Slides from a 4 session class I teach call "The Music Business for Fun and Profit"

1. Session 2
Royalties, Licensing
and
Income Streams

2. Before you can make a buck from something,
it’s not a bad idea to know what it is.
According to law, you can copyright :
• Literary works
• Musical works
• Dramatic works
• Pantomime choreographed works
• Pictorial, graphic and sculptural works
• Motion picture and other audio visual works
• Sound recordings
• Architectural works

3. The music business is concerned with
these copyrights:
• Musical works
• Sound recordings
• Motion picture and other audio visual works
Publishing is the part of the business
that exploits these rights to maximize
their value.

4. Before you try to realize any income
from your copyrights, make sure they
are in order. Here is a quick look at the
U.S. copyright process.

5. The music publishing business offers music users the
right to use recordings and/or musical works from
music creators in exchange for a fee.
The fees are collected by a variety of means including
performance rights organizations (PRO’s) like:
These companies collect money for public performance
(radio, television, major live venues) of their members
music and then distribute it to the member writers and
publishers.

6. Other companies collect money for
other types of uses like satellite
radio, internet radio, cable TV
radio, cover versions of songs by
other artists, etc.

7. The term “Royalties” can have a lot of different
meanings.
• Mechanical Royalties, are paid to the writer of a song
when someone does a cover version of their song.
These royalties are usually collected by the Harry Fox
Agency (HFA) and distributed to publishers, who then
give a percentage to the writers.
• Performance Royalties are collected by PRO’s,
ASCAP and BMI, for public performance of a work
(radio, TV) and then distributed to publishers and writers
directly by the PRO.
• Record Royalties from sales of CDs or other forms of
music are typically a percentage of adjusted MSRP paid
to the artist after the record label has recouped all their
expenses and deducted everything you can imagine.
The percentage is typically between 10% and 20%.

8. MSRP $15.95
Just for fun (and to
see why we need to Less 25% $12.00
find a better way) packaging discount
let’s look at that last
one a bit more,
which we will cover By 85% Payment $10.20
in greater detail in Base
Session 4.
By 10% Royalty $1.02
Rate
So if a label spent $250,000 to make and market a
recording, all of which is recoupable, and the recording
sells about 250,000 copies, you and your band mates
have earned about $5,000 to split however many ways.
Better hold off on buying that yacht.

9. Licensing is another term that has a variety of meanings. The
term refers to the business of granting or receiving licenses to
use a musical work.
A Licensor has a product and is the grantor of the license (the
creator).
A Licensee is the entity to whom the license is granted (the
user).
In recordings (audio only) there are several types of licenses:
Mechanical
Master
Performing
In audio visual works (film, TV, videos):
Synchronization
Mechanical
Master
Performing

10. Income streams in the music business come from the granting and
using of these licenses and rights, and the different payments are
derived from these uses.
You can make money in the business from all of these sources (most
of which involve some or all of the previously mentioned rights and
licenses):
• CD sales
• Downloads
• Satellite radio
• Cable TV Radio
• Internet Radio
• Streaming
• On-Demand
• On-premises licensees (Muzak, DMX, PCM)
• Music for films
• Music for TV and Cable
• Corporate Videos
• Product Tie-ins
• Live performances
• Sponsorships and endorsements
• Music and Sample Libraries
• Teaching, blogging, websites, information
• Playing guitar and putting a cup on the sidewalk
Yay! Back to good news. Let’s talk
about some of these…