As you study more about the music business, you’ll see the distinction over and over again between “artist” and “songwriter”. It’s an important distinction to make because the royalties for “artists” and the royalties for “songwriters” are completely different. The reason I’m putting quotes around “artists” and “songwriters” is because so many of us are both. And many of us use these terms interchangeably. And back in the day, when labels started signing artists who also wrote their own songs (which, at the time, was quite unique), they put in clauses in the contract to limit the royalties they’d (legally) have to pay out to their newly signed artists/songwriters. One of these clauses is the infamous Controlled Composition Clause.
A quick history lesson.
Before the digital age, royalties were difficult to track. But there were fewer platforms to consume music, so there were far fewer royalty streams to worry about. With physical sales plummeting, and people shifting from downloading to streaming (like Spotify and Apple Music) and the rise of digital radio (like Pandora and Sirius/XM), there are suddenly more royalties out there. But they can be tracked much easier through sonic recognition and content ID software. We’re not quite there yet, but we’re getting closer every day. For indie artists without a label or a publisher, you have to know what these royalties are and know where and how to get them. So let’s break them down.
First, some terms you need to understand:
Artists record sound recordings. Rihanna is an artist. She did not write her song “Diamonds.” So she is not the songwriter. Record labels represent artists. A band is an artist. A rapper is an artist. A singer is an artist. Typically whatever name is on the album, is the artist.
Songwriters write the compositions. “Diamonds” was written by 4 songwriters: Sia Furler, Benjamin Levin, Mikkel S. Eriksen, and Tor Erik Hermansen. Publishing companies represent songwriters.
Some call this the “master.” It’s the actual recording. The mastered track. Traditionally, labels (because they own the master), collect royalties for sound recordings. Sound recordings are not to be confused with compositions. Artists record sound recordings.
This is the song. Not the recording. Traditionally, publishing companies (because they own the composition and represent songwriters) collect royalties for compositions. Songwriters write compositions.
Performing Rights Organizations. In the US, these are ASCAP, BMI, and SESAC. In Canada this is SOCAN. These organizations represent songwriters NOT artists. These are organizations that collect performance royalties (NOT mechanical royalties – we’ll get to those in a bit).
The way these PROs make money to pay their songwriters and publishers royalties is PROs collect money from thousands of venues (radio stations, TV stations, department stores, bars, live venues, etc) by requiring them to purchase “blanket licenses” which gives these venues permission to play music in their establishment (or on the air). The PROs then pool all of this money up and divide it amongst all of their songwriters and publishers based on the frequency and “weight” of each song’s “public performance.” The PROs then pay the publishing companies their 50% and the songwriters their 50%.
PROs split “publishing” and “songwriter” royalties equally. 50/50. This is not a deal you negotiate. This is just how they do it for everyone from Taylor Swift down to you and me. 50/50. Any songwriter in the US can sign up for ASCAP or BMI without being invited or having to apply. ASCAP and BMI are both not-for-profit organizations, SESAC is for profit and you must be accepted.
American Society of Composers, Authors, and Publishers represent 550,000 members (songwriters and publishers) and over 10 million compositions. ASCAP is owned and run by its songwriter and publisher members with an elected board. They have paid out over $5 billion in the past 6 years. They represent songwriters like Katy Perry, Dr. Dre, Marc Anthony, Chris Stapleton, Ne-Yo, Trisha Yearwood, Brandi Carlile, Lauryn Hill, Jimi Hendrix, Bill Withers, Carly Simon, Quincy Jones, Marvin Gaye, Stevie Wonder, and Duke Ellington.
Broadcast Music Inc. represents over 700,000 members (songwriters and publishers) and over 10.5 million compositions. They represent songwriters like Taylor Swift, Lil Wayne, Mariah Carey, John Legend, Lady Gaga, Eminem, Maroon 5, Michael Jackson, Linkin Park, Sam Cook, Willie Nelson, Loretta Lynn, Dolly Parton, Fats Domino, Rihanna, John Williams and Danny Elfman.
