Guess How Much Money You Made. Seriously, You Need To Guess.

By George Howard and Jeff Price

(Follow George Howard on Twitter  /  Follow TuneCore on Twitter)

In order for a business of any kind to succeed you must have metrics.  You must, at minimum, be able to calculate both how much the business is spending and how much the business is making.  The music industry today, in many respects, requires and rewards the artist who views herself as a business-owner/operator.  Artists can (and we’d argue, should) be their own label, songwriter, and publisher.  As such, artists can develop multiple revenue streams for their business.  Downloads of the artist’s records generate income; usages of the song/master in film/TV generate income.  Both of these streams of income are fairly easy to quantify.  A download of a song generates roughly $.70, and income from usages in a movie/ad, while negotiated, are clear and precise. 

An interesting note is that the music industry going digital has allowed this clarity.  In the past, not only would a band not know its ”artist royalty” at a “penny rate,” but over 98% of signed artists never even saw a penny of band royalties beyond an initial advance.  Via the internet and the digital industry, artists are, for the first time, able to clearly understand how much money they make when their music sells – and they actually get the money as opposed to having it kept to recoup against label  expenses.  The point is, for the past 60 years no one really gave a shit about the band royalty rate as they never got it, and so understanding it was moot.  But now, for the artist-cum-label, it’s very real, and very important.

However, as we’ve discussed in recent articles, as we move inexorably towards a streaming-only music landscape, discerning income from this type of usage (streaming) is ridiculously complex. This complexity makes it difficult (if not impossible) to create a financial roadmap for a music entity.

Here, for instance, is a simplified “explanation” provided by a great company called RightsFlow of how income for interactive streams and limited downloads are calculated.  RightsFlow has a product called LimeLight that allows artists to get mechanical licenses as well. 

 

 

 

We understand deeply how complicated it can be to create a set of rules to govern transactions amongst a vast array of diverse market participants. There is, for instance, a compelling argument that a small broadcaster of music (a college radio station’s web site, for example) shouldn’t pay the same amount that a massive online presence should; and, thus, the artist shouldn’t receive the same amount for both usages.

There is now clarity to the amount of money the artist as label makes when the artist’s music sells; however, this same clarity does not exist for the songwriter when there is a public performance of a song.  Add to this that it appears that the streaming of music is the future of this industry and that these music streams – both interactive, via services like YouTube, Mog, Rhapsody etc as well as non-interactive, via Pandora, Jango, Last.fm etc – are required by law to pay the songwriter for the public performance of the song. It is imperative that there is some simple transparent way to understand what is being paid.  Add to this that the obtuse nature of income from public performance is, sadly, not limited to just digital transmissions.  For example, how much money is a songwriter paid when his or her song is played on a TV show, in a restaurant, in an elevator, or on a FM radio station?  In roughly twenty years in the music business, we have yet to hear anyone articulate with any type of exactitude what a songwriter can expect to be paid from these type of public performances.  Again, yes, of course, it varies upon the scope of this public performance, but to not be able to even give a range is deeply troubling. Again, you simply cannot build businesses without being able to calculate revenue and cost. 

Arguably, tracking terrestrial public performance is necessarily a less-exact proposition than tracking digital public performance – i.e. Pandora keeps track of what it plays in a database and can export a file, whereas your local mom and pop bar just plugs in an iPod and clicks play and does not keep track.  The analog would be something akin to physical distribution as compared to digital distribution.  It is simply far easier to track digital sales than physical.  TuneCore, of course, understands this, and adjusted the model for digital distribution accordingly: charge a flat fee for a service, and account to artists with exacting accuracy.  Your band royalty rate is clear, understandable and simple.

We must create a similar system for digital public performance for songwriters.  It would appear that SoundExchange is on its way (not without some bumps) towards creating a system for accurate collection and distribution of digital performance income for the record label holders and lead performers of the song, but there appears to be a gap with respect to the songwriter. 

SoundExchange — the new PRO on the block, when compared to ASCAP, BMI, or SESAC — operates with a degree of transparency that the others lack.  Part of this transparency is due to the fact that the rates that SoundExchange collects — public performance from digital non-interactive streaming — are set by statute (meaning the government sets the rates).  There is, of course, an argument to be had about the relative merits (or lack thereof) of this approach with respect to the ability to negotiate these rates.

In any case, as above, today’s artists must leverage all of their income-generating possibilities.  This includes, of course, income that they, as writer/copyright holder of a song, are legally required to be paid whenever their music is streamed; either interactively or non-interactively.

