A band releases a new album and the members are ready to make some money. Easy, right? But how exactly does a song generate income? There are many different ways to make money off the music, and each part of the recorded song can profit in different ways. Understanding how income is generated from the songs you release will go a long way to developing how, where and when you make money off the music you create.
After a song is written and recorded, it’s ready to make money from record sales, downloads and radio airplay. How this happens is based on ownership of two separate copyrights of the track, which are attached to distinct revenue sources: publishing and master recording royalties. This umbrella of royalty generation stems from intellectual property copyrights; knowing what these royalty generators are will help the creator of music develop and track incomes streams generated from a song.
Here’s a breakdown of the how’s and why’s of where your song’s money is generated from the recording side:
MASTER RECORDING ROYALTIES
The master recording is just that, a recording of your music. As an unsigned artist, you own the recording of the songs; if you’re signed to a label, generally the label owns the master. Income generated on the master recording is derived from the record royalty portion of income. Even if you are covering someone else’s song, you or the label can own the recording.
Record sales royalties:
- Unsigned artist: collects all income from sales and downloaded tracks (minus any distribution costs)
- Signed artist: label collects income from sales and downloaded tracks, and pays a record royalty percentage to artist.
Master sync royalties:
Similar to the above, the entity (you as the artist, your band, or a record label) owning the masters will collect income from licenses such as film and TV uses. If the label collects, the label typically will split a percentage of this sync fee with the artist.
Master performance royalties (Neighboring Rights):
Some countries have a system to pay a master performance royalty when a song is played publicly, such as on the radio, TV, or in a movie theater, termed neighboring rights. In the US, this income is collected, on a limited basis, by Sound Exchange. European countries have their own societies to collect and distribute these royalties. The master owner must sign up with these societies in order to collect this income.
YouTube master royalties:
If you own the master to your song, YouTube must pay a royalty. If you’re unsigned, your distributor will collect this income; if you’re signed, the royalty goes to the label, which then pays a percentage to the artist.
PUBLISHING AND WRITER ROYALTIES
The publishing and writer royalties, while two separate entities, make up a whole and are owned by the writer until such time a publishing deal is made with a third party. A writer can also own his or her own publishing entity and similarly, if two or more writers are involved, all those writers own a share of the publishing until such time they transfer the rights. Like master ownership of a cover song, you can own the publishing to a song but not the master if someone else records the song. Here’s how publisher and writer royalties are generated:
Publishing sync royalties:
Like master sync royalties, publishing fees are paid when a song is used in a film, TV or advertisement. These fees are negotiated by and paid directly to the publisher, or writer if she maintains control of her publishing.
Public performance royalties:
Each time a song is played on the radio, online via music sites like Spotify, broadcast on television in a movie or television show, or even played publicly in a bar, both the writer and publisher receives a royalty. This royalty is determined by a number of calculations such as extend of broadcast, length of use, and how often the song is played. Even if a writer has assigned the rights of the publishing to a third party, the writer can still collect his share of the royalties.
Mechanical royalties are paid to the publisher by the record label or distributor. This royalty is a set fee and paid based on how many sales or downloads a song generates.
YouTube publishing royalties:
YouTube generates both mechanical royalties (see above) and public performance royalties based on algorithms YouTube has created.
Knowing how ownership in your music is structured and where your music can make money is part of growing your career as a musician. Familiarizing yourself with copyrights, royalty sources and where your income comes from further helps target areas for the best growth of your music. And, of course, you may now see each song you create in a new light with multiple possibilities.