SESAC is not an acronym… really. It represents over 30,000 members (songwriters and publishers) and over 400,000 compositions. They represent songwriters like Bob Dylan, Neil Diamond, RUSH, Zac Brown, Lady Antebellum, The Avett Brothers, Shirley Caesar, Paul Shaffer and Thompson Square. You can only sign up for one PRO. You cannot be a member of ASCAP and BMI. So you have to make a choice. Find out what the PROs are in your country and pick one and sign up. **It’s important to note that if you sign up with ASCAP as a songwriter, you also need to register a “vanity publishing company.” That means, just make up a name and register your publishing company with ASCAP. You must do this to get paid all of your money. If you don’t have your vanity publishing company registered as a corporation, or have a bank account under its name, make sure to tell ASCAP you are “doing business as (dba)” the vanity publishing company so they can write the checks appropriately. You can also sign up for direct deposit which expedites this entire process. ASCAP pays out 50% of the total money to the songwriter and 50% to the publisher. If you don’t register a publishing company, you will only get half of your money.
If you are an unaffiliated songwriter with BMI, you don’t need to register a vanity publishing company. BMI will pay you 100% of the money. However, If you sign up for an admin publishing company (like SongTrust, CD Baby Pro or Tunecore Publishing), they will collect your publishing money from ASCAP or BMI, take their commission (10-15%), and pay you out the rest. So, you don’t need to register a vanity publishing company (if you’re with ASCAP) or register it as an LLC or open a bank account. This is a far easier option.
I recommend you make sure all of your songs are registered with ASCAP or BMI (or SESAC) and that you work with an admin publishing company. If you distribute through CD Baby, use CD Baby Pro. If you don’t, use SongTrust or Tunecore Publishing. And if you haven’t registered with a PRO yet, signup for an admin publishing company FIRST – they will then register your songs with a PRO (save some time and steps!)
Some people call them digital aggregators. These companies are how you get your music into iTunes, Spotify, Apple Music, Amazon, Google Play, Deezer, Tidal and 80+ other digital stores and streaming services around the world. The biggest digital distribution companies for indie artists are CD Baby, DistroKid, and Tunecore. I reviewed them and 6 others in this piece.
Harry Fox Agency. HFA handles US mechanical royalties. They are hired by companies like Spotify to calculate and pay out mechanical royalties to publishers. HFA represents 48,000 publishers. They have streamlined licensing services (their program is called Slingshot) for companies needing to license music. HFA calculates, collects and pays mechanical royalties. They also issue “mechanical licenses.” You can’t signup for HFA unless you are a publisher and have songs released by a third party label (not self-released).
BUT, you don’t need to signup with HFA to collect mechanical royalties. Admin publishing companies like SongTrust, CD Baby, Tunecore, and Audiam will collect mechanical royalties for you if you signup for their publishing programs. Read my comparison between CD Baby Pro and Tunecore Publishing. Fun fact: HFA was recently bought by SESAC.
Admin stands for administration. All publishing companies have an admin department. They also have a synch licensing department. An A&R department. And many other departments. But, admin publishing companies have started popping up over the past few years to help unrepped songwriters collect all the royalties out there from around the world. Again, companies like SongTrust, CD Baby, Tunecore, and Audiam are some admin publishing companies who will do this.
Synch stands for synchronization. A synch license is needed to synch music to picture. TV shows, movies, commercials, video games all need a sync license to legally put a song alongside their picture (get it? “synching” audio to picture). Technically, so does YouTube (and you, when you make a cover video and upload it).
Fun fact: virtually every YouTube cover is illegal.
A publisher (remember, publishers represent songwriters and compositions), could legally get YouTube to remove your cover if they wanted. But no publishers are really doing this because they realize how great the promotion is. And, YouTube is now monetizing cover videos and getting the publishers (and songwriters) paid through ad revenue.
