by Jay Gabler
May 19, 2014
How do musicians get paid for their work? It's a simple question, but the answer is very complicated—and very contentious. Some of the hottest debates in music today—from the value of Spotify to the importance of vinyl to the issue of bands "selling out" by placing their songs in TV ads—revolve around the topic of music rights, and some of the debates get so esoteric that even lifelong music heads feel lost trying to figure out who gets what, and when, and why.
In coming months we'll be investigating these issues more deeply, from local and national perspectives, in a series of stories. First, though, we wanted to map the terrain: how are musicians—both performers and songwriters—paid for their work?
This infographic, designed by Leah Garaas, depicts the basic relationships among artists, audiences, and the organizations and venues that make music available to the masses. This is of course only a simplified representation—there are any number of intermediary organizations that we couldn't include without creating a graphic the size of Wyoming—but it gives you a sense of the basic players in the music production and distribution game today.
To help you make sense of this, I'll walk you through the various paths from artist to listener.
Start with the artist: a singer-songwriter, say, with a guitar and a dream. For the purposes of this explanation, let's call her "Singy McSingerson."
The first thing to understand is that, from the perspective of music rights, Singy is two people: a performer and a songwriter. As a songwriter, Singy is creating original compositions—music and lyrics—that are her intellectual property (unless she's specifically writing for hire), and she (or whomever she's conveyed her copyrights to) is entitled to be paid when those compositions are sold, broadcast, or performed. As a performer, she'll be negotiating fees and compensation for her work singing and playing guitar.
Okay, so here's Singy with her original songs, ready to rock. One decision she'll have to make is whether or not she wants to partner with a music publisher. A music publisher would work on Singy's behalf—per the National Music Publishers Association, "a music publisher works with songwriters to market and promote their songs, resulting in exposure of songs to the public and generating income. Music publishers 'pitch' songs to record labels, movie and television producers and others who use music, then license the right to use the song and collect fees for the usage."
(Music publishers are called "music publishers" because traditionally, they published sheet music to sell. Singy's publisher can still do that for her, if people want to own copies of the musical notation for Singy's songs.)
If Singy McSingerson acts as her own publisher, that work will be on her shoulders. Going with a music publisher can be an attractive option—but it's not free. In exchange for their work, music publishers typically take possession of the copyright to musical composition and then collect royalties, paying only a portion to the songwriter. (Traditionally, publishers have split royalties with songwriters 50-50, but in recent years some publishers have started offering bare-bones deals where they help administer licensing but don't offer services beyond that. In those cases, songwriters typically keep their own copyrights and keep a much larger proportion of their royalties.) Whether Singy wants to use a publisher will depend on whether she thinks it's worth the services they'll bring to the table.
Either Singy McSingerson or—if she has one—her publisher will then proceed to sign up with a performance rights organization such as ASCAP, BMI, or SESAC. Why? Because these organizations negotiate and collect royalties when Singy's songs are publicly performed—via broadcast, via the Internet, or IRL—and pass those royalties on to the owner of the songs' copyright (note that these are royalties for song compositions, not recordings).
Almost all holders of musical copyrights in America collect their performance royalties through ASCAP, BMI, and SESAC. The three differ in their organization (ASCAP and BMI are nonprofits, and ASCAP is a membership association, whereas SESAC is a for-profit company) and their differing services can make it more advantageous for different types of songwriters to join one versus the others, but all three serve the same basic function of collecting performance royalties and distributing those royalties to publishers and songwriters.
Okay, time to make a record! Singy McSingerson could always record her own music and release it straight through BandCamp or another platform, but let's say she's going the classic route and signing with a record label. There are a lot of different contracts Singy could sign with a label, covering everything from simple distribution to a "360" deal that includes tour promotion and merch—but in a standard recording contract, the label will pay Singy's recording expenses and will also pay Singy for her work, an amount that can vary widely depending on the specific terms of her contract. (Traditionally, this is an advance against royalties—in other words, the label gives Singy a certain chunk of money up front, and then keeps her royalties on record sales until the label has recouped the amount they fronted to Singy. If they make that money back and the record keeps selling, that's when Singy starts making additional income over and above her advance.) In exchange, the label will keep a portion of revenue from Singy's record sales and will also own the master recording, which gives the label wide latitude to control (and profit from) uses of that recording.
Here's where it becomes important, again, to remember that Singy is working as both a performer and a songwriter. Her record deal will include provisions for her compensation as a performer—that is, the person strumming the guitar and singing the lyrics—and as a songwriter. Her songwriting royalties, earned for each record sale, are called "mechanical license fees" (because the music is mechanically reproduced, get it?). If Singy didn't write some or all of the songs she recorded, whomever did write the songs—or whomever owns the copyrights to them, if not the original songwriter(s)—gets paid the mechanical license fees for those songs.
