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How Songwriters and Music Publishers Make Money

Written by: Barry Neil Shrum

Reputation Level 11

Business Copyrights

Posted about 3 years ago. 6 helpful votes, 0 comments

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A Constitutional Right

The concept of copyright originates with the Statute of Anne (1710) in Britain. But in the US, the rights of songwriter to get paid for his or her creation are based on Article I, Section 8, Clause 8 of the U.S. Constitution, which gives Congress the right "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Congress drew upon this authority to draft the legislation which became the Copyright Act, in all its various versions. The legislation bestows upon copyright owners some basic and exclusive rights.

Exclusive Rights

An “exclusive right” is a right that only the copyright owner is free to exercise. Others are prohibited from using the work without the express permission of the owner. This is sometime referred to as a "negative right." The exclusive rights bestowed upon a copyright owner in the U.S. are as follows: THE REPRODUCTION RIGHT, i.e. the right to produce copies or reproductions of the work and to sell those copies (mechanical rights; including, sometimes, electronic copies: distribution rights); and THE DISTRIBUTION RIGHT, i.e. the right to distribute the work, including the importation or exportation of the work; THE ADAPTATION OR DERIVATIVE RIGHT, i.e. the right to create derivative works (works that incorporate and/or adapt the original work); THE PERFORMANCE AND BROADCAST RIGHT, i.e. the right to perform or display the work publicly, as well as transmit or display by radio or video and THE DISPLAY RIGHT, i.e., the right to publicly display a work

How these exclusive rights translate into money for a music publisher and/or songwriter

The exclusive rights granted to a copyright owner translate into various types of royalty payments for the songwriter and the music publisher: mechanical royalties, performance royalties, synchronization royalties and print royalties. The payments are made by record companies, internet site operators, radio stations, television broadcasters, cable television operators, print publishers, live music venues and others.

Mechanical Royalties.

Mechanical royalties are statutorily imposed. A mechanical license grants the right to produce and distribute a song. The law provides that a owner of a musical composition be paid each time his or her song is mechanically reproduced (they are referred to as "mechanicals" because they were first imposed during the production of player pianos, which used mechanical rolls to play the music). The current statutory rate as of January 1, 2006 was 9.1 cents for songs 5 minutes or less or 1.75 cents per minute or fraction thereof over 5 minutes. Record companies have traditionally limited this amount through contract and pay only 75% of the statutory rate and, on albums and CD's, for only 10 songs per album. Built into the copyright act is the compulsory license provision. If a composition has already been commercially recorded, and you wish to record and distribute that composition yourself (and you are not the original songwriter), you can obtain a compulsory mechanical license.

Performance Royalties

Companies which play music publicly, e.g. radio and television stations, supermarkets, concert halls, live music venues and promoters, are required to pay music publisher for the right to transmit or perform musical compositions. In the US, performance royalties are generally collected by ASCAP, BMI and SESAC, with which publishers and songwriters contract to collect such revenues. The various companies pay a "blanket" license to these performance rights organizations, which then make distributions to members based on very complicated algorithms which measure the usage of individual compositions and pay according to a percentage. These calculations incorporate numerous strategies designed to capture the performance data, including methods as simple as collecting handwritten logs from radio stations to capturing the data through Internet spiders.

Synchronization Royalties

Royalties are paid to songwriters and music publishers when their compositions are used in combination with visual images. This is known as a synchronization royalty because the music is "synchronized" with the image. This type of license is ad hoc, i.e. they are always open to negotiation on a case by case basis. A song being placed in big budget Hollywood film might generate synchronization fees in the six figure range, while a song being placed in a local television documentary would probably be closer to the hundreds.

Print & Folio Royalties

The distribution of sheet music and printed folios of sheet music used to be the bread and butter of the old Tin Pan Alley music publishing industry in the era before recorded music became the primary means of exploiting a musical composition copyright. Though the demand is not what it used to be, print royalties still generate a significant stream of income for publishers and songwriters. The use of a song's lyrics in books or multimedia, combined with the rise in popularity of the karaoke machine, have seen an increase in this type of royalty.

New Usages

The majority of a songwriter/publisher's income used to flow from record sales and radio airplay, but in today's complex and digital world, revenue streams are also generated from a musical compositions use in ringtones, karaoke machines, internet streaming and downloading, and video games. These sources of income could become a discussion topic in their own right and are quickly overtaking other streams of income in importance.

Keeping track

Each source of income has its own distinct payment structure and accounting standards. Most songwriters and publishers have lawyers and other business professionals assisting them with the challenging task of tracking revenue streams and making sure every dollars is properly accounted for on the statements. Hire a good music lawyer. Hire a good business consultant/accountant who is familiar with the music industry.