Name: David
Web Site: http://www.magnetvideo.com/
Bio: David Rose is the Managing Editor at KnowTheMusicBiz.com. David is an entrepreneur, music lover, tech enthusiast and the former VP of Corporate Development at Yep Roc Records and Redeye Distribution.
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- Begin with a Goal in Mind – Why exactly are you sending out emails to your fan list? This is a very important question to think through before hitting the send button on your next newsletter. Hint: Email newsletters are a great way to maintain and strength relationships with existing fans. Also note, email is a very poor tool for trying to recruit new fans. Focus your email efforts on providing as much value to your fans as possible.
- Go Pro – If you are serious about building relationships with your fans and marketing your music, using a professional email solution is a must. Sending emails to fans from your Gmail account might seem like a simple solution, but it’s not! There are several companies that provide professional email solutions designed specifically for musicians including, FanBridge, Nimbit, Reverbnation and Topspin to name a few. Professional email solutions are a great investment of time and money. Go pro today!
- Segmentation – Segmentation is a term used to describe a targeting strategy in email marketing. Targeting the right fans with the right message is critical to your long-term email marketing success. For example, don’t email everyone on your entire list about an upcoming show you’ve booked in Memphis! Pull a list of your fans in a particular market, Memphis for example, and only email them about the initial show announcement and a potentially a follow-up reminder or two as the show date approaches. Segmenting your audience helps prevent “list fatigue” from your subscribers that can lead to the dreaded “unsubscribes” from your list. Additionally, segmenting provides real value to the people you’ve targeted and are most interested in a particular piece of information (fans in Memphis hearing about a local, upcoming show for example).
- Personalization – Remember that whole “building a relationship with fans” goal? A little personalization in an email can go a long way with fan goodwill and marketing effectiveness. Emails that begin “Dear David” (John, Kate, etc.) are much more personal and effective than emails that begin without a greeting or with just “Hey fans”. Most email marketing tools make automatically including your fans first name in the greeting quite simple. Reverbnation even has a tool that will search the Internet and find the names of your fans if you only have their email address.
- Frequency – Be consistent with your email communications but be very careful with the frequency they are sent out. I recommend consistently emailing your entire fan list on a monthly basis and rarely more often than that. It’s ideal to send out your monthly email on the same day each month, the first Tuesday of each month for example. Emailing your entire list too frequently will ultimately lead to lower open rates and higher unsubscribe rates. Twitter, Facebook and blogs are much better tools for more frequent communications
- Content Matters – Don’t forget that your fans are music fans! Always be sure to include your music for download or streaming and videos in your emails. Providing exclusive content for members of your list is a great way to keep fans engaged and looking forward to getting your next email. Don’t sweat the quality of your content too much. A live video shot with a flip cam or a new song recorded in your living room can turn out to be real fan pleasers.
- Give to Get – If you want something from the fans on your list be prepared to offer them an incentive in return. For example, if you want fans to join your street team or vote for your band in an upcoming contest offer them a free MP3 download of a new song as a way of saying “thanks” for helping.
- Analytics Rule! – Another advantage of using a professional email tool is the analytic reporting they provide on how your fans respond to your emails. Monitoring key statistics such as open rates, new subscriptions and unsubscribe rates will help you better understand the effectiveness of your email marketing efforts. If you send out an email that results in a high unsubscribe rate you did something your fans didn’t like. Figure out what went wrong and be sure not to make the same mistake again.
- Cross Promotion – Always cross promote the other places where you connect with fans in your emails. If you have a band website, Twitter feed, Facebook Fan Page or blog be sure to always include links to these sites in your emails. Also, make it easy for your fans to sign up for your email list by including an email list signup option everywhere you have an online presence.
- No Spam – It is very important that you NOT add people to your email list who did not personally sign up for it. Remember, emails are great tools for maintaining and strengthening fan relationships. Email is a highly ineffective as a tool for obtaining new fans. Adding unsuspecting names to your email list will only foster a negative impression of you from potential fans and might even get you dropped by your email provider. Don’t do it!
10 Email Marketing Tips for Musicians
March 19th, 2013
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The 21st Century Indie Band Manager
December 11th, 2012
I always like talking with indie bands and band managers about their top marketing priorities and successes in hopes of learning about some innovative new approaches to music marketing. I was talking with a band manager not too long ago about his marketing priorities for the biggest band he represents and was shocked at his answer.
