How to make money: Music Publishing
The music industry is drastically changing due to streaming services, pirating, and overall change of music consumption. Due to this change, income and job opportunities in the music industry have diminished. As a result, those who make money off of music such as publishers, talent, and songwriters need to be aware of the basics of music publishing in order to fairly monetize their labor and talent. In 2021, we can still find some types of music publishing that are salient, including: performance income, mechanical royalties, and synchronization income.
Music publishers are indispensable to the music industry. Not only do they select how songs are published (how, where and when) but also decide where they are distributed– physically sold, played on the radio, licensed for TV/Film, on the internet digitally, in concerts, musicals, in games or even used in a Broadway play.
Each song contains a district bundle of rights. This makes a song a legal entity. Depending if the song is performed on stage or a soundtrack to a film it has a distinct legal characteristic.
A publisher can monetize a song through four main sources:
- Mechanical Royalties: Mechanical licensing pertains to copyrighted musician compositions that are used for CDs, records, tapes, etc. Mechanical royalties permit others to use what the publisher owns (song) through copyright. In this case, publishers and songwriters earn income.
- DPD Licensing: The Digital performance Right in Sound Recording Act enacted in 1995 to provide an agent for reproduction and delivery of sound recordings. DPD Licensing is specific to digital delivery.
Publishers license records to a record company under compulsory mechanical license. Once a publisher releases the composition, the record is public under copyright law. The rationale behind this law is related to public consciousness– if a song enters public consciousness and becomes popular, the publisher should not have a monopoly on a particular song.
Mechanical royalties rates are subject to change based on publisher and record company negotiations due to Copyright Law for compulsory licensing.
Controlled compositions are songs that an artist is the writer, producer, and publisher of the record. Historically in the US, when record companies sign an artist, they pay low mechanical rates for controlled compositions. Rates for controlled composition are approximately 75% of the minimum statutory rate.
Aggregate Royalty Payments – Further Limitations
Record companies pay an aggregate royalty payment based on a formula:
- The Record Companies pay 10 times 75% of the applicable minimum statutory rate on an album.
- The Record Companies pay 2 times 75% of the applicable minimum statutory rate on single records.
- The Record Companies pay 3 times 75% of the applicable minimum statutory rate on long play singles.
Performance income is made from performing a song. This could be on the radio, on television, in a movie. Performance income is categorized as either “small” or “grand”. Grand performances are usually related to a song used in a dramatic or theatrical performance. Small performances are more often at a bar, restaurant, store or used in entertainment programs.
Writers and publishers receive performance income through performing rights organizations. The three major performing rights organizations in the US are BMI (Broadcast Music, Inc.), ASCAP (American Society of Composers, Authors and Publishers), and SESAC (formerly known as Society of European Stage Authors and Composers). These organizations were created to help handle licenses and ensuing income.
All three of the organizations mentioned above collect royalties or commissions by issuing a blanket license to use songs in their repertoire. Their profit is a percentage of the advertising venue they collect.
Writers and publishers must be members of these organizations in order to receive mechanical royalties.
Synchronization is the right to control songs that are used with visual images such as TV, film, commercials or video games. Copyright law gives ownership to the publisher. Synch income is collected and organized by the publisher and then divided by both publisher and writer. In order to use a particular song, a license must be obtained by the publisher to legally use the song.
Fees for synchronization can vary depending on the distribution and monetization of the piece.