So now Singy has written her songs, made a record, and registered with a performance rights organization. Her music is now ready for you to hear—and to pay for, directly and/or indirectly. How are you going to do that?
Well, you can always buy a record! You can walk into a retailer and pay for a vinyl record or a CD. The store will keep a portion of that price, and will pay part of it to the record label—typically, via a distributor. The label pays Singy what it agreed to pay her as a performer for each record sale; the label also pays Singy (and/or other songwriter/publishers whose music appears on the record) a mechanical fee for each song, and then keeps its agreed cut. You can go home and listen to the record to your heart's content, never paying another cent as long as you keep the music within your own private Idaho.
It works basically the same way if you buy a download of the music from, say, iTunes or eMusic: you pay a certain amount to download a copy of the song, which you can then play ad infinitum on one or more devices (depending on the terms of your purchase). A portion of your purchase price goes to the record label, which pays a portion to Singy as a performer and, again, pays those mechanical fees to Singy and/or other publishers/songwriters involved.
Alternately, you might hear Singy's music on the radio! But wait—what kind of radio? Here's where we get into kind of distinctions that you don't typically think about as a casual listener, but that can make a big difference in terms of who gets paid for that play.
If you're turning on a conventional radio and listening to music broadcast over FM or AM airwaves, that's known as "terrestrial" radio—as opposed not to extraterrestrial radio, but to digital radio. (This is a little misleading, since there are digital signals transmitted by some terrestrial stations—this is what HD radio is, a digital signal broadcast through the airwaves—but the term "digital radio" is commonly used to refer to non-terrestrial transmission.) Digital radio is different than terrestrial radio, and though it comes in a million different varieties, the most important distinction among digital listening platforms is between "interactive" and "non-interactive" music services.
A "non-interactive" music service is said to mimic the experience of radio: what you hear is what you get, and you can't choose the songs' order. That includes digital simulcasts of terrestrial stations (for example, when you listen to the Current via our website rather than via your radio receiver) as well as streams of Internet-only webcasters (for example, Pandora). It also includes archived programs that you can listen to on demand, as long as they're programs that mimic radio (for example, when you listen to an archived broadcast of the Current's Local Show).
An "interactive" service, by contrast, lets you pick and choose songs and dictate their timing and order. That's what you do on, for example, Spotify and Grooveshark. This distinction is why Pandora doesn't let you pick exactly which songs you hear: that would make it an "interactive" rather than "non-interactive" service, and Pandora would incur greater costs. But more on that later.
For now, let's assume you're hearing Singy's music on good old terrestrial radio. That wonderful experience is free to you, but not for the radio station, which pays Singy a performance royalty—if she wrote her own songs. In the United States, terrestrial radio airplay requires the payment, by the radio station, of a royalty to the songwriter. It doesn't require the payment of a royalty to the performer. This is a matter that many musicians are now getting up in arms about, understandably: Sinéad O'Connor might be a little miffed that when a radio station plays her version of "Nothing Compares 2 U," its songwriter Prince gets paid and Sinéad doesn't. Under current law, however, terrestrial radio stations pay ASCAP, BMI, and SESAC, which crunch some numbers and figure out how much all of their songwriters/publishers get paid for that airplay.
If you're listening to digital radio, that's a different matter. If you hear Singy McSingerson on an Internet radio station—whether the Current's Web stream or Pandora—Singy gets paid as both a songwriter and a performer. That's because Internet radio stations make payments to both performance rights organizations (ASCAP, BMI, SESAC) and to an entity called SoundExchange, which collects royalties for sound recordings—as opposed to musical compositions—that are played on digital radio stations. SoundExchange then pays performing artists and the people who hold the copyrights to the recordings (typically record labels).
Got that so far? Good, now you're ready to wade into the contentious territory of interactive music services like Spotify. As an interactive service, Spotify pays royalties to songwriters/publishers via performance rights organizations (ASCAP, BMI, SESAC) and to the owners of the recordings they're streaming—in most cases, this means record labels. So when you listen to Singy McSingerson's original songs on Spotify, she gets paid both as a songwriter (by ASCAP, BMI, or SESAC) and as a performer (by her record label). On top of that, as songwriter she also gets paid a mechanical license fee—typically via the Harry Fox Agency, the same organization that administers mechanical license fees for physical products. Exactly how much she gets paid, and whether it's enough, is a matter of hot contention among artists, labels, and interactive music services—but she gets paid at least something for each of her roles (performer and songwriter) when her music is played on an interactive service.
