the business of music - may 2014
DESCRIPTION
Presentation about the fundamentals of the music business given to independent artists and songwriters by Ben Stauffer, Vice-President of Finance for Centricity Music, May 2014TRANSCRIPT
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
3
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
The Business of Music
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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
Film, TV, and Other “Syncs”
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Film, TV, and Other “Syncs”
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
ter
Rev
enue
P
ubli
shin
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even
ue
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).
The Business of Music
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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
Mas
ter
Rev
enue
P
ubli
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even
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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
Mas
ter
Rev
enue
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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
Mas
ter
Rev
enue
P
ubli
shin
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even
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Songwriter
Writer Royalties Earned Toward Recoupment
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
The Business of Music
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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%
The Business of Music
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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
Writer Royalties Earned Toward Recoupment
Licensee – book publisher
Church Income
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?
Recommended Reading
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