The Business of Music - May 2014

The Business of Music May 20, 2014

Ben Stauffer V-P of Finance Centricity Music

What I’m Talking About

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ª Developing Relationships ª Types of Record Deals & Royalties

ª Who Gets Paid For Songs & Records – A BUNCH of Stuff

The Business of Music

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First – Your Questions?

Develop Relationships

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ª Manager ª Publisher

ª Record Label / Services Company

ª Booking Agent

ª Attorney

ª Business Manager / Accountant

Order to developing these relationships depends on your needs and how far along in your career you are.

Connect With A Manager

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Live Show History

Manager

Management Agreement

Songs

Talent and Desire!

Connect With A Publisher

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Song(s)

Publisher Single Song or Long-Term Publishing Agreement

Connect With A Label

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Record Label Or

Services Company

Licensing Agreement

Development/Long-Term

Record Deal

Or

Demo(s) or Masters

Traditional Label vs. Services Deal

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Traditional Label Label Services

Agreement Type “Recording” “Licensing”

Master Ownership Label Artist

Recording Costs Label Pays Artist Pays

Marketing Costs* Label Pays Usually Label Pays

Distribution Costs* Label Pays Usually Label Pays

Manufacturing Costs* Label Pays Varies

$ Collection Label Collects Label Collects

Royalty Advance* Yes Yes

*Costs are typically “recoupable” from royalties earned before the Artist receives additional payment, under either type of agreement.

What Is Record Royalty “Recoupment?”

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•  Label recovers up-front costs of production, marketing, royalty advance, and other investments related to the services provided to the Artist

•  Artist Advance

•  Like Songwriter Advance paid by Publisher •  Prepayment of Future Royalties expected to be earned by

the Artist •  Recovered from record royalties received by the Label

before additional payment to the Artist is made

•  Recoupable costs spelled out in Artist/Label Agreement

Other Players On The Business Side

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ª Distribution Company – Gets your record into stores ª Royalty Administrator – Processes licenses and royalty

payments

First: Make Music!

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Songwriter / Artist

Song (Music & Lyrics)

Song Copyright Created

Create it in a “fixed, tangible form,” and it’s copyrighted.

Cut A Record

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Recorded Master

Song(s)

Producer

With Label A&R Rep

Master Copyright Created

“fixed, tangible form” = copyright

Artist


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Question Break #1

Master Revenue Sources – What They Are

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Recorded Master

Music Sales

Digital Public

Performance

Film, TV, and Other “Syncs”

On-Demand Streaming

Music Sales and On-Demand Streaming

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Music Sales Digital Album and Track Downloads

Audio Streaming – “Ad-Supported” and Subscription

Physical Product ª  At Live Events ª  Amazon / General Market ª  Christian Bookstores (CBA)

On-Demand Streaming

“Ad-Supported” Video Streaming

Digital Public Performance

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Digital Public

Performance

Other Online Radio


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ª Movies and trailers ª Television shows and commercials ª Video games ª Online web series

Who Gets Paid?

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Record Label Distributor Retailer Artist

Net Revenue

Music Sales – example: Sell 1 Album or 1 Track

Takes Wholesaler Fee Takes Distribution Fee

Artist Royalties Earned Toward Recoupment

Publisher(s)

Mechanical Royalties = $0.091 / track

Mas

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Songwriter(s)

Writer Royalties Earned Toward Recoupment

An iTunes Sale —The Math

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Example: Album has 10 tracks, sell 10,000 Copies of the Album for $10 each

ª  Total Revenue = $100,000 ª  iTunes cut = ($30,000) 30% of Total Revenue ª  Distribution fee = ($14,000) 20% of Rev – iTunes cut Net For Label/Artist/Publisher/Writer = $56,000

Publishing Income – ALL Writers: ª Writers’ Share = $4,550 = $.091 x 10 x 10,000 / 2 – Standard rate ª  Publishers’ Share = $4,550 = $.091 x 10 x 10,000 / 2 – Standard rate Total Is $910 Per Track Other Label Payment: ª  Producer Royalties = ($3,360) 6% of Net For Label/Artist/Publisher/Writer

Label/Artist Share After Royalties = $43,540 Artist deals vary dramatically, from a set royalty rate (~10%-15%) to profit sharing after the album “recoups” its costs (ex. 50%-50% Artist-Label).


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Question Break #2

Who Gets Paid?

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Publisher

Record Label Distributor

Net Revenue

On-Demand Streaming – $0.002 to $0.008 per Stream Starting Rate

Negotiated royalty Takes Distribution Fee

Artist

Artist Royalties Earned Toward Recoupment

Service

Harry Fox Agency

75% to 85% net to Distributor

15% - 25% of net to royalty agency

Takes Admin. Fee

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Songwriter

Writer Royalties Earned Toward Recoupment Net Revenue

Who Gets Paid?

