Guest post by Wendy Day, @RapCoalition and YouTube.com/ThisIsWendyDay
Wendy Day is a label consultant who helps build successful careers for independent artists and record labels, teaching them how to make money with music and be profitable in today’s music business. As a 25-year veteran of the music industry who has managed to do the impossible and remain relevant, Wendy also runs the not-for-profit artist advocacy organization, Rap Coalition.
A large portion of income for an independent artist (rapper or musician) comes from publishing, of which there are multiple streams. A song is broken into two shares—the writer’s share, which is the artist’s written share of ownership, and the publisher’s share, which is the ownership of the composition. When an artist writes a song, the music and/or the words, he or she owns 100% of the writer’s share and 100% of the publisher’s share. If there are two contributors to a song, they may decide that they each own 50% of the writer’s share and 50% of the publishing share. For example, in hip hop the producer typically owns 50% of the writer’s share and 50% of the publisher’s share, and the rapper owns 50% of the writer’s share and 50% of the publisher’s share; together, they own 100% of the song. These percentages, known as “splits,” are negotiated by all of the contributors to the composition of the song.
Some artists choose to sell part of their publisher’s share which is known as a co-publishing deal. A solid understanding of publishing is necessary for everyone in the music industry, and further research is suggested. A great resource is Donald Passman’s All You Need To Know About The Music Industry.
Here are some of the more important revenue streams from publishing:
- Royalties from sales
When a CD or download sells, the distributor takes their cut (usually 20%) and passes along the rest to the artist. For example, with iTunes, the largest retailer of music, for every 99 cent single that’s sold, iTunes keeps 30 cents and passes the remaining 70 cents to the distributor. Some distributors, such as Distrokid, pass along 100% of the money and charge a monthly or yearly fee to keep your music on digital services. Other distributors, such as CDBaby, charge only an upfront fee to distribute your music, and keep a percentage of sales and pass along the rest—most likely they keep 20% (14 cents) and pass along the remaining 80% (56 cents). The splits differ based on the services the distributors offer, and who has the leverage in the negotiation. Separate from these artist royalties, for every digital download or physical sale of a song, a mechanical royalty is due to the songwriters. In the US, this mechanical royalty is a statutory rate, set by law, of $0.091. That must be paid by the artist/label/distributor to the songwriters based on their percentage share of the song. Outside of the US, this mechanical royalty is typically paid via the mechanical collection society in the territory where the sale took place.
- Royalties from on-demand or interactive streams
When a song streams at a digital streaming platform (Spotify, Tidal, Apple Music, Amazon Prime Music, Google Play, Deezer, etc), a songwriter is paid per stream. The rate differs by platform and whether or not it was ad supported. These royalties are paid to publishers/songwriters by the platforms, usually via a mechanical collection society or royalty administrator. In the case of Spotify, the publisher’s share is paid via the Harry Fox Agency.
- Royalties from a broadcaster
Radio stations pay writers and publishers through membership in a Performing Rights Organization such as ASCAP, BMI, and SESAC. The payments come from licensing fees paid by the radio stations. Live shows (performances) are paid through the same PROs from licensing fees that the venues pay.
- Royalties from video streams
YouTube pays performance and mechanical royalties for songwriters via MCNs (Multi Channel Networks), or direct relationships with publishers. When the artist allows a distributor to collect YouTube royalties, they are signing up with that MCN which does take a percentage of revenue. As an aside, YouTube is under fire from the industry for having the lowest payouts of all music streaming platforms.
- Sync fees
Synchronization fees are the monies paid for songs included in films, TV, video games, commercials, etc. The writers receive a share and the publishers receive a share of the payments. This is often a one time, upfront payment, though a placement in a show or commercial that is broadcast on television will generate performance royalties (collected by PROs) each time it is aired.
This brief overview of music publishing should be seen as just that: an overview. More research and understanding is necessary, and suggested, to master this highly lucrative part of the business. Owning publishing is ownership of the music that directly coincides with revenue streams. The music industry is a business where artists can make a living with great music provided they monetize their music properly. Newer artists will usually see a return on investment first in performance income, merchandise sales, and royalty income. Building a buzz and a fan base is necessary for success to occur once you make great, marketable music.
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Wendy Day has helped discover, build leverage for, and shop and negotiate deals for No Limit Records (Master P, Mia X, C-Murder), Twista, Cash Money Records (BG, Juvenile, Lil Wayne, Turk, Hot Boyz, Big Tymers, and Mannie Fresh), Eminem, David Banner, Trouble (from DuctTape), and many others. She has worked with Do Or Die, Lil Boosie, Webbie, Ras Kass, Slick Rick, BloodRaw, Young Buck, C-Murder, Young Jeezy, MGK, Think Its A Game, and others. She wrote her first book, How To Get A Record Deal, and established a social media marketing company called A Scratchy Throat to boost artists’ Internet presence and to increase their one-on-one interaction and engagement with fans. Wendy is currently writing her second book, “Making Money With Music,” for folks who want to profit from putting out their own music. Wendy is about to launch SlavesNoMore.com, an educational website for artists who want to learn how to build successful careers independently in the music industry.