services—artists have options for improving their revenues, including getting songs into popular playlists. To get your music on streaming services, use the same platforms in the Music Distribution and Sales category and choose the streaming options they provide. Then use the playlists and social features of the streaming sites to market and improve your income from them.

PERFORMING LIVE

Playing live is still the most straightforward way for musicians to make money. That said, the variety of entertainment options available on computers, video game systems, and phones have created a war for attention; to compete, musicians must work harder at building “experiences” beyond just playing their songs onstage.

Today, musicians can put that live experience within reach of all fans, no matter where in the world they’re located—whether they’re broadcasting from their basement or streaming from a venue where they’re already playing. To monetize a streaming show, use platforms such as Stageit or Giggee.

CROWDFUNDING AND PATRONAGE

In the past, music labels were the only investors willing to risk money on music artists because of the high failure rate. Now, some artists are successfully going direct and getting bank loans—especially if they can prove that they are making a stable income.

Some even go direct to their fans to raise money through crowdfunding. If you can sell your fans a piece of your dream, they will pledge to help you realize you. In 2014, on Kickstarter, people pledged over $34 million to music projects. (Read “Money Masterclass: How To Fund Your Music Project,” “Setting Crowdfunding Goals,” and “Sequencing Crowdfunding to Get More Funding” at emusician.com to learn more.)

But that’s not the only way to raise money directly from fans. Artists who put out a lot of material on a regular basis often benefit from subscription models on sites like Patreon or Patronism.

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SYNC LICENSING

Sync fees are based on licensing music to movies, TV, and video. In the past, this process was dominated by major media companies. Today, there are more productions and channels, which puts sync revenues within reach of regular musicians, but these opportunities are still tough to get without connecting with music supervisors for these projects.

Today, the easiest way to earn sync revenues is via YouTube revenue sharing, in which videos broadcasted on an artist’s channel generate revenue streams based on advertising. Artists can connect other income sources to their videos by linking to patronage platforms, music sales, merch sales, etc., generating subscriber fanbase in the process.

Artists can also monetize videos from other creators who use their music and video content using the YouTube ContentID system, which will recognize when material is being used so that artists can get a cut of advertising revenues.

NON-INTERACTIVE STREAMING

Every time sound recordings are played on non-interactive streaming services such as Pandora, Last. FM, or Live365, royalties are generated. These royalties were established with the Digital Performance Right in Sound Recordings Act in 1995 and refined by the Digital Millennium Copyright Act of 1998. These acts granted a performance right for sound recordings that was separate from royalties generated by the performance of the composition. As a result, the SoundExchange digital performance rights organization was founded in 2003 to collect and distribute these royalties to sound recording owners, performers, engineers, and producers.

In general, labels own the copyrights to sound recording masters. But today, most independent musicians own their recordings, and thus, might be missing out on royalties if they haven’t signed up for collecting them. And if a musician is also a featured performer on a recording, he or she gets a cut for this role as well—if they’ve signed up to collect it.

Note that SoundExchange is currently the only PRO that collects money for engineers, producers, and performers. If you fall into any of these roles, make sure that the artist you work with is taking care of these registrations, and follow the instructions in the Income for Producers and Engineers Section below.

Howard Benson[BREAK] COMPOSITION PERFORMANCE ROYALTIES

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When a composition is played on terrestrial radio, at a restaurant, music venue, or inside an office, it generates a performance royalty. PROs collect royalties from radio stations, and subscription fees from venues, and distribute 50 percent to the songwriter and 50% to the publisher.

Independent musicians usually fall into the roles of both songwriter and publisher. So if the songwriter doesn’t register with the PRO as the publisher, they won’t get paid for the publisher’s credit, leaving half of the money on the table. Any artist that fills both of these roles should register with the organization as a songwriter, and then as a second time as a publisher. After doing this, they will need to register each song under each of these roles as well. To collect these royalties, sign up at ASCAP or BMI, or get invited to SESAC.