This manager told me the key to his band’s success was radio play. What? Really?? I was speechless. Did he seriously believe terrestrial radio would even consider adding this off-genre indie band’s music into their rotation and somehow ultimately help the band’s career? Maybe if the band was country or pop this approach might make some kind of sense…
As we spoke further I learned more about this manager’s professional background. And guess what? It turns out his entire career was in radio promotions for a major record label.
Now, I don’t want anyone to think that because someone had a career in radio promotions that there is no way they could be qualified to be a successful indie band manager. That’s not my point at all. However, if a band manager lays out a marketing strategy for an off-genre indie band in the 21st century and makes no mention of the web or social media I will always walk away from that discussion feeling this manager is simply not serving the best interests of the bands they represent.
This discussion got me thinking about what skills really are important for an indie band manager in the 21st century.
When Dinosaurs Roamed the Earth
The primary responsibility of a band manager prior to the 2000’s was to secure a record and / or publishing deal for the bands they represent. Once a record label deal was signed a business manager would be hired to handle the money and budgeting, an attorney would be hired to handle any contracts, the record label would handle press and radio promotions and the distributor would typically take care of retail marketing and promotions. A record label deal also meant there would typically be a tour support budget and tour marketing from the record label so getting a booking agent to pick up the band became much easier.
The manger would typically be the person to act as a liaison between all these groups and the band. But because all the aspects of the band’s touring, budgeting, contracts and marketing were handled by specialists in each area the band manager didn’t necessarily know all the details of their band’s business. These specialists (radio promoters for example) didn’t necessarily know the other parts of the business: touring, marketing, budgeting, contracts, etc.
Indie Band Manager Skills Today
There are some very specific skills I think are important for an indie band manager in the 21st century. Having previously worked in the music industry doesn’t necessarily mean all that much today.
It’s important to separate a particular set of skills a manager might possess from personal characteristics like trustworthiness, ethical, passionate, likable, etc. Below is my take on the key skills for managing an indie band in the 21st century:
Direct Marketing – Understanding how to directly market to and build relationships with fans is a critical skill given the amount of competition artists face. Basic branding and image knowledge is certainly a plus but the ability to help artists build long term and direct relationships with their fans is critical to helping an indie band build a sustainable career.
Touring / Live Shows – Getting an indie band picked up by a reputable booking agent is next to impossible unless the band has a solid track record of regularly making money for themselves and the venues they play. Building an indie band’s track record of regularly playing live shows (and making money at it) is the responsibility of the band’s manager until a booking agent is in place. The manager must know how to get shows booked and properly promoted.
Social Media – Social media has emerged as a great tool for building fan relationships and promoting live shows. Managers need to understand how to use (and how not to use) the leading social media tools including Twitter, Facebook and YouTube.
Technology – Technology is such a critical part of an indie band’s success their manager had better be adept at personally managing and operating a wide array of music related technology such as a WordPress website, Reverbnation dashboard or YouTube channel.
Business Development – Business development skills are critically important for securing sponsorships, booking festivals and getting the band’s music featured in an upcoming indie film. The manager should be outstanding at building business relationships plus have solid sales and contract negotiating skills.
Accounting / Royalties – Manager’s need to have basic accounting and budgeting skills and be able to maintain the band’s Quickbooks accounts. They should also be able understand the many ways bands can get paid royalties for their music. For example, a manager should always make sure the bands they represent are signed up with SoundExchange (so they can collect royalties from Internet radio plays).
The role of an indie band manager has changed significantly over the last decade. Don’t assume that because a potential manager has worked in the music industry that they will have the skills needed to help your band establish a sustainable career in the 21st century. Make sure they have the actual skills needed to help you succeed in the new music industry.
