John SeayDue to some scheduling conflicts, last week came and went without a new segment, so our apologies if you stopped by looking for the post and came up empty-handed. This week, however, we’re back continuing our discussion about revenues, in particular those sources that are available exclusively to artists. If you remember from our first segment, we differentiated between songwriters, who are synonymous with composers or authors of music, and artists, who perform and record musical compositions but do not write them. It’s a fairly straightforward distinction, but a crucial one because whichever side of the fence you fall on will determine how you get paid. And that, in a nutshell, is what this series is about. So with that said, here are the sources of revenue every artist should know.
Part Four: Revenues for Artists
Retail Sales
This is so intuitive that I’m not going to dive into it. You obviously get paid whenever someone buys your music. These payments may be collected directly by you, for example, at your shows or online, or it may come from your digital aggregator or record label.
Digital Performance Royalties (SoundExchange)
As mentioned in Part Two, whenever a song is played on terrestrial radio, songwriters and publishers get paid, but not the record labels and artists. In other words, we compensate the people associated with the musical composition, but not the people associated with the sound recording. Why? Back in the day, it was thought that radio play drove sales, which would then compensate the record label and artist, so there was no need to make a separate payment. The United States may be the only industrialized country that doesn’t have a terrestrial broadcast performance right for sound recordings. If you have significant overseas radio play, then you may want to look into something called “neighbouring rights” in an effort to claim some of your foreign performance royalties, since most developed foreign countries do pay for public performances of sound recordings.
However, since at least 1998, we do recognize a digital performance right for sound recordings. Every time a sound recording is streamed online through non-interactive streaming services — i.e., over internet radio, Sirius XM, and Pandora — a payment is generated which is collected by SoundExchange. If you want to collect these royalties, then you must be affiliated with the independent nonprofit collective management organization. Your PRO cannot collect these royalties (SoundExchange is technically a PRO, but it collects a different royalty).
SoundExchange collects royalties for sound recording copyright owners and featured performers. As discussed in Part One, sound recording owners are record labels or artists who self-release. They get 50% of the royalties collected by SoundExchange. An additional 45% goes to the featured performer, i.e., the artist (bands typically divide this revenue amongst themselves). The final 5% gets placed in a fund for session musicians, i.e., non-featured musicians on the track (that revenue is administered by AFM and SAG-AFTRA, a nonprofit organization that distributes royalties to session musicians and background vocalists). If you’re a self-released artist, then you need to register both as a sound recording copyright owner and as a featured performer.
Example – “Crazy” gets played on Pandora. Willie Nelson and his publisher get paid from their PRO. But this time, Patsy Cline (or her estate) gets paid as the featured performer, and her record label gets paid as the sound recording copyright owner (and some of that money may also trickle through to Patsy pursuant to her deal or the interpretation of her deal). The estate of the late Buddy Harman, who played drums on the track, may also claim his share of the 5% fund through AFM.
Interactive Service Payment
These are payments generated when your sound recordings are streamed on interactive services like Spotify, Apple Music, and Tidal. These are paid to artists by the artist’s record label or digital aggregator, as the case may be.
Master Use License
If someone wants to use your sound recording in a television show or movie, then they need to obtain a master use license from you, assuming that you own the copyright in the sound recording, or your record label if you have a record deal. The “master use” is so that they can use the particular recorded version of a musical composition. Synchronization fees for the musical composition go to the songwriter.
This completes our overview of artist revenues. Next time we’ll discuss any remaining terms that are relevant to both songwriters and artists before moving on to our final flowchart walking you through how to collect all relevant royalty payments. Until then, please don’t hesitate to email me your thoughts or questions.
ABOUT THE AUTHOR
John Seay is the founder and principal of The Seay Firm, an entertainment and intellectual property law firm based in Atlanta at the Goat Farm Arts Center. As an artist himself, John has over a decade of experience as a musician, tour manager, and writer. In addition to his work at The Seay Firm, John is also Of Counsel in the entertainment and media practice group in the Nashville office of Loeb & Loeb, one of the largest and most comprehensive entertainment and media practice groups in the world. Before founding The Seay Firm, John worked for Turner Broadcasting. In 2016, John was recognized as a Georgia Super Lawyers Rising Star in Entertainment & Sports Law, a designation only awarded to 2.5% of attorneys in Georgia. John is on the Board of Directors of #weloveatl and serves as a volunteer attorney at Georgia Lawyers for the Arts. He is a graduate of the University of Georgia School of Law. John works exclusively with artists and arts-related businesses. You can read more about his practice via the links below.
More Info
Web: theseayfirm
Twitter: @TheSeayFirmLLC