Words by John Miranda, a Chicago-area lawyer and consultant
It’s been over twelve years since the effective collapse of physical media as a viable business model, but many artists, labels, and publishers still struggle to monetize their digital copyright holdings. Additionally, there are many commentators, especially from the tech camp, who eagerly suggest that artists forget about copyright as a revenue stream and view online infringement of their copyrighted music as free advertising. Although the digital millennium has seen a steep decline in value of music copyrights, there are still many ways that innovative and diligent copyright holders can cash in on the streaming music revolution. Check out the tips and resources below to start building a digital monetization strategy for your copyrighted music.
Register with a Performance Rights Organization
This has always been part of the traditional music revenue ecosystem, but it’s way more important now that physical sales and downloads are mostly out of the picture. Copyright holders have always registered with PROs in order to get Public Performance royalties when their songs are played in stores and restaurants or on TV (with thousands of speciality channels and companies like Music Dealers specializing in putting independent artists’ songs in shows and ads, getting a song on TV is not unheard of for new indie artists these days). But you also need to be registered with one of the PROs so they can collect royalties when your song is in a digital ad or a website’s soundtrack. The three major PROs are BMI, ASCAP, and SESAC. For international royalties, you will need to register in individual countries. Unfortunately, independent artists and labels don’t get a fair shake from the PROs when it comes to royalties, but you still need to register to efficiently collect your Public Performance fees.
Note: These Public Performance royalties pertain to music composition copyrights. So if you’re a songwriter and someone else cover your song, you get all this money. Similarly, if you cover a song, you see none of this money.
In addition to the three traditional PROs, there is a relatively new organization called SoundExchange, based in Washington, DC. They distribute royalties paid pursuant to the Digital Sound Recording Performance Copyright. The details and history of this copyright royalty are too complicated to explore here, but if you own sound recording copyrights (which you almost certainly do if you’re an independent artist or label, though not if you’re a publisher) and those recordings are being streamed online via third party webcasters, you need to register with SoundExchange to start collecting these royalties.
Getting paid by Spotify, Internet Radio, and other streaming services
SoundExchange takes care of sound recording performance royalties for non-interactive streaming services like internet radio (“non-interactive” basically meaning that you cannot pick the specific song you want to hear, though that definition can be changed by an Appellate Court opinion or Copyright Office memo any day). However, Spotify, Rdio, Deezer, the upcoming Beats Music, and their brethren are all interactive, so they must negotiate directly with the sound recording copyright holder. They won’t talk to an independent artist or very small labels, so you will need the help of a digital distributor that aggregates music, such as TuneCore, the Orchard, or CDBaby (just to name a few major players – there are others). If you are an independent label and you are not in a major trade association such as Merlin that negotiates with licensees, you will probably need to go through an aggregator just like an independent artist. Interactive streaming services don’t have to pay performance royalties for sound recordings, but they still must pay for a license to the use the recordings. The aggregators will also put your songs onto digital mp3 retailers like the iTunes store and Amazon, but mp3 sales are diminishing in importance as the music world continues its migration to the cloud.
The above paragraph pertains only to the sound recording copyright. Owners of composition copyrights (songwriters, publishers) have access to a few additional royalties from streaming services. Both interactive and non-interactive streaming services have to pay public performance royalties to the PROs, so if you’re a PRO member (discussed a few paragraphs up) then you are eligible to receive these payments. Also, composition copyright owners are entitled to receive “mechanical” royalties for each and every “interactive” stream or download of your song. “Mechanical” royalties are owed for the reproduction of the song and traditionally are paid by labels to publishers in exchange for mass-producing CDs and records. In order to collect these, it is helpful to enlist the help of a music publisher or distribution/royalty administration company such as TuneCore or the Orchard (just to name two of many).
TuneCore, the digital distribution company I referenced above, has compiled a pretty good list of all potential digital royalty streams for composition holders (this list doesn’t include sound recording copyright revenue streams): http://www.tunecore.com/guides/thirteen_ways_to_make_money
Just a quick aside on SoundCloud: Getty Images, a very successful stock photo licensing company, offers licensing services for independent artists that have SoundCloud accounts. This means they will potentially consider your music for licensing deals with various media outlets (possibly including film and television) who hire their services. In order to qualify, you must own all composition and sound recording copyrights for the tracks you put on SoundCloud. This means that if your music contains uncleared samples, it does not qualify (for more on sample clearance, check out this article from Fake Shore Drive). For more details on SoundCloud’s licensing deal, here is the FAQ: http://soundcloud.gettyimages.com/faq
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