Making a living in any sphere is tricky when you’re working independently or freelancing. Knowing how tax works, how to manage your own cashflow, when to take risks in your work, and what dependable sources of income are, can be a confusing and terrifying prospect.
Because of the history of copyright in music and the changing models of performance income through the years, it can be even more difficult in the sphere of music, if you don’t get a simple breakdown from a knowledgable source. Even more rare is getting informed by someone who doesn’t have a vested interest in taking a cut of your income, like a label or a songwriting publisher might.
Understanding the basics of the business of music is essential for anyone wishing to make a living from it, so we’re here to try and help with all that. This is the third in our ongoing series of ‘How To’ articles on the business of music, and this one, co-written by Darren Rose from Sound Music Advice, is focused on the different methods of making money off of both writing and performing music – and the many forms that can take.
It goes without saying that before you can make money from music, your music has to be good (according to someone other than your mate or your mom). Below, we only describe the sources of revenue. We don’t however, go into all the other ways that you can and should create value for your music, like playing great shows, getting good press, getting your tracks into the hearts of many via radio play or playlisting on music TV, investing in your community and subculture, etc. etc.
To help illustrate some of the most common revenue streams for artists it’s helpful to separate things into three categories:
- Performance / service based income
- Recorded music income
- Image / branding income
1. Performance / Service-based income:
Whether you’re a solo singer/performer, band member, producer or DJ and regardless of your level in the music industry, a portion of your income is likely to come from performing your craft.
The exact way in which you make your money will depend on the role you play, but could for example include:
- being booked by a promoter/client to perform at a festival, club or event either solo or as part of an act/band where you receive a fee;
- hosting/promoting your own events where you accept the risk of making a loss if it’s a failure but also stand to gain if it’s a success. This may or may not be done in conjunction with a sponsor or venue owner;
- fee received by a session singer or musician for a live performance or studio session;
- fee received for studio production services e.g. producing, mixing, remixing, mastering, etc.
- fee received for songwriting (music and lyrics)
NB: Don’t underestimate this last one. It can be a huge money-spinner for young and experienced songwriters and producers. Aside from the fee for your time, you can also make good money off the recording of the song, through royalties and sync detailed in point 2 below. Some studios and artists will require you to sign over any and all of your rights, as part of the initial fee they pay you, so it’s important to know which is more important to you – cash up front or royalties in the future – and this decision is based on whether or not you think the song you’re contributing to will do well, and therefore earn any royalties at all.
Rates vary massively depending on your level in the industry, how in demand you are and type of gig, performance or service involved.
2. Recorded music income:
As soon as we enter the world of recorded music we enter the world of copyright. We’ll deal with the detailed differences between publishing and master rights in a future article but for now it’s important to understand that there are two different copyrights in every piece of recorded music:
- the composition i.e. the rights of the person/people who wrote/composed the music and authored the lyrics (‘publishing rights’)
Side note: They’re called ‘publishing’ rights, because people used to sell published books of sheet music to be performed at home or in a venue by professional groups of musicians.
- the sound recording i.e. the finished track you actually listen to (‘master rights’)
Side note: ‘Master rights’, as in, the right to be paid for using the ‘master’ recording.
Ownership of these rights determines who gets paid when a piece of recorded music is sold, streamed, performed* in public or licensed for synchronisation purposes.
*performance can mean many things, including any way that the recorded song is played in public or the composition is performed live by live musicians or their tools.
a. Sales & streaming:
The master rights holder is entitled to receive any revenue generated from:
- the sale of physical product such as CD’s and vinyl;
- the sale of digital downloads via online stores such as iTunes;
- streaming platforms such as Apple Music and Spotify,
What this means is that in the case of a fully independent artist owning 100% of the rights to their music, they (or often their self-owned label imprint) will receive 100% of the money generated from the sale or stream of their music, after the deduction of the distributors fee which can range from 10-30%.
For those artists who are signed to a label in a conventional sense (…we’ll get into the different kinds of relationships you can have with labels in a later article), the label will receive the income and then pay the artist an artist/recording royalty in terms of the recording contract with the label. This royalty is typically based on a percentage of the wholesale price for physical product, or percentage of net income for digital products/streaming.
b. Public performance royalties:
A significant and often misunderstood source of revenue for artist’s stems from the public performance of their music. The most practical example of this is when music is broadcast on radio and TV, although the same principles apply to the usage of music in public places such as bars, restaurants and retail stores.