Some musicians have expressed to me their reluctance to put up covers on YouTube for which they have not obtained the proper licenses. The honest folk of the world. Those who wouldn’t dare fill up their free water cup at Chipotle with soda. I applaud your ethics. However, it’s virtually impossible for an indie artist to obtain a synch license from a major publishing company. Believe me, I’ve tried. They don’t make it easy. There’s no streamlined way to do this. But, there IS a very easy way to release cover songs, like on iTunes (not videos, songs).
Licensing companies work to get your music placed in TV shows, movies, trailers, commercials and video games. Independent licensing companies have been popping up left and right over the past 10 years. Before that (and still currently) all the synch licensing was done within publishing companies. All publishing companies have synch licensing divisions. Licensing companies typically take 30-50% of the upfront synch license and master use license fee. Some take a percentage of your PRO backend royalties as well, others don’t.
Licensing companies typically only represent artists who are also the sole songwriters. Licensing companies are one-stop shops for music supervisors. They want to make it easy as possible for the ad agency or TV show to use the song. Licensing companies can clear the songs immediately for the music supervisors. So if you co-write with anyone, FIRST make sure they are NOT signed to a publishing company (if they are, it makes things very difficult and will almost certainly prevent a licensing company from working with you – or rather repping that song). And make sure you get in writing (email is fine), that you have full rights to the song to license without getting permission from your co-writers.
Word to the wise: NEVER pay a licensing company money up front to go pitch you. If they believe in your music, they will pitch you and work solely on commission.
Again, DO NOT pay anything up front. If any company charges you up front for these services it’s a scam. Runaway (to this comment section and let us know who these scam artists are!)
A lot of people confuse SoundExchange with PROs. Because technically SoundExchange IS a performing rights organization, but I’m not including them in the “PRO” classification out of clarity. And when most in the biz discuss PROs they are just referring to the aforementioned ASCAP, BMI, SESAC. SoundExchange represents artists and labels whereas (the other) PROs represent songwriters and publishers. Over 110,000 artists and rights owners (labels) are registered with SoundExchange and they have paid out over $3 billion since inception. “Non-interactive” means you can’t choose your song.
Unlike the 3 PROs in America, SoundExchange is the only organization in America that collects performance royalties for “non-interactive” digital sound recordings (not compositions). “Non-interactive” means you can’t choose your song. So, Pandora radio is non-interactive, whereas Apple Music and Spotify are “interactive.” Beats 1 (within Apple Music) is digital radio (non-interactive). Spotify’s Pandora-like radio service is also non-interactive, but more on that in a sec.
But, SoundExchange has agreements with 20 foreign collections agencies. When your music is played in their territory, they pay SoundExchange, and SoundExchange pays you. Like the PROs, SoundExchange issues blanket licenses to digital radio (non-interactive) platforms (like Pandora and Sirius/XM) which gives these outlets the ability to play any song they represent. Like the PROs, the outlets pay an annual fee for the blanket license. BUT, SoundExchange ONLY collects digital royalties. The PROs collect both digital, terrestrial (AM/FM radio) and live royalties.
There’s a weird copyright law still on the books (and lobbied heavily by Big Radio) that makes it so AM/FM radio only has to pay composition performance royalties and NOT sound recording royalties. Makes no sense. The US Copyright Office has recommended that this law is changed, but thanks to the Big Radio, it hasn’t. This, unfortunately, can only be changed by passing a bill in Congress. And our current American Congress doesn’t pass sh*t. Pardon my American English. So, again, SoundExchange = digital sound recording royalties for non-interactive plays.
But, interestingly enough (I know this stuff is SOOO interesting – stay with me!), Pandora, pays BOTH digital sound recording performance royalties (to SoundExchange) AND digital composition performance royalties (to PROs), but, thanks to Consent Decrees (set by rate court judges and, once again, for which the practices can only be changed by Congress), pays about 10x more for sound recording royalties (to SoundExchange) than for songwriter royalties (to the PROs). The Songwriter Equity Act (bi-partisan) has been in Congress for about two years now to make this change. But Congress moves slower than an Adele ballad (but contains about the same number of tears shed).
And to just complicate matters worse, not ALL digital radio services work with SoundExchange (but 2,500 do). Some opt out (Spotify non-interactive radio has opted out) and they just negotiate rates directly with each label/distributor.