TuneCore brought clarity to the record label and band royalty side.  It would like now to bring the same clarity to the songwriter side and get as much of your money into your pockets as quickly as possible with a clear understanding of how it is calculated and what you should expect.

In addition, and just as important, songwriters (who are also acting as label and publisher) need a voice at the negotiating table, as these songwriters appear to have as much, if not more, market share then the old school guard.

We believe we need reform in this area if we’re to ever see true innovation in the music business.  Smart external money will never enter a market where they can’t calculate revenue.  More importantly, the millions of artists out there who, increasingly, are essentially small businesses – operating as label, writer, publisher, etc — were forgotten in the byzantine negotiations that resulted in the codification of the rates surrounding streaming.

Do your part. Become informed. Know your rights. Now more than ever, it’s essential to understand the various revenue streams that are due to the artist/label/songwriter/publisher.  There simply is no alternative if you desire to continue to make your music, on your terms, in an ongoing manner.

As for TuneCore, it must step into the void and do its part to help organize these countless important voices in a manner that makes it impossible to be ignored

These are disruptive times, but from disruption comes true opportunity…for those smart enough, informed enough, and brave enough to take control.

You can read about your Six Legal Copyrights that drive the entire music industry here.

 __________________________________________________________________________________________________

George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: twitter.com/gah650

 

Comments

[Yves Villeneuve]

The only question that needs to be asked is: how much percentage of total revenues do the artists/labels receive.

For instance, there is no transparency at Spotify or Google/YouTube. Artists and labels are being ripped off by these streaming services while companies like Google make billions every 3 months from ad revenues related to streaming.

I don't believe streaming is the way of the future for artists who actually want to get paid for their work.

[Rex Stratton]

You know, I've been selling music on the net since 1998. and the total revenue I've collected is about 300.00 yet I have thousands of fans. Who is getting the money? It certainly isn't me, and I have no way of knowing who bought what, or where, or when because the venues won't say if they're asked to be specific. I tunes for instance won't even talk to me, and I've been making them money here and in Europe for over 12 years.

[Tom Green]

Well, yes, theoretically there's money in streams but for most of us it's barely worth the bother, financially - and Spotify are still struggling to make any kind of profit.

Better advice from Tom Silverman, here

http://www.linkedin.com/news?viewArticle=&articleID=452544520&gid=1088247&type=member&item=50537748&articleURL=http%3A%2F%2Fwww%2Esongwriting%2Enet%2Fblog%2Fbid%2F55794%2FTom-Silverman-On-Songwriters-And-The-New-Reality-Of-The-Music-Business&urlhash=Jl8v&goback=%2Egde_1088247_member_50537748

I quote - "I also call it the Creative Conundrum; it is composed of four elements that combine to make an artist a hit artist. There is a lot of clutter in a world where over a hundred thousand albums are released a year, and over 81,000 of them sell less than 100 units, and 17,000 releases sell only one unit! Thousands of musicians produce releases on their home computers, with programs like Garageband, and they pay maybe 35 dollars to put it up on TuneCore, and these releases don’t get bought by anyone, but they get in the way of the artists who are in real studios spending real money in real time trying to break through. There’s so much clutter out there, the artists have to have a sound, everything about them has to be differentiated to have a chance at breaking through."

So you may think you know where that income is supposed to come from - but without something really special, a lot of luck, and either a very fat promo budget of your own, and/or serious label support, guess what happens ?

Absolutely nothing. This industry is virtually dead on its feet.

[peter noone]

Because ABKCO never paid Herman's Hermits or reported income since 1967, we were obliged to re record most of our 20 plus hits and distribute them in direct competition with the originals. Anyone and everyone knows that an Original is always better than the remake, but we were left no choice as the label and it's sons simply never paid us for our work, insisting that we had never recouped, but never explaining why we had not recouped, or what the number were were waiting to recoup even was?
EMI paid us so there was royalty income from everywhere except the USA and CANADA, so we knew that people were still buying and downloading our material.
We uploaded our re recordings on Tunecore and are now in direct competition with our own material, except we get paid by Tunecore which for us is a whole new feeling.
I should make it clear that we never made recordings to make money, so we were totally unprepared as teenagers for the Label owners and their minions. As the brilliant lawyer Brian Rohan said "They stole too soon". Thank you Tunecore for making it easy to compete with ourselves at last!

[TuneCore]

After going after consumers, retail stores, ISPs and more, Tommy and the RIAA finally ran out of enemies, so they started attacking the artist

More on that can be read here in the blog posting " How the Artist Became the Enemy of the Music Industry" - http://blog.tunecore.com/2011/01/how-the-artist-became-the-enemy-of-the-music-industry.html

In a nutshell, how in the world does music sitting on Apple's hard drive stop the "good" music from selling..