In basic terms, broadcasters pay monthly license fees to collection societies to allow them to use music on TV and radio. When those broadcasters submit their playlists to those collection societies:
- SAMRO (Southern African Music Rights Organisation) distributes royalties to composers, authors and their publishers for the publishing rights for the composition, while,
- SAMPRA (South African Music Performance Rights Association) on the other hand distributes what is known as ‘needletime’ and pays 50% of these royalties to record labels/master rights holders, while the remaining 50% is paid to performers via POSA (Performers Organisation of South Africa).
Side note: It should also be noted that performers have the right to elect that their needletime royalties be collected by an alternative new collection society called IMPRA (Independent Music Performance Rights Association).
We’ll go into more detail about collection societies in a later article, but registering with the correct collection societies is very important. Bear in mind that payments from these institutions can come as late as a few years after the song has been performed in public.
c. Mechanical royalties:
Mechanical royalties relate to the copyright in the composition and are generated every time a piece of music is copied, reproduced or undergoes a format transfer. So for example, every time a CD is pressed, an MP3 purchased for download or when music is reformatted for broadcast on TV or radio, the writers of that composition are entitled to a payment.
In South Africa, these royalties are administered through a collection society called CAPASSO (Composers Authors and Publishers Association).
d. Sync licensing
Remember that ad for responsible drinking with that Felix Laband song, ‘Donkey Rattle’? Best believe Felix got paid for that.
Potentially one of the most lucrative sources of income in the music industry today is the licensing of music for synchronisation purposes, i.e. for use in advertising campaigns, TV shows, movies and computer games.
Both the owners of the copyright in the composition (publishing right) and copyright in the sound recording (master right) must consent to the usage and are typically each paid the same amount (50-50) in return for granting the licenses. These fees can run up to several hundred thousand Rand, a value which is determined by a few things, the usage granted (where it can be used, how long it can be used and how much of the total song is used in the ‘sync’, the exclusivity of the sync deal, etc.) and the agreed value of the music itself (how recognisable/unique the song is, how recognisable the artist is, how much value the song adds to the value of the sync’ed media). The intricacies of sync will also be explored in detail in a future article.
Remember also, that music used in syncs is also subject to the royalty payments described in (b) and (c), so you earn money initially, and for every time the media gets broadcast or sold.
3. Image / Branding Income:
Heard of Fenty Beauty? Rihanna is about to make a bundle of cash off merchandising under the brand that holds her surname, especially because it’s a smart product that speaks to her progressive values, her image and the needs of her loving fans.
Merchandising rights are very important, and for artists with a strong brand image and fan base the old school method of selling merchandise (T-shirts, caps, tote bags, lighters, etc.) at gigs can be very lucrative. From an artist’s perspective it’s preferable to be in control of your merchandising rights as this gives you the power to decide which suppliers to use for manufacture and negotiate the terms of these deals accordingly. There are many other ways to make this work, and can include collabs with bigger brands (like Rihanna’s Fenty collabing with Puma on multiple ranges) or pure independent items, like your name on a tee or a cap.
Because of the potential to make good money in this area, some record companies will try to acquire an artist’s merchandising rights as part of a recording deal – especially given the way it’s so difficult to make money off of recorded music alone – so consider whether the label is best suited to handle this aspect of your career before signing away these rights, or if you should be controlling all the rights for your merch.
b. Brand endorsements / sponsorship:
Similar to merchandising, as an artists brand and popularity increases, this opens the door to possible brand endorsement and sponsorship deals. These deals can take various forms and may range from getting free sneakers and clothes from a brand, to receiving funding from a brand to assist with recording, making videos or covering some/all event costs, or for more established artists, actual hard cash incentives.
The more cash and in-kind value you receive from a brand, the more they’ll request from you – which could include appearing in ads, shouting them out on social media or demanding brand exclusivity, in terms of restricting your ability to contract with competing brands.
Always speak to someone experienced in matters of brand relationships before signing on the dotted line (and always get those agreements in writing), because companies all too often exploit young artists on the comeup – knowingly or out of negligence or ignorance.
While we have made every effort to explain everything as simply as possible, without missing the required details for a basic understand of the avenues for making money as a songwriter or musician, we are sure there are things that can be explained further or added to this. Please hit us up in the comments or on Facebook, Twitter or Instagram to ask any further questions or to request future articles on topics that you think are crucial for pursuing a career in music.
Darren’s business, Sound Music Advice, is a legal and music business consultancy that acts on behalf of songwriters, composers, musicians, producers, bands, artist managers and record labels.
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