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

Text of The Business of Music - May 2014

  • 1. The Business of Music May 20, 2014 Ben Stauffer V-P of Finance Centricity Music
  • 2. What Im Talking About 2 Developing Relationships Types of Record Deals & Royalties Who Gets Paid For Songs & Records A BUNCH of Stuff
  • 3. The Business of Music 3 First Your Questions?
  • 4. Develop Relationships 4 Manager Publisher Record Label / Services Company Booking Agent Attorney Business Manager / Accountant Order to developing these relationships depends on your needs and how far along in your career you are.
  • 5. Connect With A Manager 5 Live Show History Manager Management Agreement Songs Talent and Desire!
  • 6. Connect With A Publisher 6 Song(s) Publisher Single Song or Long-Term Publishing Agreement
  • 7. Connect With A Label 7 Record Label Or Services Company Licensing Agreement Development/ Long-Term Record Deal Or Demo(s) or Masters
  • 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. 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. Other Players On The Business Side 10 Distribution Company Gets your record into stores Royalty Administrator Processes licenses and royalty payments
  • 11. First: Make Music! 11 Songwriter / Artist Song (Music & Lyrics) Song Copyright Created Create it in a fixed, tangible form, and its copyrighted.
  • 12. Cut A Record 12 Recorded Master Song(s) Producer With Label A&R Rep Master Copyright Created fixed, tangible form = copyright Artist
  • 13. The Business of Music 13 Question Break #1
  • 14. Master Revenue Sources What They Are 14 Recorded Master Music Sales Digital Public Performance Film, TV, and Other Syncs On-Demand Streaming
  • 15. Music Sales and On-Demand Streaming 15 Music Sales Digital Album and Track Downloads Audio Streaming Ad-Supported and Subscription Physical Product At Live Events Amazon / General Market Christian Bookstores (CBA) On-Demand Streaming Ad-Supported Video Streaming
  • 16. Digital Public Performance 16 Digital Public Performance Other Online Radio
  • 17. Film, TV, and Other Syncs 17 Film, TV, and Other Syncs Movies and trailers Television shows and commercials Video games Online web series
  • 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. An iTunes Sale The Math 19 Example: Album has 10 tracks, sell 10,000 Copies of the Album for $10 each Total Revenue = $100,000 iTunes cut = ($30,000) 30% of Total Revenue Distribution fee = ($14,000) 20% of Rev iTunes cut Net For Label/Artist/Publisher/Writer = $56,000 Publishing Income ALL Writers: Writers Share = $4,550 = $.091 x 10 x 10,000 / 2 Standard rate Publishers Share = $4,550 = $.091 x 10 x 10,000 / 2 Standard rate Total Is $910 Per Track Other Label Payment: 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. The Business of Music 20 Question Break #2
  • 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. Who Gets Paid? 22 Publisher Record Label Digital Public Performance % of Services Total Revenue (varies) Takes ~5% Admin. Fee Artist / Union MasterRevenuePublishingRevenue Songwriter Service PRO 50% 50% Writers Share = 50% Publishers Share = 50%
  • 23. What Is SoundExchange? 23 A non-profit organization that collects royalties from the performance of sound recordings on: Satellite radio (SiriusXM) and Internet/mobile digital radio stations (Pandora, iHeartRadio, and many smaller webcasters playing music) Does NOT collect for recordings played on YouTube, Rdio, Spotify, and similar "on-demand" streaming services 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 incompositions.
  • 24. How Does SoundExchange Pay? 24 SoundExchange pays royalties as follows: 50% directly to the Owner of the Master (usually Label, or Artist if he/she retained master rights) 45% directly to the Featured Artist 5% to any non-featured performers throughunions 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
  • 25. Performing Rights Organizations 25 A Performing Rights Organization, or PRO, represents song copyright holders by licensing and distributing royalties for the public performance of their copyrighted works. These public performances include, but are not limited to: Commercial radio stations (AM/FM) Restaurants and bars Other businesses playing music Pandora and other online radio stations SiriusXM satellite radio Live performances 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. 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 Note that the use of a Recording requires two separate licenses. Master Song
  • 27. The Business of Music 27 What major music listening platform havent we discussed yet?
  • 28. Commercial Radio 28 Question: What is the royalty rate paid to Labels/Artists for a song played on Commercial Radio in the U.S.? 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. Commercial Radio 29 Question: Are royalties paid to Publishers and Songwriters for a song played on Commercial Radio in