Go to SoundExchange.com. If you are both the performer (artist) and the owner of the sound recording (meaning you don’t have a record label) simply select “Both” on the 2nd page of the registration when it asks you to select: Performer, Sound Recording Copyright Owner or Both. It’s a long process and you have to submit a full catalog list. When I did this, I had to email in a complicated Excel doc with lots of info. Plan a weekend to do all of this. It’s time consuming, but worth it.
SoundExchange will hold your back royalties for 3 years, so register now if you haven’t already. And if you HAVE registered (maybe you did years ago), make sure you have also registered as the Sound Recording Copyright Owner (they previously called it “Rights Owner”). Because the “Both” option is very new, you may have missed it and are only receiving 45% of your total money. Why 45% and not 50%? Keep reading.
Session musicians can get some of this money too! If you are a session musician, 5% of the total money earned for each song that you played on has been reserved for you. Contact the American Federation of Musicians (AFM union) to grab this moolah! SoundExchange’s breakdown for payment is: 45% to Featured Artist, 50% to the Sound Recording Owner (label – or you if you self released), and 5% to session musicians or, how they put it, “non-featured artists.” Regardless if you have session musicians or not on your record, SoundExchange holds 5% of all royalties from everyone for them.
Sound Recording Digital Performance Royalties – These come from non-interactive (you can’t choose the song) digital platforms like internet and satellite radio. Download Sales – These come from when someone downloads your music on iTunes, Google Play, Amazon, etc. **note: BandCamp and Loudr also sell downloads, but unlike iTunes, they are artist managed stores and you get sales revenue directly from BandCamp and Loudr.
There are lots of different kinds of streaming revenue. But “interactive” (meaning you choose the song) streaming revenue (like from Spotify, Apple Music, Deezer, Tidal) goes to the artist/label. But when these services claim they pay out 70% of all revenue, the 70% is for both the artist/label revenue AND the songwriter royalties (mechanicals). Streaming revenue to artists is WAY more than the mechanicals paid to songwriters.
Technically there are a bunch of “assets” or streams of revenue for each YouTube video. To make it simple, we’ll just get into how you can earn money. First, for the sound recording (we’ll get into the composition in the next section). Any video that uses your sound recording you can make money off of (whether you uploaded the video or not) if you allow YouTube to put ads on the video (they call it “monetize”). Either videos you upload or fan made cat videos with your sound recordings can generate ad revenue that you can collect. YouTube splits the ad revenue 45%/55% in your favor.
How To Get Paid: Most digital distribution companies have this option via an opt-in check box. You can see which do and which do not on this chart. If your distribution doesn’t handle this, you can sign up for independent YouTube revenue collection companies like Audiam, AdRev or InDmusic. But it’s easiest if you keep everything under one roof.
Any TV show, movie, commercial, trailer or video game requires both a master use license (from the artist/label) for use of the sound recording and a synch license (from the songwriter/publisher) for use of the composition. These days, most music supervisors (the people who place the music), will just pay you (an indie artist) a bulk amount for both the master use license and the sync license (because most indie artists wrote and recorded the song).
But if you’re repped by a label and a publisher, the supe (that’s short for music supervisor) will go to your label and pay for a master use license and then to your publisher and pay for a sync license. Usually, it’s the same amount, but not always. These monies range from a thousand bucks for background music on a cable TV show all the way up to hundreds of thousands of dollars for commercials and big movies/trailers.
Composition Performance Royalties: These come from plays on the radio (FM/AM or digital), interactive and non-interactive streaming services (Spotify, Apple Music) live at a concert (yes even your own), in restaurants, bars, department stores, coffee shops, TV, literally any public place that has music (live or recorded) needs a license from ASCAP, BMI and SESAC to legally be able to play music in their establishment.
only exception is movie theaters. For some reason (politics), American movie theaters are exempt from needing a public performance license and no one gets paid when songs are played in movie theaters. On TV, yes. Movie theater, no. However, royalties are generated for Foreign (outside the US) movie theaters. And for an international smash, it could add up to be some serious cheddar. And oh: I’ve heard in the hundreds of thousands.
