Ever wondered how royalty payments for music actually work? I thought I roughly understood it having worked in live music for nearly 10 years, but then I saw this diagram. Looks intimidating doesn’t it? But if you invest a bit of time it will start to become clear. It doesn’t just show how royalties work, but actually how a sizeable chunk of the music business works.
(This is a little off-topic for the kind of things I normally write about here, but I think it’s really interesting and relates to some intellectual property training I’ve recently done as part of my Boom fellowship.)
There’s a key in the top right corner, but a quick run down of terminology might be useful before getting stuck in.
- A license – when the creator of the music gives permission to another person to use and distribute it in a defined area for a defined period of time. (This is different to assigning the rights, which is generally permanent and is how an artist gives their music to their publisher and record label.)
- Collection societies – the bodies who gather payments from the users of the Music. Each of the ones in the diagram (PRS, MCPS etc) deals with different formats and stakeholders: recorded music, live music, songwriters etc
- Aggregator – companies which get music onto streaming services and online retailers such as iTunes on behalf of record labels/artists. The streaming/retail companies don’t really deal with individual artists because that would be far too labour intensive. Essentially they are the digital equivalent of distributors, who get physical copies of an album into stores.
- Publisher – traditionally the company that would publish the music you’ve written as printed sheet music, back in the days before recordings were prevalent. Nowadays they are the caretakers of the composition: they will do the deals for it to be used commercially and ensure you are paid when it’s due.
So the blue lines show who holds a copy of the music (the work), the pink lines show where it is being licensed, the red lines show where license fees are paid into the collection societies, and the green lines show where royalties get paid out by them. The orange lines show other payments.
As you can see, the diagram assumes that the person who writes the music is not necessarily the one who performs it… Let’s track an example through the diagram to make it clearer, assuming that you are both the composer and performer of the music:
You write your hit song ‘Total Eclipse of the Lungs’ for your band Fruitloaf, which gets passed to your publisher once complete. Your publisher licenses the song to the collection societies, who give permission to various broadcasters, venues etc for the performance/playing of it. They do this by charging the venues for a license which permits them to have live or recorded music in the venue. Fruitloaf perform the song and make a recording of it which is passed to your record label. They release it both digitally and physically (CDs, vinyl etc). It is distributed physically by a distributor so goes into stores as a vinyl EP, and digitally by an aggregator. You and your band also play it live on your tour of the UK, and it’s such a hit that it also gets played on the radio and in some bars as background music.
Royalty payments are due to you, the songwriter, from the physical EPs, the digital streams, radio play, and the venues who host your performances. Royalty payments are also due to the performers of the recording (you and your band members) for radio play and where it has been played in a bar. This is why it’s really important to agree who gets writing credits and at what percentage when you write collaboratively as a band, which is particularly relevant in jazz where improvisation plays a large part…
But look how many layers those payments have to pass back through before they make it to you! What becomes clear is the large number of organisations and people involved in passing money around. Unsurprisingly, each of them takes their cut before it reaches the artist. It’s like being on a carousel where someone dips their hand into your pocket each time you go around. The collecting societies do a pretty good job of making sure the relevant venues, broadcasters etc cough up, but this multi-layered system is one of the many reasons why it’s really difficult to earn a living as a musician in the UK today. For starters, this diagram assumes that someone is actually paying for your music rather than downloading it illegally!
It’s a tangled mess which has no sign of being cleared up because all those middlemen are profiting. (Fortunately PRS and PPL have combined into the same organisation, PRS for Music, but that’s about it.) It doesn’t have to work this way though; I came across this diagram when a jazz musician shared it on social media citing it as the reason they had started releasing and distributing their own music, thereby cutting out a lot of the middlemen. That wouldn’t have been possible 15 years ago but illustrates one of the ways the internet has changed the face of the music industry. But in return for that independence and a bit more cash, the artist is taking on an extra workload which detracts from time when they could be writing or practicing. Is that a trade off worth making?