Why are musicians struggling to make enough royalties

The enduring controversy over music royalties, including Digital Royalties, has been prevalent in the last decade. With the rise of the internet and growing piracy, musicians are losing out millions in music royalties.

The digital music download giant Spotify came under harsh criticism for paying low royalties to artists.

Most notably, the only platinum-selling artist of 2014, Taylor Swift, has removed her entire catalog from the online music-streaming service.

Legendary guitarist Pete Townshend once made headlines when he called iTunes a “digital vampire.”

So, why is there so much controversy around music royalties?

If we have to ask, “What Cuts Do Artists Get for Album Sales?” Well, every contract is different, but the average high-end record company royalty deal pays musicians $1 for every $10 retail album sale.

And it can be a lot worse than that: A low-end royalty deal only pays $.30 per album sale. That’s a minimal profit for a CD purchase, especially considering that bands may have to divide that among several members.

What is music royalty?

A music royalty is a legally bound compensatory payment made to an artist, songwriter, and composer to sell their music, either singles or an album.

Let’s say that a music royalty is an amount paid by a third party to an owner to use their song.

If you are wondering how much musicians earn on royalties. In the U.S., the amount owed to the songwriter for ‘mechanical royalties’ is $0.091 per reproduction of a song. Outside the U.S., the royalty rate is around 8 percent to 10 percent but varies by country.

These royalties are paid out by institutions that use music, such as movies, TV, radios, and other streaming platforms such as Spotify.

The more records you sell, the more royalties you’ll get.

What are the different types of music royalties available to musicians?

There are two distinct sets of music rights attached to each piece of music ever recorded.

Composition –Songwriters and their music publishers own the copyright for the harmony, melody, and lyrics.

Master –The copyright for the particular expression of a composition, created when the composition is turned into a sound recording and owned by the recording artists.

Likewise, musicians can earn six different types of royalties.

Streaming royalties

The streaming services such as Spotify and YouTube owe royalties to musicians, record labels, and distribution and recording studios.

The rise of streaming services and digital listeners has made royalties more critical than ever. These days recordings are licensed to streaming platforms. The payouts made through digital streaming are considered “royalties.”

These compensations are made differently, including 50% of revenue for content owners or revenue split by sharing content or several streams.

Neighboring rights

The neighboring rights are collected by PROs. A PRO is an agency that ensures songwriters and publishers are paid for the use of their music by collecting royalties on behalf of the rights owner.

The neighboring rights are similar to performance royalties.

Digital performance royalties

Digital radio platforms must get a statutory license from SoundExchange to use licensed music, and recording artists, labels, and session musicians must register with SoundExchange to collect digital performance royalties.

SoundExchange allocates royalties to rights holders based on how often each song was played, with the following breakdown:

• 45% to featured artists

• 5% to non-featured artists

• 50% to the rights owner of the master recording

Sync licensing fees

Sync licensing fee is paid to artists when their music is synchronized to any other type of content, including video content for ads, TV shows, movies, games, etc.

Music users need to get a license from both sound recording and composition owners to synchronize a song.

Public performance royalties

Performance royalties are paid out when a specific composition is played in a commercial environment. These royalties are out by streaming services and royalties generated by public broadcasters such as radio, TV channels, venues, clubs, etc.

Mechanical royalties

Mechanical royalties are paid out when a copywriter’s composition is reproduced or distributed in either physical or digital form.

The Reproduction copyright guarantees royalties to songwriters for every unit sold or manufactured in physical forms, such as CD, LP, and cassette tape.

If you’re wondering who can get paid royalties? Everyone, including recording artists, record labels, distributors, licensing companies and sync agencies, songwriters, publishers, and PROs, may get paid when royalties are collected and distributed.

How do current music royalties fare?

The royalties paid out by streaming channels do not fare well on today’s market.

If a customer downloads a $9.99 album on iTunes, the royalty percentage to an artist would likely be 94 cents, which is less than a 10% cut. While the record company might be $5.35, the remaining revenue minus royalty is kept by Apple Inc.

To put that into perspective, artists would need to sell over 12,400 songs every month to earn a minimum wage salary.

The situation is bleaker in other streaming channels, where online streamers like Last.FM, Rhapsody, Spotify only pay about $.006 for each song stream.

The listeners would have to stream a song 4, 053, 110 times on Spotify for a musician to earn a minimum wage income.

Because CDs and album sales are almost NIL in today’s time, most musicians rely on streaming platforms to earn regular royalties.

For massive selling musicians, the royalties can be significant; however, the young and upcoming artists can face a harrowing experience when they first step into the medium.

Here’s another way of looking at it. With the above analysis, this is how many streams the songwriter needs to earn income based on assuming the songwriter is equally sharing income four ways with three additional songwriters:

While royalties aren’t the only source of income for musicians, most artists rely on other forms of income such as touring, public performance, and ad revenues through YouTube.

Some of the other reliable ways musicians can make money are as followed:

• Making money playing gigs

• Selling band/artist merchandise online

• Collaborate with brands and other musicians

• Sell beats and samples

.Teach music classes and online lessons.

For more information please check this infographic

In the early stages of your music career, it’s crucial to have multiple revenue streams. Get in touch with Rick Perdian, the best travel music consultant in the US!