CMU:DIY Notes

Lecture Notes | Making Money From Music

Published on Wednesday 4 October 2017

These notes accompany the CMU:DIY lecture ‘Making Money From Music’ and provide a beginner’s guide to the different ways artists generate revenue and the business partners they might work with along the way.

In addition to these notes, you can also download the slides for the ‘Making Money From Music’ lecture HERE. For more on music copyright and label/distributor deals you might also want to check out the ‘Dissecting The Digital Dollar’ reports and guides HERE.


 

INTRODUCTION
Why do we even want to make money out of music? Well, this is probably stating the obvious, but if – as an artist – you want to focus on your music full time, you need to turn what you do into money.

You need to pay for…

• Living costs: This will depend on how much you cost to run. And obviously in a band, there are more living costs to cover.

• Touring: While gigging will eventually become a revenue stream, at the outset you will likely lose money every time you get on stage. But you need to get on stage because it’s the single most effective way to build a fanbase.

• Producers, engineers, songwriters etc: It’s a lot cheaper to produce music today than it used to be, though most of the best tracks are actually collaborations between multiple artists, songwriters, record producers and sound engineers. And those people need to make money too.

• The distribution of recordings: This is also a lot cheaper in the digital age, though there is still admin associated with the digital distribution of music, which takes time. And time is money!

• Marketing and PR: Although most of the social media and digital channels you’ll likely employ to promote your music are free to use, every single artist in the world has those channels, so you need to stand out from the crowd. Success requires great content; interaction with fans; support from media, industry and social opinion formers; and probably some advertising spend. For most artists, marketing and PR continues to require a significant time and financial investment.

• Someone to manage all this activity: Most artists start off truly DIY, but as your artist business starts to grow you will need more support and help from suppliers and business partners. All of whom are ultimately going to need to be paid.


 

MAKING MONEY FROM MUSIC
So, artists need to turn their music-making into money. There are three main ways you can generate income from your music.

1. Create and exploit intellectual property.

2. Stage and monetise live performances.

3. Build a fanbase and monetise the fan relationship.


 

MAKING MONEY FROM INTELLECTUAL PROPERTY
As an artist you create four main kinds of intellectual property…

First, every song you write is protected by copyright. We call these the ‘song rights’ or the ‘publishing rights’.

Second, every recording you make is protected by a separate copyright. We call these the ‘recording rights’ or the ‘master rights’.

Third, all the photos and illustrations you create are also protected by copyright – the ‘artistic rights’.

Fourth, your brand – so your actual name, performer name or band name – can be protected by a thing called trademark.

Copyright and trademarks
Both copyright and trademarks are forms of intellectual property.

Copyrights are automatic – there is copyright in every song you write, every track you record and every photo you take as soon as the song, track or photo is created. You don’t need to fill out a form or pay anyone any money.

Trademarks are registered – to protect your name you need to register it with the trademark registry. This costs money and you will likely need legal advice on how to go about it.

Therefore registering trademarks is not a top priority for new artists, though it’s something to be aware of. Superstar artists make lots of money by allowing other companies – eg tech companies, fashion companies, perfume companies – to build products using their trademarks.

Copyright ownership
Because copyrights are automatic, artists and songwriters need to be clued up on copyright from the off. And the first consideration is copyright ownership.

By default a song copyright is owned by whoever writes the song. By default a recording copyright is owned by whoever arranges for the recording to take place. By default the copyright in a photo or illustration is owned by the photographer or illustrator.

Where multiple people create a copyright-protected work together, they co-own the resulting copyright. This happens a lot with songwriting. If you co-write a song with another person, you together own the song copyright.

It’s for you as collaborators to decide how you are going to split the copyright, ie what percentage of the copyright (and any subsequent money) does each co-writer get?

It’s important to note that, although copyright law provides these default ownership rules, copyrights can also be transferred.

So, one member of a band might arrange for a recording to take place, but they might decide to share the copyright with their bandmates. Or, you might write a song, but you might sell the copyright to me in return for money.

Copyright law allows such transfer – it calls it ‘assignment’. Though when copyrights are assigned, there should be a written agreement so everyone is clear on who owns what.

Copyright terms
Copyright doesn’t last forever, though it does last for a long time.

In Europe, the copyright in a song, photograph or illustration lasts for the life-time of the creator and another 70 years.

The copyright in a recording lasts for 70 years after its release.

Copyright controls
Copyright provides copyright owners with certain controls over what happens to their content. There are six main controls: the reproduction control, the distribution control, the rental control, the adaptation control, the performance control and the communication control.

Copyright makes money whenever another person or company wants to exploit one of your copyright controls. So they want to reproduce, or distribute, or rent, or adapt, or perform, or communicate one of your songs or your recordings.

Whenever that happens, they must get your permission to exploit your copyright controls. You charge for your permission (aka licensing), which is how copyright makes money.

Licensing
When a copyright owner sells permission to – or licenses – a third party to utilise their copyright controls, a deal needs to be done between the copyright owner and the licensee.

In the music industry, there are three main ways copyright owners license, and which method is used generally depends on what the licensee wants to do with the song or the recording.

Option One: License direct
The licensee finds the copyright owner and negotiates a bespoke deal.

This happens when a brand wants to use your song or recording in an advert. They must find you and make you an offer. You will negotiate a deal, agree terms and write a contract.

Option Two: License via a third party
The copyright owner allows a third party to license on their behalf. The third party then does the deal on behalf of the copyright owner.

This happens with DIY artists and the streaming platforms. Realistically the likes of Spotify and Apple Music don’t have time to negotiate deals with every single DIY artist. So they negotiate deals with distributors like AWAL, CD Baby, Distrokid, Ditto, EmuBands, Spinnup and TuneCore.