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Publisher

Record Label

Digital Public Performance – % of Service’s Total Revenue (varies)

Takes ~5% Admin. Fee

Artist /Union

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Songwriter

Service

PRO

50%

50%

“Writer’s Share” = 50%

“Publisher’s Share” = 50%

What Is SoundExchange?

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ª  A non-profit organization that collects royalties from the performance of sound recordings on:

ª  Satellite radio (SiriusXM) and

ª  Internet/mobile digital radio stations (Pandora, iHeartRadio, and many smaller webcasters playing music)

ª  Does NOT collect for recordings played on YouTube, Rdio, Spotify, and similar "on-demand" streaming services

ª  Does NOT collect royalties for compositions (songs). Performing rights organizations (ASCAP, BMI, and SESAC) and The Harry Fox Agency pay songwri ters and publ ishers for r ights in compositions.

How Does SoundExchange Pay?

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ª  SoundExchange pays royalties as follows:

ª  50% directly to the Owner of the Master (usually Label, or Artist if he/she retained master rights)

ª  45% directly to the Featured Artist

ª  5% to any non-featured performers through unions

ª  Because SoundExchange pays money directly to Artists, you need to register with SoundExchange yourself to get paid. Your label will not pay you any of these royalties.

Register here: https://register.soundexchange.com/welcome

Performing Rights Organizations

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ª  A Performing Rights Organization, or PRO, represents song copyright holders by licensing and distributing royalties for the public performance of their copyrighted works.

ª  These public performances include, but are not limited to:

ª  Commercial radio stations (AM/FM) ª  Restaurants and bars ª  Other businesses playing music ª  Pandora and other online radio stations ª  SiriusXM satellite radio ª  Live performances

ª  Three major PROs represent songwriters in the U.S. •  ASCAP and BMI – not-for-profit, accept all applicants •  SESAC – for-profit, chooses who it wants to represent

Who Gets Paid?

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Publisher

Record Label

Film, TV, and Other “Syncs” – Amounts earned for these “placements” vary depending on prominence/extent of use in the feature, size of audience, time period of use, and other factors

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Songwriter


Licensee Artist

Artist Royalties Earned Toward Recoupment Ex. Film Production Company

ª  Note that the use of a Recording requires two separate licenses.

Master

Song


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What major music listening platform haven’t we discussed yet?

Commercial Radio

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ª  Question: What is the royalty rate paid to Labels/Artists for a song played on Commercial Radio in the U.S.?

ª  Answer: $0 L – The U.S. is the only major music market that does NOT require broadcasters to pay master royalties for Commercial Radio play.

Commercial Radio

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ª  Question: Are royalties paid to Publishers and Songwriters for a song played on Commercial Radio in the U.S.?

ª  Answer: Yes J – performance royalties are paid to the PROs who then pay publishers and songwriters, like they do for digital performances

Publisher

Songwriter

PRO

“Writer’s Share” = 50%

“Publisher’s Share” = 50%


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Question Break #3

Other Publishing Revenue Sources

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ª  Church Income (Christian Copyright Licensing International) – songs performed in churches generate money from computer projections, song/lead sheets, bulletin inserts, service recordings, and more

ª  Print – from sheet music and songbooks sold commercially ª  Other digital uses – custom mixes and tracks from demos, used

for leading worship

Who Gets Paid?

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Other Publishing Revenue Sources

Songwriter


Licensee – book publisher

Church Income

Print

Other Digital

CCLI Licensee – ex. Church

Publisher

Licensee – Multitracks

Revenue Summary – Masters vs. Publishing

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Masters Revenue Publishing Revenue

Music Sales Distributor Pays Label Label Pays Publisher

On-Demand Streaming Distributor Pays Label Harry Fox Agency

Digital Performance SoundExchange PRO

Film, TV, & Other Syncs Directly to Label Directly to Publisher

Commercial Radio L PRO

Church Like a Sync CCLI

Print N/A Licensee Pays Publisher

Other Digital N/A Licensee Pays Publisher

Other Sources Of Income

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How Do You Make Money Touring? ª  Guarantees / % of the House – flat fee per show and/or

share of gross ticket sales or profits

ª  Sell Merch! – CDs, t-shirts, hats, bumper stickers, etc. ª  Sponsorships – brands and non-profit organizations

ª  “Love Offerings” and Donations

Other Sources Of Income

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ª  Become A Session Player / Background Vocalist ª  Become A Producer

ª  Other ideas?

The Business of Music - May 2014

Business

Transcript of The Business of Music - May 2014