Recent discussions about the economics of music streaming sparked an interesting debate regarding what would be considered equitable pay for artists and musicians. As governments, companies, and associations struggle to find a common ground, many artists and music professionals at the early stages of their careers don’t always have a clear idea of how they can earn money from their music. That’s why we’ve put together a series of articles that will shed some light on how royalties work, how to find other sources of income, and what your rights are as an author, producer, or performing artist.
To kick-start this crash course on the economics of the music industry, let’s focus on one of its pillars: copyright.
Copyright is part of Intellectual Property, which is a broad category that regroups all the intangible products of the human mind. At its simplest, copyright is the right to control the copying of certain works for a limited period of time. It acts as a limited-time monopoly, during which you have control of the rights of a work that you created and, consequently, are entitled to the revenue it generates. In order to be copyrightable, your work needs to be:
Although the duration of a copyright varies from country to country and is based on the type of work you create, the key concept is the same worldwide: if you have composed a song, people or other entities need to ask your permission in order to play that song, and pay to use it.
As the name suggests it, “copyright” means that you have the right to copy the work and, most importantly, grant the same right to other entities in exchange for equal compensation. As a copyright owner, you have a juicy series of rights that you can commercially exploit, such as:
To make it simple, a radio station isn’t allowed to play your songs for free. You’re granting them the right to broadcast it, and they pay you each time the song is on air. This is generally done via the local CMO (Collective Management Organization) / PRO (Performing Rights Organization) which reaches out to radios to collect that information for you. Here is where things start to get complicated!
People often think “song” and “recording” are synonyms, but that is not the case. Despite being deeply intertwined, they are two completely different things with separate bundles of rights. The only problem is that songs do not exist in the material world. They exist in an “immaterial world” so they need to be given some sort of physical or digital format, as prescribed by the second condition to be copyrighted. Let’s consider a song by the Beatles, for a minute, to illustrate this distinction.
When you hear the song “Hey Jude”, your mind goes straight to the 1968’s single produced by George Martin and performed by McCartney, Lennon, Harrison and Starr. The track is so famous and unique that you think about that specific performance, even if you’re singing it by yourself under the shower. What you are thinking of is the Recording of Hey Jude. The Song you’re singing is the sequence of specific notes, in that specific order they were created for Hey Jude.
Let’s consider another situation: you’ve organized a party with a live band and a DJ. If the band plays a cover version of Hey Jude, as the event organizer you would need to pay the rights relative to the song Hey Jude. On the other hand, if the DJ plays the 1968 record of Hey Jude, you would need to pay for the usage of both the song and the record to their respective owners.
While it may seem like a technicality from the audience’s perspective, it makes an enormous difference in the music industry. The primary reason is that these two entities have their own set of rights and, most of the time, two (or more) different owners and different entities are in charge of collecting the money earned from third parties’ exploitations/usage.
If you as an artist are able to write and record your own songs by yourself, congratulations! You officially own the rights for both the song and the recording, and are entitled to 100% of the money coming from their exploitation. So if someone streams one of your records on a DSP: you get paid twice, since the user is accessing both the song and the record that contains it.
However, this is quite a rare situation because high-level productions often involve way more entities. Usually, record labels own the copyright of the record since they paid the costs, and it is them who pays the artist a royalty share based on the revenue generated by the record. Also, the more people involved in this process, the more the cut of the pie shrinks. Music producers usually get a royalty on the records they’ve worked on, and even though you’re a high-level performer there is a good chance you will get a small percentage as well.
The song is no different in terms of the number of owners. In fact, there are usually multiple people involved in the writing process, and each one of them gets a split of the song based on whether they contributed to the lyrics, melody or beat. Also, songwriters generally assign their administration rights to publishers who take charge of issuing licences, collecting royalties, and paying the writers and composers in exchange for a share of the profit. To sum it up, here’s a visualization of what a copyright split looks like.
Such a great deal of information to process, right? The complexity of the music industry will never stop to surprise us. Many aspects to keep in mind, but it surely comes with its own perks. Following your dream career, exploiting your passion, and taking your music around the world makes this whole process worthwhile. Quite a handful isn’t it! Let’s take a break for a moment and meet again in two weeks for part two. We’ll take a deeper look into public performance rights and the long journey you need to embark on to collect your royalties!!