As an artist you ally with one of those companies, allow them to license your recordings to the streaming services, and ‘piggy back’ on the deals they have already negotiated.

Option Three: License via the collective licensing system
In certain scenarios the music industry chooses to license as one.

So, all the artists and record labels (more or less) put all their rights into one pot and appoint a collecting society to license on their behalf. And all the writers and music publishers (more or less) put all their rights into one pot and appoint another collecting society to license on their behalf.

Licensees can then get two ‘blanket licences’, one covering all recordings (more or less) and one covering all songs (more or less). The collecting societies collect the money and pass it on to the artists, labels, writers and publishers, in theory based on how often their music was used.

Things like live performance, cover versions, TV, radio and the public performance of recorded music in public spaces are usually licensed via the collecting societies. In the UK, PRS/MCPS is the society for writers and publishers, while PPL is the society for artists and labels.


 

MAKING MONEY FROM LIVE PERFORMANCE
Making money from live performance is much easier to get your head around. If people are willing to pay to be in the same room as you while you sing your songs, you can monetise live performance!

Though the live industry makes money in other ways too, including booking fees; selling food and drink; selling other services like parking, cloakroom facilities, queue hop and VIP rooms; and selling sponsorship to brands.

Most artists’ live careers go through similar stages…
• Self-promoted gigs, open mic nights.
• Gig and club-nights, festival new band stages.
• Pub/club venue touring, small festival stages.
• Theatre venue touring, bigger festival stages.
• Arena touring, festival headline slots.
• Stadium touring.

Gigging only really becomes profitable for the artist once they are playing smaller theatres or bigger club venues. At the grass roots, artists might actually make more money from their copyright if they are performing their own songs, as they will be due PRS royalties in addition to any fee they are paid by the promoter of the show.


 

MAKING MONEY FROM THE FAN RELATIONSHIP
This is the newest part of the music business, which has become possible because artists now have direct online relationships with their core fanbase.

Once you have an engaged fanbase, you can start to sell them products and services directly online. It doesn’t matter what you sell them – sell them what they want to buy! This might include: premium products (records, merch); VIP live experiences; a subscription service (online fan club) etc.

Plus, if you build a sizeable fanbase, brands may want to partner with you to reach your online audience – basically you become like a media.


 

MEET THE MUSIC INDUSTRY
So, there are lots of ways to make money out of music. Though building a fanbase and unlocking those revenue streams takes time and will likely require some expertise and cash investment. Which is where the music industry comes in.

The music industry consists of companies and individuals who work with artists to help them turn what they do into money. Most music companies specialise in one music revenue stream.

This means the wider industry can be split up, commonly…
• Those which work in music rights v those that work in live.
• Those which exploit recording rights v those which exploit song rights.

This means artists usually have relationships with multiple companies, doing a different deal for each of their revenue streams.


 

THE MUSIC RIGHTS INDUSTRY: KEY PARTNERS

Record Label: The label first and foremost exploits sound recording rights. It works with artists on creating and distributing recorded content, liaising with the studios, record producers, sound engineers and other songwriters, plus CD/vinyl manufacturers, music retailers and digital platforms. The label also leads on the marketing of the artist’s albums and singles, running campaigns that also help the artist grow their fanbase.

Music Publisher: The publisher first and foremost exploits song rights. It will manage the licensing of the songwriter’s songs and the collection of royalties, liaising with the collecting societies and directly with some licensees. It will also support the songwriter’s artistic development, and may also seek sync and original composition opportunities for the writer. Publishers may also publish sheet music, hence their name.

Merchandiser: The merchandiser oversees the production of the artist’s merchandise, and may also be involved in the sale and distribution of these products. A merchandiser may also seek opportunities to generate further income by licensing the artist’s artwork and trademarks to third parties.


 

THE LIVE MUSIC INDUSTRY: : KEY PARTNERS

Promoter: The promoter stages gigs, tours and festivals, booking the artists and venues, hiring the crew, leading on marketing and taking the financial risk. Some promoters also own venues.

Booking Agent: The agent sits between the artist and the promoter, seeking opportunities for the artist to play live and negotiating any deals. Whereas artists often work with just one label and one publisher at a time, they will likely work with multiple promoters on different shows, tours, festivals and corporate gigs, hence why artists have a separate member of their team seeking and negotiating deals in the live space.

Ticket Agent: The ticket agent sells the tickets, obviously. It will have an online platform for selling said tickets, and may also offer telesales and/or physical shops. More importantly, the ticket agent may have a mailing list of music fans it can promote a show to. Ticket agents may also advance money to help the promoter with cash flow.


 

THE FAN BUSINESS: : KEY PARTNERS

D2F Agency: This is the newest part of the music industry, but there are now companies that help artists with their direct-to-fan activity. Some of these mainly provide technology while others help manage online artist stores. Some labels and promoters have also been dabbling in this space.

Brand Partnership Agency: While some brands will work directly with artists, labels or promoters, some prefer to work with specialist brand agencies which sit between them and the music industry. This is partly because brands will often want access to recordings, songs, merch, tickets and fanbase, but that might require doing deals with five different companies. Brands would rather deal with one agency, which then talks to the artist and all their business partners.


 

ARTIST MANAGEMENT
Sitting between the artist and all their business partners is the manager. The artist manager is the only business partner that takes an interest in every aspect of the artist’s career.

The role of the manager changes as the artist’s career progresses. Initially, when there are no other business partners, artist and manager must do all the work between them. Meanwhile the manager is helping the artist identify business partners and negotiating deals with a label, publisher, merchandiser, agent, promoter, D2F company and/or brand agency.

Once the deals are in place, the manager needs to make sure everyone is doing the work they promised to do, including the artist. A good manager is also always looking ahead into the future, beyond the current album and tour, advising the artist on how to build their business for long-term success.


 

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