Indie Record Label Economics
October 30th, 2012
It seems the way money flows at a record label is largely a mystery to most artists who haven’t worked in the music industry for an extended period of time. It’s always interesting to lift the veil a bit on an unknown. Let’s take a look at one side of the economics of an indie record label, getting a new release to market. Below is a summary of the actual expenses an indie record label incurred for a new release:
Recording advance: $15,000
Tour support: $2,100
Mastering costs: $934.96
Marketing: $13,433.23
Advertising: $2,067.50
Publicity: $5,153.34
Manufacturing: $16,581.04
Artwork / photos: $200
Misc: $587.71
Total: $56,057.78
Here is an overview of each of the line item in a little more detail:
Recording Advance – The money for the recording advance is used to cover the cost of recording. Including studio rental, mixing, session musicians, sound engineer and producer.
Tour Support – Artists have traditionally sold more overall units when they tour so record labels will often times financially support a tour. Tour support money can help pay some of the expenses of touring such as gas, insurance, hotels, food and supplies.
Mastering – Mastering is a post production process that takes the final mix of the recording, edits minor flaws, adjusts volume and stereo widths, equalizes tracks, etc. It’s usually expected that the person who masters the recording will be different from the person who mixes it so there is typically a separate line item in the budget.
Marketing – The marketing line item is entirely for retail co-op marketing expenses. Co-op marketing dollars are expenses distributors incur from retailers for special product placement, in-store promotions, listening stations or advertising. The amount of co-op marketing dollars the distributor (and ultimately the label) are willing to spend on a new release has a direct correlation to the amount of product the retailer orders.
Advertising – Advertising expenses can include any print, radio and online advertising the record label incurs to promote a new release (outside of retail co-op dollars).
Publicity – It’s fairly common for a record label to hire an independent publicist for a 90 day period to help promote a new release to press, print and online media, bloggers and anyone else who can help influence music fans.
Manufacturing – The manufacturing costs for a CD with jewel case can vary but is still around $1.00 per unit for a distributor or label with measurable volume.
Artwork – The cost of custom creative and / or photos for the release.
Miscellaneous – Just like the name implies this is the catch “everything else” expense category related to a new release. For example, legal fees or video production expenses charged to a new release could end up here.
For this particular release to break even it must generate $70,072.23 in gross sales ($56,057.78 + the 25% fee of sales paid to the distributor). The typical deductions a distributor takes on sales including return reserves and breakage (to name a few) further impact cash flow on sales back to the record label.
It’s important for artists to fully understand how the basic economics of an indie label work since they will not get paid any royalties from sales until the record label recoups all the expenses incurred in getting the record to market. This is true of both traditional record label agreements and even “50/50” licensing agreements. It is very common for artists to never receive royalties on sales from their record label since many new releases never fully recoup their expenses.
Being signed to a record label is no guarantee of sales success. Artists need to carefully weigh what a record label is going to spend on a new release to determine the level of sales that will be needed to achieve profitability before signing a recording contract. Even though the artist might sell a lower number of units on their own there is a very real chance they can actually earn more money without a record label being involved.
Most indie record label owners are simply trying to get music they love heard by fans. They aren’t in it for the money. In addition to the above mentioned costs of getting a new release to market they have to cover multiple other expenses such as insurance, rent, payroll, travel and mechanical royalties. Making money as an indie label is no easy task. Needless to say, label owners give it a great deal of consideration before signing a new artist and committing to releasing their music.
It does take a lot of money and resources to get a new release to market. However, real transparency in accounting for these expenses is still largely lacking. Inevitably this leads to conflict between the record label and artist around recoupment of expenses and payment of royalties. Hopefully, as artists better understand the economics of record labels they will be able to make more informed decisions about when it makes more sense to sign with a record label or go it alone.
An Overview of Music Publishing
October 2nd, 2012
Copyright
Often the process of registering a copyright is what comes to mind when people hear the term copyright. However, songs are automatically copyrighted as soon as they are in tangible form, even recorded at home or simply written down. Copyrighted songs have to be original (not copies of another piece) and significant enough to constitute a work. Copyrighting your work (getting it out of your head and in tangible form) not only protects it from being copied or used by unauthorized parties but also is the first step to publishing your material and ultimately being paid for it.
Once your work is copyrighted you have the exclusive rights to: 1. Reproduce the work, 2. Distribute copies of the work, 3. Perform the work publicly, 4. Make a derivative work. It also means no one else can do these things without your express consent.
There are two general rights covered in a music copyright : the authorship of a song and the ownership of a song. According to Copright Law, you are the natural owner of every song you write until you assign the ownership to someone else.
