How Every New Music Artist Should Prepare To Get Paid

In today’s music industry, the ease with which music can be recorded inexpensively has lead to more artists entering the marketplace. At the same time, customers have had more access to music on an increasing number of platforms.  Streaming service models have slowly started to out-pace file sharing as the primary way consumers get and listen to their music. The new streaming models are allowing artists and other stakeholders to get paid when customers listen to their tracks, as opposed to when file sharing started in the late 90s. It has become more difficult for artists to get a grasp on where each and every income stream they are entitled to lies and how they can set up their affairs to receive what they are due from these sources.

There are two copyrights created anytime a song is written and recorded. There is a copyright ownership interest in the underlying musical composition, which typically belongs to the songwriter(s). There is also a copyright interest in the sound recording which typically belongs to the record label. Artists that self-record their albums or enter into record contracts where they keep the ownership of their masters retain the copyright ownership interest in the sound recording.

Both copyright owners have six exclusive rights, four of which are typically used when monetizing musical works. Those rights include: (1) the right to reproduce,  (2) the right to distribute, (3) the right to publically perform, and (4) the right to publically perform over digital transmission (applies only to the owner of copyright in the sound recording). Copyright owners can license any of these rights to third parties and receive royalties based on the licensing terms between themselves and the third party. Copyright owners can enter into non-exclusive licenses for any of their exclusive rights which further increases any potential income streams they would be entitled to receive from outside sources.

The right to reproduce is typically exploited by the underlying composition copyright owner.  Whenever a musical composition is embodied in either compact discs, vinyl records, cassettes, MP3 permanent downloads, or interactive streams, the composition copyright owner is owed a mechanical royalty (typically from the record company or streaming service manufacturing the physical copy, digital file, or interactive stream from which music is accessed).  The mechanical royalty rate is set by Congress and is currently 9.1 cents for each song that is reproduced. Record Companies and streaming services pay mechanical royalties to Harry Fox. As a result, it is important for the composition copyright owner to sign up with Harry Fox to lay the groundwork for receiving their mechanical royalty income. Note that in order to get mechanical royalties from plays on Spotify, composition copyright owners must be signed up with Harry Fox.  Harry Fox only works with artists through certain publishers, therefore, songwriters who are independent artists (have not signed a record or publishing contract) will not be able to collect mechanical royalty income from Spotify. Independent artists work around this by signing up with publishing administrators like Tunecore or CD Baby. Composition Copyright owners also have to sign up with a publishing administrator to receive all of their mechanical royalties from interactive plays on YouTube. Publishing administrators register a content ID system that allows YouTube to identify every time a video with the copyright owner’s composition is streamed.  This is the case whether the streaming video is uploaded by the copyright owner or a third party user. Composition Copyright owners can also share in ad revenue on the platform by signing up for YouTube monetization directly on the platform’s website.

The right to distribute musical works are usually exploited by record companies. This right would stay with artists that retain the rights to their master recordings or are unsigned. Record companies and independent artists work with distributors to bring physical copies of their recordings to retail outlets. In this day and age, most physical distribution deals are entered into by the bigger musical acts or labels. If you are a smaller record company or independent artist you can access digital retailers like ITunes and streaming services like Amazon or Spotify by signing up with digital aggregators like Tunecore, CD Baby, Catapult, and DistroKid.

The right to publically perform works are traditionally exploited by composition copyright owners. Terrestrial radio stations, streaming services like Pandora, Spotify & YouTube, and establishments like bars & restaurants that play music for an audience typically obtain blanket licenses from ASCAP, BMI, and SESAC, who are the three main Performance Rights Organizations (“PROs”). Getting blanket licenses from all three PROs allows licensees to play almost any released song. The composition copyright owner or publisher must sign up with one and only one PRO to ensure that they will receive any public performance royalties due to them. The PROs conduct surveys of licensees and remit public performance royalties to copyright owners accordingly.

The final commonly exploited exclusive right is the public performance right for non-interactive digital transmission. This is very much like the traditional public performance right, except that this right applies only to sound recording copyright owners with respect to non-interactive digital transmissions. Since 1998, sound recording copyright owners have received public performance royalties for non-interactive streaming sites like Pandora and Sirius XM. To receive these royalties, sound recording copyright owners, whether they are record companies or artists that have retained their masters have to sign up for SoundExchange. SoundExchange is a PRO that collects royalties for copyright owners, performing artists, and session players.

Underlying composition copyright owners who have signed up with Harry Fox to collect mechanical royalties and a PRO to collect public performance royalties must also remember to register the songs in their catalogs that these third parties will be exploiting on their behalf. Registering songs involves informing Harry Fox and the PROs information including song details, song metadata, credits, ownership interests, and release information. Things can get complicated when you as an artist are collaborating with multiple songwriters, who have their own publishers, and belong to different PROs. Documenting this information correctly and sending it out to third parties through the song registration process ensures that those tasked with sending royalties to multiple parties for the exploitation of each song will have the right information to do so. Songwriter management databases like TuneRegistry are helpful in providing a platform for artists to document and organize this information. These platforms also allow for integrated registrations so you won’t have to fill out separate forms for Harry Fox and all the other PROs including SoundExchange if you are a self-releasing artist looking to collect your non-interactive performance royalties.

The new streaming models offered by digital service providers have presented exciting new opportunities for copyright owners to exploit their works. However, these income streams aren’t going to find you. Artists and record labels have to lay the groundwork so that this money starts to flow where it is supposed to. Making money as an artist in today’s industry will require collecting income from a variety of sources, unlike the past where record sales were the primary driver of artists’ earnings.