What Fans Need to Know About Music Rights & Royalties
Taking the appreciation of music to a whole new level.
BAND Royalty has always had one goal: demystify the music business. While concerts and merchandise make up a portion of a performance artists’ revenue, a piece of music is much more than just the artists playing it. There may be writers, producers, managers, labels, and publishers, all receiving income from each song.
For taking the appreciation of music to a whole new level, it’s important for fans to understand the financial matrix of the music rights and royalties that’s going on behind the scenes, and to participate in being part of its imminent evolution, known as BAND Royalty.
Many fans and even some of the new musicians don’t really think deeply about music rights and royalties. In fact, the simple enjoyment of the music for most may be just enough, and the business side of music may not mean much at all to the majority of the fans. Nevertheless, it’s a topic that can’t be ignored if a musician wants to take their craft from a hobby to a career. The main source of income and long term wealth for a huge spectrum of musicians is how they handle their music rights and the royalties that come along.
The core of music rights and music royalties can be broken down into two main components: writer’s share and publisher’s share. These two components work bilaterally, and are mutually dependent for the production of music and its monetization. According to the U.S. copyright law, musical production is considered intellectual property, and it is a serious offence to strip musicians off of their work.
Let us delve deeper into how the music industry works…
The pandemic situation during 2020 & 2021 made it very clear on how important royalties are to musicians, particularly when they cannot tour. The key takeaway is that royalties are compensation to the makers and owners of copyrights, in return for using and broadcasting their work in movies and TV shows, re-creating audio, producing derivatives, and more. The licensor signs an agreement that shares usage of their musical composition with a licensee for a certain period of time, and monetizes the profit according to the number of copies sold, and the generated revenue. These rights allow intermediaries, such as radio channels, podcasting, and webcasting panels, to collect such revenue by streaming original patent music.
Similarly, an agreement is required to perform certain songs in public performances, which is called a blanket license. Usually, record labels take a small cut out of the gains for such public performances. This whole system thrives on finance and distribution of the master record -oftentimes by record labels and compensation of the talent that made the music, such as writers, producers, and performers- to name a few. Popularity and finding your audience is everything when it comes to making a profit based on royalties; now more than ever, streaming plays an integral part of your favorite artists’ royalty checks.
There are various calculators that will help musicians and fans figure out exactly how much their favorite artists make for each 1 million streams; some sources average it to be approximately $0.00238 to $0.00322 -which is the equivalent of $2,380 to $3,220 if you are on Spotify. So, bringing enjoyment to a 1 million listens/ers is worth only a few thousand dollars? While these music streaming services have made distribution easier, they have also significantly increased financial profits for rights’ holders and performers. In contrast, CDs hover around $.90 cents to $1. USD in royalties per album sold. Album royalties have their own series of issues, and the payout contrast is still sharp; we will dive further into album royalty rights in future articles. But it is clear something is not working properly.
Rights are backed by legal negotiations and agreements in the music industry. Let’s now explore the breakdown of copyright and its utilization, particularly from the music labels’ perspective…
The copyright of music allows its owner to:
- Reproduce a copy of the original work. The copyright owner is allowed to create copies of the original work for its distribution, gain maximum reach, and generate desired revenues. This allows for the physical and digital production of original work, and applies to all music-producing formats such as CDs, concerts, streaming services, and online downloads.
- Produce new versions of the original work. By holding the exclusive rights of such copyright, the music owner has the permission to create any alternate versions of the original song such as covers, remixes, mash-ups, etc.
- Distribute copyrighted work to the general public. This aspect of copyright has to do with the release of a music album. This allows for the creation of a proper channel for the distribution of a song via intermediaries, such as record labels, music distributors, streaming channels, and online download services.
- Public performance of copyrighted work. Artists have to be allowed and to pay negotiating fees in case they want to perform a song that is owned by another person or institution. The work could then be performed in concerts and public appearances.
- Public display of original work. This allows the exclusive owner of the copyright to showcase details about the composition of this song, photos from performances, photos from rehearsals, and more.
Music rights and royalties are the bread and butter for professional artists, and have allowed for a systematic working of the music industry. There’s a plethora of ways by which they are utilized to generate optimal revenues, and BAND Royalty’s goal is to be integral in all these aspects.
For taking the appreciation of music to a whole new level, it’s important for fans to understand the financial matrix of the music rights and royalties that’s going on behind the scenes, and to participate in being part of its imminent evolution, known as BAND Royalty.