Every song is made up of two equal parts; not the lyrics and the melody but the writer share and the the publisher share.
The writer share represents the authorship of the song. While a copyright can change hands many times; the writer share remains the property of the author.
The other fifty percent, the publisher share, is the equitable share. It is what you can sell or buy. In this context it is known as the “copyright”. When a publisher acquires a copyright, it is acquiring the publisher share.
Control
The Publisher controls the writers share. The publisher licenses mechanical , print and synch rights on behalf of itself and the writer. These royalties and fees are collected by the publisher (the owner of the copyright) for both the publisher share and the writer share. It is the publisher’s responsibility to pay the writer. Performance royalties are the only royalty type where the writer can collect his writer royalties directly from the performing rights organization. Control means the publisher has the right to negotiate and execute all licenses.
Royalties
Ongoing earnings of licensed songs from each sale or broadcast.
Exploitation
In music publishing, exploitation is a good term. You want your songs to be exploited. Landing a song in a film or television show is an exploitation; somebody recording your song is an exploitation; releasing a record is an exploitation. When one of those songs from your record becomes part of a greatest hits package down the line – that’s an exploitation. An exploited song that is licensed and registered opens revenue streams.
Royalties don’t just magically show up in your mailbox; It is the result of the publisher executing licenses and filing the proper registrations.
Registration
You or your music publisher registers your songs with a performing rights organization (ASCAP, BMI or SESAC) to get the song details in their database so the correct percentages of performance royalties can be attributed and paid to the correct party.
Your music publisher registers your songs with a ‘local’ publisher in a foreign territory so they can, in turn, register the songs with their local mechanical and performing rights societies (society being a fancy term for foreign mechanical and performing rights organizations) so the correct percentages of foreign mechanical royalties and the publishers side of performance royalties are attributed and paid to the correct party.
Licensing
The music publisher doesn’t sell songs to another artist to record or to be used on a TV show or film- they license it. There are four primary rights to license:
Mechanical rights Back in the early twentieth century, there were two methods of distributing music: sheet music and player piano rolls. To differentiate between the two, early copyright law defined the royalties generated by the sale of these player-piano rolls a “mechanical” royalty for which you needed a mechanical license; after all, piano rolls were a mechanical contraption. The definition of Mechanicals through time went on to include Edison rolls, 78 rpm vinyl records,45 rpm records, 33 1/3 rpm long play records, cassettes, 8track tapes, cds and now digital downloads. It’s like calling your iPod a Victrola but the term stuck. A good way to think of it is mechanical royalties are for the sale of music.
Performing rights — Think broadcast. There are three performing rights organizations in the United States: BMI, ASCAP and SESAC. They are not music publishers or administrators. These “PRO”s have blanket licenses with radio stations, television stations, clubs, restaurants, stores, digital streaming services like Napster and so on. You should belong to one if you have any exploited songs. For the price of these blanket licenses (which vary depending on the size of the broadcaster) the broadcaster can play all the BMI, ASCAP or SESAC songs ‘til their heart’s content for a measured period of time. These ‘plays’ are tracked and the pool of blanket license money is divvied up proportionate to the number of plays and the value of plays. In other words, for example, a play on a major radio station is worth more than a play on a college radio station. Another example: a featured play on a television program is worth more than a background play on the same program. Performance royalties are generated from the broadcast of music.
Synch rights - short for synchronization this is the licensed right for a film or other audiovisual medium to use your song, to synchronize your music to recorded visuals, in an audio-visual product. It can be a commercial, a videogame, a film, a TV show or a website. A synch license usually produces a negotiated fee for certain rights depending on the usage. Yes, we are talking about rights within rights. For example, say it’s your lucky day and Mitsubishi wants to use your song in their new car commercial. With your approval your music publisher negotiates a synch fee with the music supervisor for the Mitsubishi spot which will allow them to use your song for, say, one year for national television plays for one flat fee. If they still want to use it after the one year or if they want to run it internationally or stream it on their website or put it on a promotional DVD for give-away, all of these uses are rights within the basic right and should most likely carry additional fees. (Since the Mitsubishi spot is broadcast it also produces a performance royalty)
Print rights - Sheet music, song folios: it’s pretty self-explanatory — but be careful-the term ‘publish’ has a few different meanings depending on how it’s used. Once a song is released or exploited in some way it is considered ‘published.’ Once a song is filed with the Library of Congress for copyright it is considered published, it does not necessarily mean the song‘s notation and lyrics are published in print form. However, if the song’s written notation and lyrics are published in print or digital form for purchase, it will earn print royalties from the print license your publisher negotiated.
