5 Steps To Collect Royalties On All Your Music
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In a World where digital distribution is king. The irony presented is this: collecting all the royalties on your music depends on your ability to leave a paper trail leading back to your content.
This entails registering with the appropriate organizations and collection societies, so that when the proper funds — do — become available they are allocated to the appropriate parties.
Companies like SoundExchange have been leading the way in an ever-changing digital distribution landscape. The stories of their artist-centric services are nothing short of epic, inspiring and legendary.
Adding to their brand affinity and growing reputation by seeking out artists at SXSW with checks in hand for owed royalties. It is estimated that the company has paid out close to a billion dollars to rights-holders in 2018 alone.
This explosion of online music streaming and digital distribution has shifted the landscape to favor the independent artists and has — undoubtedly — changed what it means to be a self-releasing artist/independent record label.
London-based Midia Research has estimated that this trend has generated more than $643 million worldwide in 2018, amassed and gathered by digital distributors such as DistroKid, TuneCore, Ditto Music & CD Baby.
According to conservative calculations, the estimated $643 Million is only a piece of the pie. When you factor in the additional publishing and licensing, we’re easily looking at a billion-dollar pay day year-over-year — these are estimates that will only increase over time.
“We are entering potentially the most transformative era that the record business has ever seen.
The rise of ‘direct artist’ service companies, and a whole host of other commercial models, mean that [unsigned] artists have more choice and flexibility than ever before.
These artists can create their own virtual record label.”
— Midia Research MD Mark Mulligan.
Capitalizing off of a global boom, online music streaming has afforded independent artists the opportunity to embrace life-changing arrangements without comprising future opportunities.
The rise of digital distribution has placed an emphasis back on infrastructure and artist development. This revolution within the music industry has created an ecosystem where independent artists can partner with the digital distributor of their choice.
‘Direct artists’ can now choose a path that best fits their idea of success, create a track record, build up leverage within an infrastructure and operate as an independent entity with the subsequent support of a record label.
The rise of online music streaming places a clear understanding on how success is defined for ‘DIY musicians’. Partnering with digital distribution companies like Create Music Group and Label Engine is becoming a very promising situation for content creators.
Creative freedom, worldwide distribution, publishing administration, marketing and promotion of music, brand development, retaining your masters, etc.
Lets go over some eye-popping statistics that paint a better picture of the state of online music streaming, publishing & digital distribution.
- TuneCore collected more than $500 million for independent artists within the 18 months to end of March 2019
- AWAL generated $59.9 million in the 12 months through June last year.
- CD Baby was acquired by Downtown Music Holdings, the parent company of “DIY Publishing” Songtrust as part of a $200 million deal.
- Spotify acquired a stake in Distrokid last October for an undisclosed sum.
- Bandcamp is now generating more than $8 million in sales every month.
- Warner launched Level Music, which distributes ‘direct artist’ music for no fee.
- Independent artists are becoming a true volume business, with DistroKid, CD Baby & TuneCore, CD Baby partnering with over 1 million artists.
Fred Davis, a partner at Raine Group, the powerhouse global investment bank that backs SoundCloud and independent artist distribution/label services startup Amuse, discusses the economic revolution in the music industry.
“The most exciting and fastest-growing sector to spring out of the music industry’s streaming revolution is the self-published artist.
The unsigned artist’s only lane to monetize their talent used to be through performing live, [but now] a thriving new sector has evolved that allows the self-published artist to support his or her craft.
It’s the most artist-friendly development in this entire global streaming revolution.”
If you take a look at the chart below. You can see that digital distribution is the heart of online music streaming. The artist royalties flowchart from Ari’s Take paints a picture of all the avenues your music will take on it’s way to becoming net profits.
This chart holds a lot of value for artists because it differentiates between the number of revenue streams that are in play when you distribute your music Worldwide. Everything from interactive and non-interactive platforms to TV commercial residuals.
Now lets check out ‘5 Steps To Collect Royalties On All Your Music’.
1. Register Your Work With The U.S. Copyright Office
Registering your music with the U.S. Copyright Office should be the first step in collecting all the royalties on your music (creating a digital distribution funnel). This form of registration is essential because it represents your intellectual property and receives every benefit under the protection of the law.
Copyrighting your music allows you to provide a record of ownership when it comes to your work. The Copyright Office will provide you with a formal document that will be be kept on record at the Library of Congress.
Your music is copyrighted automatically when you record it on any medium. This applies to published and unpublished work. The full process takes about six months to complete. So, if you’re interested in copyrighting your unpublished music before a release, that is possible as well.
There is a $35 fee for every work processed. This is considered a business expense and can be deducted from your profits on your taxes. Registering your work ultimately defers unauthorized use of your work and allows you to collect every penny from your music.
To register your music visit Copyright.gov, you can sign up for an account and select “register a copyright.” You will see “log into eCO” and you will be directed to a screen where you can register your work.
Registering your music with the U.S. Copyright Office allows you to fully protect your work. The process is not expensive or difficult, the registration process should be looked over carefully and thoroughly proofread.
2. Register With PROs (Register Songs With Appropriate Splits)
PROs play a significant role in the collection of music royalties. Pretty much every country in the World has their own PRO. In Canada its SOCAN and the UK is represented by PRS. In the United States there are four major Performing Rights Organizations.
They are SESAC, BMI, ASCAP & GMR (Global Music Rights). Although they play almost identical roles for artists and publishers, BMI & ASCAP are not-for-profit and free to join with an associated fee for sign-up. While, SESAC & GMR are for-profit organizations and require it’s members to meet a certain criteria to be accepted to the organizations.