The idea of "oh no, more artists are making music and therefore its harder to get discovered" makes zero sense.  These same musicians existed before the internet, and these same artists created music, the difference now is its available to be discovered, shared, bought and streamed

TuneCore Artists the Civil Wars was the #1 album on iTunes for over a week - no label.  Was that "clutter" before it was released?  Why is it "clutter" after?  Is it only not "clutter" if it sells?  98% of what the labels release fail - should we call these artists clutter (I dont think so)

Oh, and by the way, music sales by unit are up, not down.  Revenue for artists is up, not down.  Articles like the one you mention are simply not telling the truth.  

Don't believe me - check the Nielsen, RIAA and IFPI stats on unit sales - notice they are up every year for the past 15 years, including 2010 (increase of about 1.3% over the previous year)

[TuneCore]

Peter, thank you for the extreme privilege of allowing us to work for you.  Never in my life would I have thought I would have had the opportunity to contribute in anyway towards your goals.

It is truly an honor!

Jeff

[anonymous]

I would just like to add look at the source of the LinkedIn article... Tom "Rob Your Artist Blind" Silverman. As someone who worked with arguably Tommy Boy's biggest artist "TKA" back in the 80's and 90's, I can attest that there is still ongoing litigation over about $7 mil in revenue that the group in its various incarnations generated. So for him, not being able to fleece artist like he used to I would say is the reason for all of his negative comments on the indy industry. BTW the members of the afore mentioned group are all doing quite well on their own.....

[Steve A.]

I've been fortunate enough to sell tens of thousands of downloads thanks to Tunecore.

Their reporting ("metrics" that every good business needs) are excellent and keep getting better.

I for one am glad that Tunecore stepped up and embraced the digital age, giving artists complete control and transparency, rather than fighting it as most do.

Keep up the great work y'all!

[Thona]

Hello !!!
for an DIY artist to sell
What a lots of artists around cannot understand is that you must be everywhere in the same time if you want to sell more unit ....
just putting your music on itunes etc guarantee nothing (even if your music is very good ), you must work hard ...
doing promo online , offline , if you can afford get yourself a PR etc ...
oh and play live around as much as you can , and build a solid fanbase
so before thinking of earning some cash with your music ,build your fanbase first .And interact with your fans online :facebook ,myspace , youtube etc ...
try to put your music in films etc ,getting radio airplays ....
and give music for free time to time .
To get discovered you must Be ACTIVE almost 24/24hr

[Tom Green]

I quoted Silverman purely for the facts- and they are facts- that around 80% of releases generally sell in very low numbers indeed. As the last poster said- without serious, and often expensive, promo action of all kinds, it's unlikely the average Tunecore artist is going to sell much. This, I think, does have to be acknowledged. I've worked with major labels, indies, and also done the DIY thing, so I do know that musos can often get ripped off by labels- me too-but I do feel that a lot of Tunecore promo tends to gloss over the difficulties the DIY artist faces. Fair enough- Tunecore makes money from DIY artists so you're not going to stress those difficulties in your promo. I don't want to stop anyone from putting their music out, but I do think that people should know that the DIY route rarely achieves the kind of success most people look for. Silverman's advice about the importance of image, promo, and the 'story' remains, I think, sensible and on the money, even if his comments about Tunecore and his previous biz history are dubious! Folks... Just using Tunecore to get your music on iTunes - without also paying full attention to the serious business of promotion- rarely results in anything. That's all I'm trying to say. This business remains really hard and it's not getting any easier.

[Tom Green]

Ps... Without in any way denying the exceptional talent of The Civil Wars... It's worth noting that their success had a lot to do with a Grammy award winning producer (Charlie Peacock)and a mutual friend who just happened to sync a tune onto Grey's Anatomy. These are the things that make the difference between success and failure, regardless of talent- and, still, these things are more likely to occur with label contacts in place than doing it DIY. Yes, it can happen, without label help, but the chances of it happening are few and far between. A good producer, and his studio, will make your sound better. Getting your tune sync'd on a big show needs good contacts with music supervisors or sync agents- very difficult to get without outside help. It really isn't easy achieving that doing it all on your own with probably not a lot of cash or time to do the promo work. I do think it's important that DIY artists are fully informed about the true facts of this industry- contacts and networking are absolutely essential to break through- it just won't happen, otherwise.

[TuneCore]

No matter how you frame it, in this day and age, no artist should be denied access to distribution and no artist should have to give up their rights or revenue to get it.