Publishing Companies
Publishing companies handle the administration of registering copyrights for songs, issuing mechanical licenses for use of a song or songs, collecting royalties and distributing money to songwriters. The larger publishing companies will have staff that actively tries to get songs they represent recorded by artists or record labels. Publishing companies range in size from one-person outfits to giants like Warner/Chappell Music. The right publishing company can have a significant impact on your earnings.
Once a songwriter assigns the rights of their songs to a publisher the publishing company will typically split all the money they collect from their songs 50/50. Publishing companies may offer an upfront advance to the songwriter for royalties they will collect on their behalf if they anticipate a high volume of sales from the material.
Some songwriters elect to keep their publishing rights and royalties by setting up their own publishing company. It is possible to hire a third party to handle the publishing related administration if you don’t want to try and keep track of all the paperwork yourself. If you decide to set up your own publishing company be sure to register you affiliation with ASCAP, BMI or SESAC.
Quickbooks Chart of Accounts for Indie Record Labels
September 19th, 2012
Many Indie artist simply start their own record label instead of sitting around waiting for a recording contract to fall in their lap. Starting a label is an exciting endeavor but there are several pesky, non-creative details that need to be tended to like, accounting…
Quickbooks has established itself as the the go to accounting solution for small businesses, including indie record labels. Quickbooks is pretty inexpensive, fairly simple to use and can be installed as software on a computer or used as a software as a service model (available through a web browser).
Setting up Quickbooks correctly before entering revenue or expense items is critical to your long-term ability to gain value from your accounting information. At some point it will become important to know how much money your label is making (or losing). Building a chart of accounts that captures the specific income and expense items related to running your label is the first step to getting Quickbooks setup.
Alyson Miller is a CPA who’s firm, Sound Accountants, specializes in accounting and business management for record labels and musicians. Alyson was kind enough to share with us a sample chart of accounts indie record labels can use to help setup their Quickbooks.
Here is a link to a publicly available sample Quickbooks chart of accounts posted in Google Docs. Hopefully, this information will help you get you moving in the right direction when it comes time to setup your accounting function.
There is a lot to learn about accounting for a record label but setting up an accurate chart of accounts is a great first step.
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You Have a Band and a Facebook Fan Page, Now What?
August 8th, 2012
Now that you’ve started a band and built your Facebook fan page here are a few additional steps in your music career you might want to consider:
1. Write Great Songs
If you are trying to attract the attention of music fans it all starts with great songs. It’s understood that this is much easier said than done but it is a critical starting point. Great songs with mediocre / poor marketing will ultimately trump mediocre / poor songs with great marketing when it comes to attracting and keeping the attention of music fans over the long-term. Artists should make sure they have a reasonable balance between the amount of time and effort they spend on social networks, designing merch, creating videos, email campaigns, etc. and the time and effort they spend perfecting their craft.
2. Get a Website
If you are serious about a career as a musician you should own a url that includes your name (or bands name) and have your own website. If you don’t already have a website check out Bandzoogle and Nimbit, they both provide full featured and inexpensive website solutions specifically for musicians. The central point for all marketing activities should be the artist’s website. Marketing efforts that drive fans to Facebook, YouTube or iTunes help foster relationships between fans and Facebook, YouTube and iTunes, instead of directly with the artist.
3. Fan Lists
I firmly believe an artist’s success in achieving a sustainable career in music is tied directly to their ability to build and nurture an ongoing, direct relationship with their fans. Both FanBridge and ReverbNation offer an impressive set of email marketing tools that can help artists communicate directly with fans and drive traffic to their website and live shows. Both companies help gather and provide important information that can be used to better understand their preferences and demographics. To learn more about effective email marketing to fans check out this post 10 Email Marketing Tips for Musicians.
