Disclaimer: This information is brought to you by Debbie Egel, an attorney whose practice includes writing and reviewing music contracts, running an independent label for over 10 years, and developing indie artists. — She is knowledgeable of the economics of music, the DIY process, and has written an instruction manual for Indie artists, labels and managers called, “For The Record”, and teaches an online course. Debbie has a deep appreciation of the business of music as well as her legal knowledge as a practicing attorney. Always consult with your personal legal and tax professionals regarding your specific situation before making any decisions.
Where Does The Money from Master Recordings Come From?
Before we dive in, let’s talk basics.
Who Owns The Master?
It comes down to two easy aspects. If an artist is independent, they own their own masters. If they’re signed to a label, the label owns them.
Traditional labels produce, distribute, market and promote music. They prepare legal agreements and are responsible to account and issue royalty statements that have been earned for each record.
If they want to, independent artists can act as their own label. However, there is a benefit to the labels use of their extensive expertise to develop their artistry and brand value for them. It takes time, money and resources to market and promote an artist.
There is a symbiotic relationship between the label and artist. Artists are able to successfully fulfill their dreams while record labels invest and profit from them. Although you can do it independently, that doesn’t mean you can do it alone.
- Check out, “How To Know If Signing a Recording Contract Is Right For You” to learn more…
Record labels want a partner. They rely on signing talent to the label to grow and make money. Labels win when the artist’s wins, and recording agreements are what allow an artist and a label to work together.
Artists sign a legal contract with deal terms they agree to which allows the label to navigate and grow the artists career.
In a traditional arrangement, income flows from a variety of sources. It comes from things like:
- social media monetization
- sync licensing
First, the label will need to recoup their investment. This may include any advances, recording costs, touring and promotion and other fees. After the expenses are deducted, the artist receives the percentage that was legally agreed upon in the contract.
Sharpen your skills…
Useful Tools to Generate More Income As A Producer
5 Ways To Make More Money Off Your Songs
How to Optimize your Songwriting for Sync
What You Need To Know About TV & Radio Royalties
What About Commercially Released Music? — Where does that money come from?
Sales & Streaming // Once your music is commercially released artists and labels have the ability to earn income thru sales and streaming royalties. — Here’s how it works…
- Record labels give their music to the distributor who then delivers to stores (digital and retail).
- The distributor keeps a small portion of the income earned from sales and streaming.
- Then, they pass down the proceeds to the label who also keeps a small portion.
- Then, more money is passed down to the artist in the form of “royalties”, only after the label “recoups” their investment.
In 2020, here’s what those break down to…
Tidal // $0.019 per stream // 1,000,000 streams = approx. $19,000.00
Apple Music // $0.01284 per stream // 1,000,000 streams = approx. $12,840.00
Deezer // $0.00676 per stream // 1,000,000 streams = approx. $6,760.00
Spotify // $0.0064 per stream // 1,000,000 streams = approx. $6,400.00
Amazon // $0.00437 per stream // 1,000,000 streams = approx. $4,370.00
Pandora // $0.00402 per stream // 1,000,000 streams = approx. $4,020.00
YouTube has multiple forms of payout for streaming.
“YouTube is a multi-sided platform in terms of payout. There are at least three separate payouts under the brands’ umbrella: per YouTube Red/YouTube Music stream ($0.008), per video-stream on the official artist’s channels ($0.00164) and videos monetized through Content ID ($0.00087).”
In addition, when it comes to music videos on YouTube, payment is split among 3 payees (owner of the video, owner of the SR and owner of the composition).
Where Else Does The Money Come From?
It’s more than just streaming. Money also comes from:
- Neighboring Rights
- Sound Exchange
- Remixes and Sampling
Keep in mind, every career is unique. Different arrangements work for different artists. While streaming revenue has grown significantly, there are a limited number of streams spread amongst all the songs uploaded. That means you need to do more than just rely on streams.
Independent artists don’t necessarily need major labels anymore. Another emerging model outside of traditional labels is companies who offer integrated solutions for artists and indie labels. Now, there are independent companies who provide management services, label services, and data analytics in addition to distribution, all to help indie labels and artists access to a greater level of service and technology than ever before. Before you jump into any major deals, remember that you’ve got options. Play the field. Do your research. You wouldn’t marry someone after one date, would you?
Please feel free to contact me with any questions at firstname.lastname@example.org.
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