On a global scale, all of the PROs play off of each other to pay the artists through their appropriate country of origin and respective PROs. PROs are considered the next step in collecting your royalties on all your music because they collect royalties from thousands of distribution outlets (live venues, restaurants, TV Stations, radio stations and streaming services (Spotify).
If you plan on performing live or going on tour in the near future. You can register your set list and collect performance royalties (not mechanical royalties. Keep in mind, PROs represent songwriters and publishers, not artists.
3. Distribute Music Through A Digital Distribution Company
Choosing a digital distribution company is the third step in the process of collecting all your royalties from music. Digital distribution companies are the heart beat of everything concerning online music streaming.
Streaming services DO NOT pay mechanical royalties to PROs (BMI, ASCAP or SESAC). Mechanical royalties are paid directly to publishers via collection agencies. This is where creating a distribution funnel has its benefits.
Worldwide distribution can give you access to a number of markets, the key is to have the proper paperwork in place so that digital service providers can find you and pay out earned royalties.
Companies like Create Music Group have been playing a vital roll in the digital distribution arena. The biggest growth driver in the music industry is online music streaming and Create Music Group has become a major player in helping artists collect revenue that is owed or that is generated from a number of DSPs (Digital Service Providers).
In 2018, the Recording Industry Association of America estimated that online music streaming generated $7.4 billion in revenue. Along with Tunecore and DistroKid, Create Music Group has grown into a heavyweight when it comes to collecting revenue for its artists.
The sheer volume of musicians that use Create Music Group’s platform speaks to the value that they are providing for content creators.
The company has grown at a rapid rate, going from an annual revenue of $133,000 in 2016 to $28 million in 2018. Create Music Group was featured as one of the top private companies in the state of California in 2020.
Create Music Group essentially acts as a partner to artists and record labels. Acting as a buffer between DSPs and content creators, dealing with monetization, copyright claims and registering the appropriate ISRCs.
The services that Create Music Group provide for their artist is nothing short of brilliant. Providing a sense of clarity, the company carves out a number economic avenues that artist have overlooked.
Most artists in the music industry tend to not want to leave money on the table, especially when your are generating revenue worldwide. Following the recipe of; provide value and opportunity will follow.
Already involved in artist development, content creation and publishing. The company continues to add to their ecosystem. Staying true to its core product, the company continues to helps artists with:
- Mechanical collection through HFA
- Audio-fingerprints and Content ID monetization claims
- PRO registrations
- Soundexchange
At a certain point in your career, the risk you take by not properly setting up your digital distribution could add up to hundreds of thousands over a couple of years.
The dynamic being presented is this; the more you grow, the more you lose.
COO and co-founder, Alexandre Williams sat down with Michael St. James to discuss some of the pain points that are prevalent to independent artists.
When it comes to new artists, the biggest problem we see is that a lot of people don’t understand the publishing side of it.
Digital royalties, how they’re paid, what partners you have to upload information to, etc.
If you don’t understand it, you’re going to miss a lot of money. And it might not be that you’re getting screwed over, it’s just that you don’t understand all of the avenues you have to cover.
Even the ones that do go to music school don’t seem to understand that. If you don’t get it, you need to partner with someone who does.
The company has also developed an app called ‘Splits’ that lets you divide your revenue with the appropriate parties. As the focus around technology remains prevalent, Create Music Group is continuing to improve their artist portal by providing real-time data and developing a music licensing platform for video makers.
4. Register With Songtrust
The fourth step in creating your digital distribution funnel and collecting all the royalties on your music will be signing up for Songtrust. They charge a $100 setup fee and take 15% off of your backend earnings. Songtrust provides a valuable service by affiliating you with a PRO if you aren’t already a member of BMI, ASCAP, SOCAN, etc.
The next two steps are probably the most valuable assets in digital distribution funnel. By signing up for Songtrust, you will be in a position to collect from 50+ socities, spanning across 150+ countries/territories. They also collect mechanical and performance royalties from 95% of the music publishing market.
This is Worldwide Distribution at the highest level.
It all starts with properly registering you work with your home collection society. Collecting all the royalties on your music completely depends on the song registration information to determine who needs to be paid and exactly how much. Any mistakes or omissions could result in your royalties being withheld or allocated to the wrong parties.
One of the most important pieces of information is your IPI (Interested Party Information). This is a nine-digit number that is associated with songwriters and publishers by their PRO to connect rights holders to work. It’s pretty much like the social security number for music royalties.
5. Register With SoundExchange
SoundExchange is often confused with Songtrust and for good reason. The biggest difference between the two is that SoundExchange is FREE 99! This is the last step in your digital distribution funnel most essential for artists who are performing their music.
SoundExchange collects digital performance royalties produced by master recordings on behalf of the rights holders (owners and performers). SoundExchange operates like a PRO in a sense that they represent artists and record labels.
A key difference is that SoundExchange is the only collection society in the United States to gather performance royalties for “noninteractive” digital sound recordings. For example, platforms like SiriusXM are “Noninteractive” in the sense you can’t choose your music. In comparison with “interactive” platforms like Spotify and Apple Music.
SoundExchange has partnerships with twenty different foreign collection socities. Meaning if your music is played in their region, they pay royalties to SoundExchange, and SoundExchange pays you. The biggest difference from the traditional PROs is that SoundExchange only collects digital royalties. So “noninteractive” platforms like SiriusXM and Pandora can stream any song SoundExchange represents.
Following these simple five steps will put you in a position to collect all the royalties on your music. These steps are based on the power of reduction, if you can provide accessibility to your information through the U.S. Copyright Office, PRO, Digital Distribution Partner, Songtrust and SoundExchange.
It’s just a matter of refinement and staying organized. I would love to help anyone who has any questions about getting started. If you need assistance with digital distribution or addressing your publishing administration needs. Feel free to reach out to me by email or on social media.
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