This session reviews the basics of digital revenues streams for musicians using online radio, download and streaming sites to promote and sell their music.

1. Understanding Digital
Revenue Streams: Music
Deborah Gonzalez, Esq.
Georgia Lawyers for the Arts
2014

2. Overview
• Introduction
• Setting the Context
– Definitions
• Music Revenue Streams
• Digital Revenue Streams
– Sound Exchange
– iTunes, YouTube, Pandora, Spotify
– Grooveshark, Presto.fm, Rdio
• Music Revenue Strategies
• Q&A

3. Who am I? Who are you?

4. Setting the Context
• Video killed the Radio Star.
– MTV (1979)
– http://www.youtube.com/watch?v=Iwuy4hHO3Y
Q&feature=kp
• Digital killed the record.
– CD sales down
– Digital download sales down
– Digital streaming up

5. Setting the Context
• Mechanical Royalties: are revenues from sales and are
determined by federal law. As of 2012, when any music
retailer sells a copyrighted music track on a CD or as a
download online, a fee of at least 9.1 cents must be paid to
the music publisher to be split with the songwriter. **
Those royalties are set through a government apparatus,
not free markets.
• Mechanical royalty rate for streaming is 10.5% of revenues.
For the two major sources of streaming revenues (Spotify
and YouTube), the mechanical is paid directly by the
services to the publishing concern (in Spotify's case,
through Harry Fox) and does not flow through the label.

6. Setting the Context
• Synch Licensing: earns revenue through upfront fees paid
to the publisher by a music licensor, such as a production
company or movie studio, for rights to synch some or all of
a song to visual images.
• Performance Royalties: Whenever a song is broadcasted to
the public, such as through a radio station, podcast,
nightclub, jukebox, shopping center or public event, a
performance royalty must be paid to the song’s publisher.
Performance rights organizations offer blanket licenses that
venues or broadcasters can purchase, after which the songs
selected for airplay are tracked and the appropriate
payments are made to the songs' publishers.

7. Setting the Context
• Self-Publishing: able to keep 100 percent of music
revenues can make it worth the extra work for
songwriters. Independent songwriters can sign up
as publishers with performance rights
organizations. They can also upload their own
music to websites that offer opportunities for
broadcast, synch licensing and mechanical sales,
such as Reverbnation.com, Musicdealers.com, CD
Baby and Amazon.com.

8. Setting the Context
Note on Self-publishing:
Downside: you still need to find people that will help you
take your music to market.
If you own your master or copyright, but lack the
relationships to adequately expose it, then you're
keeping 100% of something that's not worth very much.
If we're talking revenues, then the effectiveness of which
a copyright or recording is exploited is an important
variable in the equation that should be considered.

9. Music Revenue Streams
Future of Music Coalition:
http://money.futureofmusic.org/revenue-streams-
existing-expanded-new/

10. Digital Revenue Streams
• In 1995, Congress passed Digital Performance
Right in Sound Recordings Act (DPRA).
• The DPRA established a performance right for
sound recordings in digital transmissions.
• Sound Exchange was then created to administer
the digital performance right.

11. Digital Revenue Streams
• ASCAP, BMI and SESAC collect performance
revenue for the owners of the copyrighted
musical work (the song), i.e. music publishers,
songwriters and composers.
• Sound Exchange collects performance revenue
for the sound recording copyright owner (usually
the record label) and for the performers.

12. Digital Revenue Streams
• Digital royalties are fees that service providers
such as Pandora, SiriusXM and webcasters are
required by law to pay for streaming musical
content.
• These royalties are paid by the services to Sound
Exchange, and accompanied with playlists of all
the recordings played by the service provider.

13. Digital Revenue Streams
• Example: If I hear Patsy Cline singing “Crazy”, which was
written by Willie Nelson, on terrestrial radio, Willie will get
a check from BMI because he’s the songwriter, but Patsy
gets nothing. But if I hear Patsy Cline’s “Crazy”
on XM Radio, Patsy’s estate is paid by SoundExchange for
performing the song, and Willie is paid by BMI for writing it.
• Katy Perry’s “Roar” - KP gets paid for the lyrics (she wrote
the song) from the PRO + the recording performance (from
Sound Exchange)

14. Digital Revenue Streams
Payment breakdown:
– 45 percent of performance royalties are paid directly to
the featured artists on a recording,
– 5 percent are paid to a fund for non-featured artists,
typically session musicians and background singers.
– The other 50 percent of the performance royalties are paid
to the owner of the sound recording (i.e., the owner of the
“master”), which can be a record label or an artist who
owns their own masters.