4. Direct Commerce
Buying directly from an artist helps strengthen the direct to fan relationship. Direct commerce also provides better margins for an artist than selling through a third party like iTunes or Amazon. Selling direct also provides the artist with more flexibility and creativity when it comes to bundling sales of music with t-shirts, tickets or unreleased tracks. Make sure fans can easily purchase music, merchandise, tickets and anything else you sell directly from you / your website. Both Bandcamp and Nimbit offer direct commerce solutions for musicians that can be easily added to any website.
5. Metadata
Metadata is all the collective information associated with a particular track, release or band, summarized and available in a digital format. Metadata typically includes track titles, track lengths, ISRC codes, album art, genre, band bio’s and publishing information. Accurate metadata is of significant importance since it is the information fans need to identify a particular artist or song in the very crowded digital music world. Not having the titles of your MP3 tracks or CD show up when it’s being loaded into a media player will appear amateurish at best and at worst prevent your songs from ever being played by that fan again simply due to the hassle factor of trying to locate an another unlabeled track in a large digital music collection. Be sure to register the metadata information with the two primary companies that manage metadata databases for the industry: All Music Guide and Gracenote. Both companies have different procedures for accepting metadata from directly from artists. Check out each of their websites for details.
6. Digital Distribution
Even though artists should encourage fans to buy music directly from their website it’s still very important for artists to have their music available for sale at the leading online music retailers and streaming services (Amazon, eMusic, iTunes, MOG, Rdio, Rhapsody, Spotify). These companies have large user bases and fairly good recommendation tools for music fans to discover artists similar to the ones they already enjoy. Retailers typically work exclusively through distributors and don’t accept music directly from artists. There are many very good, inexpensive options now available to artists for digital distribution including CD Baby, ReverbNation and TuneCore.
7. Live Shows
Playing live shows is one of the most important aspects of an artist’s career since it provides a great opportunity to directly connect with fans, sell music and merchandise, add fan names to the email list and (hopefully) earn money from ticket sales and / or the venue’s door receipts. Electronic press kits have emerged as a very effective and low cost way for artists to submit their music, bios, photos and videos to promoters or music buyers at the venues they would like to play. There are several companies now providing electronic press kits for artists including ReverbNation and Sonicbids.
8. Online Radio
Online radio now provides independent artists with unprecedented access to a large and growing audience and promotional opportunities that had only been available to label backed artists. Many of the leading Internet radio stations such as AOL, Last.fm, Pandora and Yahoo accept submissions directly from artists so there is no need to incur the cost of hiring a radio promotions person or firm to work a new release to Internet radio stations.
Another benefit of Internet radio is that artists actually earn royalties. Soundexchange collects royalties from internet, cable and satellite radio stations then pays those royalties directly to the performing artist (and copyright holder) for streamed tracks. Make sure you are registered with Soundexchange!
9. Social Media
Facebook and Twitter are great ways to build fan relationships and add to your fan base. But remember, building relationships is a two-way process. Get involved and communicate in a personal way with fans, don’t just try to sell your next show or iTunes track. Don’t use the auto-responder feature in Twitter. Getting an automated, non-personalized auto-response message from a band I decide to follow on Twitter is as impersonal and unprofessional as it gets. Facebook fan pages also provide some really useful demographic information on fans.
10. Find a Fifth Beatle
Finally, don’t try to do all this online music marketing by yourself. Give serious consideration to Pandora radio Founder Tim Westergren’s Fifth Beatle for The Digtal Age suggestion. Tim suggests finding a hard working, knowledgeable, trustworthy fan or friend to handle your band’s marketing initiatives instead of trying to do it all yourself.
An Overview of Musician Royalty Streams
July 17th, 2012
Like almost everything else in the music business, it seems the ways artists earn royalties and actually get paid is confusing and a bit of a mystery. Below is an overview of how the typical royalty streams for musicians are earned, collected and paid in the music business.
Before we get into the specifics of royalties it’s important to understand the difference between a songwriter and a recording artist since royalties for each are often times different.