Of course if a coffee shop has the AM/FM radio playing, you won’t get paid when your song is played there. But if they have Pandora or Sirius/XM on, this is tracked and you will (eventually) get paid on the plays. The system is currently being worked out and not everything is tracked yet, but eventually, say, in a few years, it will be.
Kobalt is leading this front. Hopefully ASCAP, BMI and SESAC follow suit and improve their tracking systems. ASCAP uses a “sampling” method, where they use an electronic monitoring system, MediaMonitors/MediaBase, for sample performance data from commercial, NPR & NCR radio. The sample data is then loaded into ASCAP’s Audio Performance Management system where it is (mostly) electronically matched to the works in the ASCAP database. ASCAP states that they supplement this data with station logs and other technology vendors and methods that capture ads, promos and themes and background music.
BMI also uses sampling. They say they use “performance monitoring data, continuously collected on a large percentage of all licensed commercial radio stations, to determine payable performances.” They also use their “proprietary pattern-recognition technology.” They call it a “census” and claim it’s “statistical reliable and highly accurate.” For college radio, BMI pays a minimum of 6 cents “for all participants.” Not sure if that’s per station or what.
Tip: Both ASCAP and BMI have a program where you can import your setlist and venue information to get you paid for your live performance royalties (for performing your originals in a club, theater, grocery store, arena, wherever). They’re called BMI Live and ASCAP OnStage. Last I heard, most indie artists playing under 500 cap rooms were making about $10 a show. It ain’t much, but it can add up – especially if you’re a live act playing 200 dates a year. Who couldn’t use an extra $2K?
Mechanical royalties are earned when a song is streamed, downloaded or purchased (like a CD or vinyl). In America, the rate is set by the US government. It’s currently 9.1 cents per download and it’s a very complicated formula to figure out what you get per stream. But you can check out HFA’s charts here to attempt to make sense of it. But, it’s AROUND $.0007 per stream – but of course varies based on the streaming platform’s user numbers, revenue, etc. Worldwide, it’s about the same – about 8-10% of the total sale/stream.
Worth noting: in the US, mechanical royalties get passed onto the label/distributor from iTunes. However, for nearly everywhere else in the world, mechanicals get collected by local collections agencies BEFORE the money gets to your distributor. And that’s why when you look at your statements, an iTunes download in the US nets you $.69: 70% of $.99 — Apple retains 30% from iTunes sales.
Whereas, a download in England nets you around $.60. So, if you don’t have an admin publishing company you won’t get any of your international mechanical royalties from download sales. Like SoundExchange, these international collections agencies will hold onto this money (for about 3 years) until a publisher comes and claims it. You technically could try to do this by calling up collections agencies in every country, but I just recommend going with an admin pub company. They already have all the relationships built (and they only take about 10-15%). It’s worth it.
Because your music is being played on YouTube videos, it’s technically a public performance. And that includes any video on YouTube (by you or anyone else): cover, live performance, original recording lyric video, music video or cat video. As long as it has your compositions in it, it earns a public performance royalty.
In addition to performance royalties, you can earn a percentage of the ad revenue generated from the video. Again, any video on YouTube that has your composition in it (uploaded by you or anyone else) can get an ad placed on it and start generating revenue. Your admin publishing company will handle this. I know you’re wondering, ‘but how will my admin publishing company know when Joe Schmo from Lincoln, Nebraska uploads a cover of my song? Especially because my song title is “She Loves You” (and it’s not the Beatles song)?’
Yeah, you can see the difficulty. And YouTube’s Content ID program doesn’t catch these, because covers and live recordings are different sound recordings than the original. Some admin publishing companies and YouTube collections companies are better at tracking this than others. Some do manual searches/listen. Others have other systems in place. But you can always ask your company how they do it.
Like the master use license, any TV show, movie, commercial or video game requires a synchronization (sync for short) license to put the composition alongside their picture.