PRODUCER AND ENGINEER ROYALTIES

Historically, producers and engineers only received money from music labels or artists. While they could get a cut of royalties from music sales, they would need to arrange royalty splits with the artist or label (and get official sales statistics). This structure changed when SoundExchange was formed in 2003 and engineers and producers were compensated from sound recording performance royalties; in order to earn those, however, producers had to be added to the royalty agreements via a “Letter of Direction.” In recent years, The Recording Academy and its Producers and Engineers Wing have been working with Sound- Exchange to streamline the LOD process.

Maureen Droney Producer Howard Benson, who has worked on albums with Motörhead, Less Than Jake, My Chemical Romance, Kelly Clarkson, and others, says “SoundExchange has been a huge benefit to producers, since SoundExchange is direct-deposit. You can see exactly how much each artist pays you. It’s far more transparent and a lot more fair because of the transparency.”

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Benson suggests producers follow these three steps in order to ensure payment: (1) get an artist-signed Letter of Direction to the label that assigns a percentage directly to the producer, (2) get an artist-signed Letter of Direction to SoundExchange (see examples at SoundExchange.com) to pay the producer directly, and (3) register for neighboring rights at organizations such as ACTRA. Since payment depends on accurate data, it’s important to get these forms filled out properly. As Jonathan Bender, Chief Operating Officer of SoundExchange said, “Letters of Direction must list each track title and version of a recording to be included, so we encourage producers and engineers to be diligent in filling out the LOD forms. (Often, only one version will be listed, when many should be included.) Finally, the LOD must be signed by the Artist or the Artist’s Registered Representative to be honored.” Demos should also be included, in case they become a YouTube hit, for example, and each sound recording counts as a separate revenue-generating entity.

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THE FUTURE STATE OF INCOME

While there are more ways to monetize music than ever before, not every music creator has access to every type of income. Producers, engineers, and performers are left out—except for non-interactive streams. And that’s where a proposed new law comes in.

A bill being considered by Congress called the Fair Play Fair Pay Act of 2015 (H.R. 1733) aims at addressing four issues. It would:

• Create a performance right for artists on terrestrial radio—something today’s musicians don’t earn in the US (but their European counterparts do).
• Establish a process for setting fair-market royalty rates.
• Close a pre-1972 loophole so veteran performers could receive royalties.
• Codify royalty payments to producers.

This legislation is aimed at the larger commercial radio stations. Public, college, and noncommercial stations either have special exemptions or pay a smaller administrative fee. As Maureen Droney, the Managing Director of the Producers and Engineers Wing of The Recording Academy said, an example of the problem with royalties is that “when you hear the song ‘Respect’ on the radio, Aretha Franklin doesn’t get paid, only Otis Redding does.” And as Benson noted, neither does the producer or engineer: “[It would be] better if the songs stopped playing on the radio altogether because we’d get paid more often, because there would be more plays on streaming platforms where producers get paid from SoundExchange.”

You can see the text of the Fair Play Fair Pay Act at emusician.com; and to learn how you can get involved and to contact your legislator regarding this proposed legislation, visit The Recording Academy's Website at www.grammy.com/action.

FOCUS ON THE POSITIVE

Although sales numbers are nowhere near the figures of 30 years ago, today, unlike in 1985, musicians benefit immensely from direct access to fans. As Clay Shirky wrote in his book Cognitive Surplus, the internet is now the media—it’s a connector that allows people to collaborate and participate. Social media, blogs, YouTube, and a host of other ways fans can interact have dropped barriers to fans. This direct relationship impacts income: Artists can sell music and merch to fans directly worldwide, and tools like crowdfunding and patronage sites allow fans to break out of the consumer role and directly fund the artists they love.

The key is to participate in as many sources of income as you can, and be informed about upcoming legislation to take control of your music income and the future of music.

Randy Chertkow and Jason Feehan are authors of The Indie Band Survival Guide (St. Martin’s Griffin), now in its second edition.