Silverman's advice is based on selling tickets to the New Music Seminar, not on the reality of the market place - as a simple example he claims music sales by unit are down when they are in fact up

He implies artists are not selling music when empirically the data shows the exact opposite

He states artists are not making money when empirically there are actually more artists making more money off the sale, stream and play of music now that at any point in history

No, not every artist is going to sell a million units, however I take huge exception with people knowingly misrepresenting the truth to sell tickets to a "seminar".  Tommy likes to make money, there is nothing wrong with that.  My concern is in his quest to do so he delegitimizes and hurts artist - you can read more on that here
http://blog.tunecore.com/2010/10/the-state-of-the-music-industry-and-the-delegitimization-of-artists-pt-3-how-a-skewed-perspective-de.html

A recent blog response written about your point ran on hypebot - http://www.hypebot.com/hypebot/2011/04/tuncecore-ceo-jeff-price-responds-when-artists-become-the-product.html

[Tom Green]

A further ps ... Yes, digi sales are up, but overall sales are down, by about 21%. Consumers aren't buying mp3s instead of CDs- they're just buying less, overall. Stats here -

http://76.74.24.142/DB3D7CCB-1E88-03DF-387D-E0F1FBBC4775.pdf

Yes, more artists are probably making some money out of their music than ever before- but let's be clear about this. Most of those artists are making very little money indeed out of their music. All I'm really trying to point out is that DIY artists should be realistic about their chances of breaking even, never mind a profit, and especially, mainstream success.

[Steve Jackson]

I wish there was a way for us ARTISTS who distrubute our music through TUNECORE to also have access to ITUNES, AMAZON accounts so we can see how much we are selling. A lot of ppl are saying that TUNECORE is under investigation by the FBI because they are keeping some of the money from our record sales. That part worries me a lot.

[stephennkasyoka]

HI TO EVERY ONE AND TAKING THIS FAR,BUT I PRAY 2 PRODUCE SOMETHING 2 HEAT DA KITCHEN LIKE YES,THE WAY I MIGHT DREAM ABOUT AND MORE HOT LIKE CARGO STYLE MAVALDO,VERBS,SAUNPAUL,BENNEI MAN,ALAINA,CECILLA,BUSY SINGLE,CASH FLOW,TONNY YAYYO,DONNIE MARLEY,LUCIANNO,IWIILL BEBACK,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

[Peter Wells]

Absolutely false, Steve. There is not "a lot of people," there is one person who are lashing out at us rather than face their own fraudulent activities. We wrote a response, please take a look:

http://blog.tunecore.com/2011/02/the-new-music-thieves-stealing-from-artists.html

--Peter
[email protected]

[paul proudlove]

i call it 'Enronomics" and i pay Napster dude . squish me like a bug E.S.

[TuneCore]

Hi Steve

There was one person that stole someone else's song and got caught by the songwriter.  He made up a bunch of things and posted it on some random blog about a year and half ago

You can read about it here

http://blog.tunecore.com/2011/02/the-new-music-thieves-stealing-from-artists.html

This stuff about the FBI?  Not only made up, but just completely weird.

jeff

[[email protected]]

hi,i believe my contact with tunecore will motivate me to produce more selling music for tunecore if they keep to their promise because the real me will soon manifest to the music industry cos i gat lot of fantastic song inside me of which i working in in studio,my first contact for tunecore is test for life if they can really prove to me they take me there limelight,time will tell.
from Deelatest

[Deelatest]

hi,i believe my contact with tunecore will motivate me to produce more selling music for tunecore if they keep to their promise because the real me will soon manifest to the music industry cos i gat lot of fantastic song inside me of which i working in in studio,my first contact for tunecore is test for life if they can really prove to me they take me there limelight,time will tell.
from Deelatest

[Chris]

The LimeLight fees entirely cover you obligation to the artist(s) on cover dues on that fast a scale? That is an invaluable service! Thanks!

[Songman]

Peter, I grew up with your music and I'm very glad you're now making music and money.

[Songman]

This Tom Green sounds like an idiot from what I've just read up above. I know for a fact. I don't care where music comes from as in Major artist or "indie" If I like it, I like it. An example the new Michael Jackson CD. I don't believe MJ would have ever put out that material, but the major record co did. It sucked and hasn't made a major impact and just goes to show how warped the industry is. I also have songs placed and recorded that I've never gotten royalties off. I've made more on my own releases than I have on major artist releases. To hell with them.

[Virgil]

Thank you for the informative post. However, the crude language was offensive and unnecessary.