The Business of Music - May 2014


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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 2014

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The Business of Music - May 2014

  1. 1. The Business of Music May 20, 2014 Ben Stauffer V-P of Finance Centricity Music
  2. 2. What I’m Talking About 2 ª Developing Relationships ª Types of Record Deals & Royalties ª Who Gets Paid For Songs & Records – A BUNCH of Stuff
  3. 3. The Business of Music 3 First – Your Questions?
  4. 4. Develop Relationships 4 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.
  5. 5. Connect With A Manager 5 Live Show History Manager Management Agreement Songs Talent and Desire!
  6. 6. Connect With A Publisher 6 Song(s) Publisher Single Song or Long-Term Publishing Agreement
  7. 7. Connect With A Label 7 Record Label Or Services Company Licensing Agreement Development/ Long-Term Record Deal Or Demo(s) or Masters
  8. 8. Traditional Label vs. Services Deal 8 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.
  9. 9. What Is Record Royalty “Recoupment?” 9 •  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
  10. 10. Other Players On The Business Side 10 ª Distribution Company – Gets your record into stores ª Royalty Administrator – Processes licenses and royalty payments
  11. 11. First: Make Music! 11 Songwriter / Artist Song (Music & Lyrics) Song Copyright Created Create it in a “fixed, tangible form,” and it’s copyrighted.
  12. 12. Cut A Record 12 Recorded Master Song(s) Producer With Label A&R Rep Master Copyright Created “fixed, tangible form” = copyright Artist
  13. 13. The Business of Music 13 Question Break #1
  14. 14. Master Revenue Sources – What They Are 14 Recorded Master Music Sales Digital Public Performance Film, TV, and Other “Syncs” On-Demand Streaming
  15. 15. Music Sales and On-Demand Streaming 15 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
  16. 16. Digital Public Performance 16 Digital Public Performance Other Online Radio
  17. 17. Film, TV, and Other “Syncs” 17 Film, TV, and Other “Syncs” ª Movies and trailers ª Television shows and commercials ª Video games ª Online web series
  18. 18. Who Gets Paid? 18 Record LabelDistributorRetailer 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 MasterRevenuePublishingRevenue Songwriter(s) Writer Royalties Earned Toward Recoupment
  19. 19. An iTunes Sale —The Math 19 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).
  20. 20. The Business of Music 20 Question Break #2
  21. 21. Who Gets Paid? 21 Publisher Record LabelDistributor 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 MasterRevenuePublishingRevenue Songwriter Writer Royalties Earned Toward RecoupmentNet Revenue
  22. 22. Who Gets Paid? 22 Publisher Record Label Digital Public Performance – % of Service’s Total Revenue (varies) Takes ~5% Admin. Fee Artist / Union MasterRevenuePublishingRevenue Songwriter Service PRO 50% 50% “Writer’s Share” = 50% “Publisher’s Share” = 50%
  23. 23. What Is SoundExchange? 23 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 songwriters and publishers for rights in compositions.
  24. 24. How Does SoundExchange Pay? 24 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:
  25. 25. Performing Rights Organizations 25 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
  26. 26. Who Gets Paid? 26 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 MasterRevenuePublishingRevenue Songwriter Writer Royalties Earned Toward Recoupment Licensee Artist Artist Royalties Earned Toward RecoupmentEx. Film Production Company ª  Note that the use of a Recording requires two separate licenses. Master Song
  27. 27. The Business of Music 27 What major music listening platform haven’t we discussed yet?
  28. 28. Commercial Radio 28 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.
  29. 29. Commercial Radio 29 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%
  30. 30. The Business of Music 30 Question Break #3
  31. 31. Other Publishing Revenue Sources 31 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
  32. 32. Who Gets Paid? 32 Other Publishing Revenue Sources Songwriter Writer Royalties Earned Toward Recoupment Licensee – book publisher Church Income Print Other Digital CCLI Licensee – ex. Church Publisher Licensee – Multitracks
  33. 33. Revenue Summary – Masters vs. Publishing 33 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
  34. 34. Other Sources Of Income 34 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
  35. 35. Other Sources Of Income 35 ª  Become A Session Player / Background Vocalist ª  Become A Producer ª  Other ideas?
  36. 36. Recommended Reading 36
  37. 37. The Business of Music 37 Ben Stauffer Final Questions?