15. Digital Revenue Streams
• Includes iTunes & iTunes Radio
• Digital Downloads – license not a “sale”
– Per song: $.70 (under 10 minutes)
– Per album $7.00 (10 songs)
– + Share of Advertising Revenue
• $0.14 cents per play and 19 percent of net ad
revenue (after a year of service)

16. Digital Revenue Streams
• YouTube's Billion-Dollar Payout (Feb. 2014)
http://www.rollingstone.com/music/news/youtubes-billion-
dollar-payout-provide-new-revenue-for-musicians-
20140205#ixzz2zWgUpUXb
• Seven Ways Musicians Make Money Off YouTube
http://www.rollingstone.com/music/news/seven-ways-musicians-
make-money-off-youtube-20130919

17. Digital Revenue Streams
• Monetization
• Content ID
• Vevo
• Music Sales Links
• Sponsorship
• Merchandise
Annotations
• KickStarter

18. Digital Revenue Streams
• Pandora is a radio model, under which you cannot
select your own music or replace ownership of music.
• That is different from Spotify, MOG, Rdio—and other
selectable music services which let users pick songs—
and as a result they don't fit all three criteria in the
Digital Performance Act (they are interactive rather
than "non-interactive") and thus negotiates all royalties
individually with record labels and distributors.

19. Digital Revenue Streams
• ASCAP has charged Internet-radio services either 1.85% of
their gross revenue or 0.06 cent each time a user tunes in
for a listening session, whichever sum is greater. Pandora
has been paying an interim rate along those lines since
2011, in the absence of a deal with ASCAP over what it
should pay through 2015.
• According to Pandora regulatory filings, separate legal
battles are currently under way between Pandora, ASCAP
and BMI to determine publishing royalty rates after the
current rates expire in 2015.
http://www.cnbc.com/id/101393890 (2/6/14)

20. Digital Revenue Streams
• Subscription Service
• Does NOT pay per stream.
• An artist’s royalty payments depend on the following variables, among
others:
– In which country people are streaming an artist’s music
– Spotify’s # of paid users as a % of total users; higher % paid, higher “per
stream” rate
– Relative premium pricing and currency value in different countries
– An artist’s royalty rate
• Recently, these variables have led to an average “per stream” payout to
rights holders of between $0.006 and $0.0084

21. Digital Revenue Streams

22. Digital Revenue Streams
• Grooveshark Artists is the only music service that provides
independent artists and content holders with free,
worldwide digital distribution and access to over 20M
active listeners across the globe. Grooveshark is actively
signing licensing deals and welcomes all independent
artists to the service. It is free to upload your content and
manage your presence on the site.
• A licensing deal with Grooveshark entitles your label or
distribution entity to a predetermined portion of our
advertising revenue, based on your contents' quarterly
market share on Grooveshark.

23. Digital Revenue Streams
Illegal??? See article below:
http://www.digitaltrends.com/web/spotify-vs-pandora-vs-grooveshark/
12/2013
In fact, an RIAA spokesperson emailed me to make sure I knew
that “the vast majority of songs streamed on Grooveshark are not
licensed, making the service unauthorized and illegal.”
“That’s why they’re not featured in Apple’s app store,” the
spokesperson continued. “That also means that with the paid
version of Grooveshark, that money is going straight into the
operators’ pockets and not to artists and songwriters, as opposed
to Pandora and Spotify who do pay music creators.”

24. Digital Revenue Streams
• Free online music streaming and discovery service with the
goal of connecting you to music perfectly matched to your
tastes.
• Since Presto's content comes directly from Youtube, you
can earn a share of the money from the ads that Google
displays in the Youtube player. To get started, sign up for
Youtube's Partner Program and you'll receive royalties
based on the advertising displayed on the content that you
upload. You can also monetize content uploaded by other
users that you own the rights to by using Youtube
ContentID.

25. Digital Revenue Streams
• Free web or subscription $10/month
• Rdio Artist Program: earning additional revenue
that complements the existing royalty structure
already in place with the record labels and
distributors we license your music from.
• Integration with Shazam app; goes international
(Feb 2014)

26. Music Revenue Strategies
• Expand your
channels
• Use your resources
more efficiently
• Branding
• Partner outside your
industry to optimize
your value creation
potential

27. Resources
Music and Money Quiz
https://futureofmusic.org/music-and-money-quizzes

28. Thank You!
Deborah Gonzalez, Esq.
The Law Office of Deborah Gonzalez,
Esq., LLC
IP: Art, Music, Entertainment, Digital
Atlanta – New York
www.dgonzalezesq.com
dgartlaw@att.net
Twitter: @dg_iplaw