In my success book readings, I've often come across the thought that says something like the following, "Success is finding something you love to do so much that you’d do it for free, and then figuring out how to make people pay you to do it." The music industry is known as a tough business in which to make money, so anyone starting out in this industry must know that it’s NOT for the faint of heart. You must have a powerful drive and determination to be successful whether you’re in the role of the artist or the many supporting roles that are found within the industry, such as artist manager. Many who are new to the music industry can benefit greatly by understanding how the money is made. One topic they should cover first is how royalties are paid and to whom. In talking to some of the artists with whom I work, there seems to be some confusion in this category. To help clear up some of the confusion, I thought it would be a good idea to post some resources that will help educate everyone on this very topic.
First and foremost, there is the issue of copyrights. In the U.S., a creative work or piece of intellectual property is considered copyrighted if it has been written down or recorded on some format. But just having that be true doesn't mean you as an artist will have time to track down everyone who may be using your material. That is why performance rights organizations exist, or P.R.O.s. There are three such organizations for this purpose in the U.S. They are ASCAP, BMI, and SESAC. To save time, you can see a comparison of these three agencies here. These three agencies are in charge of collecting royalties from anyone who may perform or play your song. This may include but is not limited to: radio stations, Internet radio/streaming, restaurants, elevators, telephone hold music, etc. They basically track down any public broadcast of your music and collect royalties on your behalf. It’s important to familiarize yourself with these agencies if you plan on making your music career more than a hobby.
While those agencies cover performance royalties, they do not collect royalties from mechanical rights. Mechanical royalties are paid to the songwriter by the person (or business) making the mechanical copy of the song. For example, a record company will pay an artist mechanical royalties for every CD that is pressed, regardless of the sales that CD generates. The most prominent agency responsible for issuing and collecting royalties from mechanical licenses is the Harry Fox Agency. The FAQ page on the Harry Fox Agency website is recommended reading to help clear up any questions you may have when it comes to this complicated issue.
Just when you thought you understood all this rights and royalties business, remember; this ONLY covers the United States. There are a full set of different entities that operate in global markets. I found a great blog that addresses many of these same issues for the European nations called Music & Copyright’s Blog. It is a great resource that should be bookmarked by any artist or artist manager who is new to the music industry.
This information is only the tip of the iceberg when it comes to how royalties are paid. Unfortunately, this is a complicated topic that will require more reading and research. Here are some links to some websites that I have found helpful in wrapping my head around all the ins and outs of this area of artist management:
-A great article about who gets paid by whom and for what. A must-read.
-Another really great break-down of how royalties get paid. Bookmark this one.
-Not only a great article, but DIY Musician is a great blog to follow for any independent, up-and-coming artist.