Gah, this is complicated! It would be understandable if you wanted to keep it simple and just go buy a ticket to hear Singy McSingerson play a show at your favorite local club. Even that, though, is not as simple as it might seem.
When you hear Singy's music played in a public space—whether you're rocking out at a club or waiting for your dry-cleaning—that's a public performance of a copyrighted song, and Singy's entitled to a royalty payment as a songwriter. Any public venue at which copyrighted songs are heard may be subject to royalty payments, made to performance rights organizations and then distributed to publishers/songwriters. The specific amount that these venues need to pay varies depending on their size and other factors (for example, number of speakers used).
Most public venues where copyrighted songs are heard are required to pay royalties no matter what source they use for their music. If you're a coffee shop, for example, you owe royalties to ASCAP, BMI, and SESAC whether you're playing CDs, playing the radio, or just having your barista belt out the hits while he steams milk. Exactly how much you owe varies depending on the nature of your establishment, its size, its revenues, and the manner in which copyrighted songs are heard. ASCAP, for example, offers specific licenses for different types of establishments ranging from strip clubs to roller rinks to dog shows.
(This is why some live venues don't allow bands to play cover versions—because cover songs might be registered with performance rights organizations, and some venues choose to not make royalty payments for those songs.)
This makes it sound like musicians are getting paid by everybody, all the time. While it's true that there are multiple avenues for musicians to collect income from the use of their music, those streams of income don't necessarily add up to much. That's especially true since, in general, the bigger you get as a musician, the more different costs you incur. Your albums get more expensive to produce, you have more band members to pay, your management and publicists get a cut of your income, and if you use a music publisher, they typically take half your songwriting royalties.
It's hard to become popular on a large scale without the aid of such a team, but the expenses associated with production, distribution, and publicity can mean that even bestselling records can sometimes barely pay for themselves. In his book How Music Works, David Byrne candidly lists the expenses and income associated with his 2004 album Grown Backwards; though the album sold 127,000 physical copies over the course of its first six years on sale, Byrne's net income from album sales was only $58,000. As Byrne notes, "That's what an elementary school teacher makes in New Jersey." That's not a bad salary—as Byrne acknowledges—but remember, we're talking about David Byrne, frontman of the Talking Heads and a household name among music fans. Scale that income down to someone who's not in the Rock and Roll Hall of Fame, and you start to understand why your favorite local bands are drinking PBR instead of Hennessy.
That said, this system does help to make a select few musicians very wealthy—particularly those who write their own songs, and particularly those whose material can be repackaged, re-sold, and featured in multiple formats. Consider, for example, if Mary Lucia buys an Alice Cooper CD to play on her show Rock 'n' Roll Radio. When Mary buys that CD, Alice Cooper gets paid as both a songwriter and a performer per his contract with his record label. When Mary plays "School's Out" on the Current, Alice Cooper gets paid again—this time, just as a songwriter—for that terrestrial radio broadcast. Since the Current is simulcast digitally, Alice Cooper gets paid again via SoundExchange—both as a songwriter and a performer. When your local bar turns the Current on and regales their customers with "School's Out," Alice Cooper gets paid again (as a songwriter) via the royalties the bar paid to BMI. We're talking pennies here, but add up all the CDs, all the radio stations, all the bars in America...and those pennies can start to amount to something substantial if you're at the level of an Alice Cooper.
There's another hugely important way for musicians to gain income from their work: by licensing their music to film, TV, video games, or other multimedia. While the exact nature of video licensing ("sync") agreements vary by medium (TV or movie? streaming or broadcast? etc.) and the way in which the music is to be used, in general, producers of audiovisual content pay royalties to songwriters/publishers when they use copyrighted music—and then, additionally, they make one-time payments to artists and record labels when they use particular recordings.
Since TV programs are often broadcast many times, these payments can add up quickly; as Steven Greenberg, writer of the song "Funkytown," told Andrea Swensson, every time a character on Parenthood sings a bit of the song as a euphemism for...well, every time that happens on TV, Steven Greenberg gets paid. If you're lucky enough to write a song that becomes as ubiquitous as "Funkytown," you can realize significant income for the rest of your life.
Will Singy McSingerson be so lucky? Only she and her artistic muse know whether lightning will strike in terms of songwriting, but whether Singy becomes the next Alice Cooper or quits music for a career as a yoga instructor, it's important for her—and her fans—to know how music rights work.