Music streaming is a relatively new source of income for artists. But it has already firmly established itself. Unfortunately, most original music creators do not think like entrepreneurs and therefore miss out on non-obvious ways to earn creative income.
What is a royalty?
The word “royalty” comes from a Latin root meaning “royal.” It was borrowed by Old French and then migrated to medieval English. At first, the word “royalty” was used to describe things that belonged to a king or queen. Today, it refers to all the privileges and income of the British monarchy.
The second meaning of the word is “income and royalties” from the use of any intellectual property, including copyrights and patents. The proud “royalty” seems to hint that the author is actually a king and has serious privileges in the market.
These “royal” incomes come in several forms. Let’s take a look at what royalties authors and performers receive from music. Let’s consider that copyright and related rights are automatically granted to the person who created literally any sneeze (sample, vocal hook, guitar phrase, effect) in the soundtrack.
We would argue that such apparently intangible things as the rights to the soundtracks, the copyrights to the music and lyrics are capital, more important and weighty than cash. Just as in the world of finance there is a rent from capital, well-invested music gives “rent from rights”.
Royalties associated with music soundtracks
Each recording is a potential asset, similar to shares in the world of investments. The asset can grow, or it can become “junk security”. To make it grow in value, the artists themselves and (if any) their labels, producers, publishers, marketers and other specialists involved in the business work to ensure that it grows in value. A recording can bring the owners of the rights to it several types of income. Here are the main ones:
- On-Demand Streaming or income from playing phonograms on streaming platforms like Spotify, Apple Music. Almost all modern musicians know about them, although at the beginning of their careers they experience some difficulties with choosing a music distributor, who, in fact, collects money for them.
- Digital Royalties (Digital Sales) or electronic sales. This is everything that concerns transactions like “the listener paid for and downloaded the phonogram to his device.” The number one platform in the world that provides musicians with this service is BandCamp. Unfortunately, it was recently bought out by the publishing platform Songtradr, and is conducting incomprehensible and disturbing experiments with it. But that’s a separate story. Some of these services work directly with the copyright holders of the phonograms. Some – through music distributors. In fact, a musician can sell his phonograms himself – for example, on his website. The only question is how to attract traffic to it. Services like BandCamp offer a slight advantage over your own online store because they can generate a small stream of random visitors to the artists’ “showcases.” But you’ll have to bring people to your online resource only through your own efforts.
- Digital Performance Royalty – income from playing music on “internet radio” like Pandora, SiriusXM, iHeart Radio. Fewer and fewer copyright owners know about this. And music distributors may miss out on the trickle of money flowing from “digital public performance.”
- Synch Licenses (Master Recording Use) or “synchronization” of master recordings. Simply put, this is the use of soundtracks in films, TV series, documentaries, commercial advertising, TV shows, online videos, games, and even for sampling and processing. All this costs money, which is paid to the copyright holders of the recordings in several ways.
- YouTube Royalties — everything is intuitively clear from the name. People all over the world create content for the video platform. They often use officially released music as background music, but do not apply for a license. Previously, this was considered “piracy” and “unauthorized use”, but now YouTube has an automatic system for recognizing phonograms and their publishers (including DIY artists). If no one “puts a strike” on a particular video for copyright infringement, the video platform sends a portion of the video’s income to the copyright holder of the master recording.
The above-mentioned 5 types of royalties associated with master recordings are also paid in cases where the phonogram has several copyright holders. In particular, related rights may be held by musicians-performers who participated in the recording, the music producer who set the tone for the production or did it directly, the vocalist, etc.
Read also: Music Streaming Payouts – Is It Worth Dealing With Labels?