A Songwriter is typically the person (or people) who write a song’s lyrics and melody. A catchy guitar rift doesn’t entitle the guitar player to any songwriter royalties unless that person is also credited with contributing lyrics or melody to the song. Ultimately, the people who receive songwriter royalties are the ones that are listed as a songwriter when the song is registered with the US Copyright Office. The majority of royalties in the music business are paid to songwriters. It’s much more viable for a songwriter to build a long-term career in music than it is for a drummer who doesn’t write lyrics or melodies.
The Recording Artist is the entity collectively considered “The Band”. This usually includes all members of the band. For example, all the members a band like The Arcade Fire would be considered the “recording artist” for royalty calculations purposes. Recording artist can also mean a solo artist. Even though an artist like Pete Yorn is backed by session musicians in the studio during a recording session, the session players are not usually entitled to recording artist royalties. In this example, Pete Yorn would be considered the “recording artist” for royalty calculations.
Now, let’s take a look at the different types of music business royalties.
Royalties from Sales – Royalties from sales are royalties paid by the record company to the recording artist based on sales from their music. These royalties are typically based on a percentage of sales, 10% for example. The calculations used for determining royalties from sales can be quite complex and are a negotiated as part of the artist’s overall recording contract with the record company. Payments of royalties from sales to the recording artists do not start until the record company has recouped all the expenses they incurred for making, promoting and marketing the record. Recoupable expenses can include the costs of recording, producing, mastering, manufacturing, promoting and marketing the record, tour support, video production and any other related expenses the label includes as part of the recording contract.
It is quite common for a recording artist to never receive royalties from sales (unless, of course, their record is a huge hit) due to the way royalties from sales are structured and the high costs for the record label of getting a new record to market.
Mechanical Royalties – Mechanical Royalties are paid to the songwriter by the record company for the right to reproduce songs for public distribution. Mechanical royalties are paid on a per song basis for physical sales (CD’s, Albums) and permanent digital downloads (iTunes). Mechanical royalties are determined by multiplying the mechanical rate by the number of tracks on each record or CD that is sold. As of January 1, 2006 the statutory rate is 9.10 cents for a composition five minutes or less in length. For example, a record with 12 tracks on it that sells 50,000 copies would generate $54,600.00 in mechanical royalties (12 tracks X $.0910 X 50,000 sold copies) that the record company would have pay to the songwriter.
An agreement was reached for limited download and interactive streaming services to pay a mechanical royalty of 10.5 percent of their revenue, less any amounts owed for performance royalties. It is currently unclear how the calculation for paying songwriters from these revenues will be calculated.
Mechanical royalty payments are typically not reliant on the record label recouping their expenses from recording, producing or marketing the record like royalties from sales.
Public Performance Royalties – Public performance royalties are paid to songwriters for use of their songs by radio stations, restaurants, bars, TV / cable networks, retailers, online services or any other establishment that plays / streams licensed music heard by the general public. These royalties are collected and distributed in the US by the major performing rights organizations, ASCAP, BMI or SESAC. Public performance royalties are calculated using several variables and not on a per play basis. Songwriters should register their works online with one of the performing rights organizations in order to receive royalties for their work. However, it’s common for songwriters to not receive any public performance royalties until their song is publicly performed heavily.
Digital Performance Royalties – Digital Performance Royalties are paid to recording artists and copyright holders (usually the record label if there is one involved) when their sound recordings are performed on digital cable and satellite television, music, internet and satellite radio providers. SoundExchange collects and distributes digital performance royalties on a pay per play basis. Recording artists and copyright holders should register their work online with SoundExchange to receive royalties for their work.
Synchronization Royalties – Synchronization Royalties must be paid for a song to be used or “synchronized” with a movie, TV show, commercial or video. Synchronization royalties are usually paid in two parts. First, the copyright holder (usually the record label if there is one involved) is paid a fee for use of the song. Second, since the song will be publicly performed as part of a movie, TV show, commercial or video a public performance royalty must be paid to the songwriter through their performance royalty organization of record. Fees for synchronization range widely and are usually negotiated with the producer of the movie or TV show.
Print Music Royalties – Print Music royalties are paid to songwriters based on sales of printed sheet music. Royalties are typically 10% of the retail price of the sheet music.
Please keep in mind that royalty calculations can be very complex and for the sake of brevity this is only a broad brush overview of how royalties are generally structured without getting into the nuances of copyrights or music publishing.
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