Music Royalties Archives

Music Royalties Are Not a Bed of Roses, But There Is Help

When I was six years old, and taking guitar lessons for about six months, my music school arranged a big (“giant” to a six year old) concert at a plush Long Beach Hotel around 1963. I was playing The Yellow Rose of Texas with about twenty other guitarists and assorted band members. The guitarists were to play the lead (I was a lead guitarist) until the violinist’s solo part. At that point we were supposed to stop playing…I didn’t. How did I know? Because they were recording us, and it came out on the 33 RPM vinyl album. Yep. The highlight of the song during the violinist solo was interrupted by note here and there by a six year old who played in a daze.

The interesting thing was nobody talked music royalties. Surely they were going to sell our album. It didn’t matter, all I wanted to do was play.

Sometimes musicians that I work for have the same opinion. They don’t care about music royalties very much, they just want to play their music.

You don’t have to be a music attorney to know the basics of music royalties. In addition to the web, there are a couple of books that can help you: Music Money and Success by Jeffrey and Todd Brabec, and All You Need to Know About the Music Business by Donald S Passman. Both these books are excellent sources in learning about the different types of music royalties like writer’s royalties and publishing royalties.

However, there are online sources that can inform you about some of the latest royalty streams like Brain Tarquin’s article at Music Connection, Get Paid, Alternative Royalties for Indie Artists. Brian discusses the different royalty streams that have emerged with later technology like satellite and cable TV. Organizations like Soundexchange, LTVSMF, and SENA are explained in his article.

I have personally dealt with SoundExchange for years and have found a reasonable royalty stream for my clients. Any possible money left on the table is worth the effort of contacting them.

SoundExchange didn’t have any royalties for me on my Yellow Rose of Texas debut. Maybe next year.

Music Royalties: Never Leave Money on the Table

I remember about six years ago when a relatively unknown organization, Soundexchange, contacted us (CPA entertainment business managers) about signing up one of our music artist clients. They said that our client was not collecting all music royalties through ASCAP, UMG, EMI, etc. Instead, there were an increasing amount of royalties being left on the table from certain digital transmissions like streaming.

I was skeptical. However, according to some industry opinions, the public’s method of listening is changing. This is confirmed in the most recent growth of digital music in the last 3-4 years. According to How Artists get Paid for Internet Radio: An interview with Mike Huppe, President of Sound Exchange by Chris Castle, “More and more people are accessing music through digital devices, mobile devices and through streaming content rather than downloading it. The article also informed me that “Soundexchange pays performers directly, regardless if they are recouped through their record deal.” (“Recoupment” is the method of recovering monies advanced to the artist before any royalties are paid out to them.)

So, what does this mean to you?

Make sure you have good representation in your contracts. You can lose a substantial amount of money because of a poorly-worded contract.
You don’t have to be a CPA entertainment business manager to know what you don’t know. Even though you are an artist, you should at least know the basics of your industry. There are a number of good reference books that speak of the music industry. After that, leave the rest to your attorney and CPA entertainment business manager.
If you receive substantial royalties payments, don’t be afraid to hire an auditor that specializes in music royalties. You must keep the payers honest.

Music artists and writers have the best copyright laws in our nation’s history. Don’t squander it by sticking your head in the sand.

Whether an Artist, or a Business, You can Write Your Own Story

When I was 15, I wrote a song for my girlfriend. She said the music was alright, but the lyrics (the inspiring, personal lyrics that revealed my love for her) sucked. Well, never the one to go down in flames, I got back at her….I married her seven years later(serves her right, and she’s still stuck with me 32 years later).

I enjoyed reading Mark Winkler’s article, You can Write Better Lyrics published in the April 2011 online edition of Music Connection Magazine. He laid out a laundry list for song writers that I adapted for business and strategic plans.

Come up with a great title: Like in a song, you need something short and sweet that can interest people. Some think the Executive Summary of a business plan fits the mold, but there is more. You should be able to recite an “elevator speech” in less than thirty words that spells out the proposition.
Be Specific: Winkler advises that lyrics should be specific to tell a story in a song. The same goes for a business plan, however, a lot of the specifics can be relegated in the accompanying financial statements and notes. You don’t have to tell every detail in the body of the plan.
It’s the Music Stupid: Just like a great set of lyrics will not save a bad melody, a great business plan will not save a bad business idea. Research the masses to see if your business idea will be accepted.
Writing is re-writing: One thing our business plans have done every time, if forced our clients to re-write some of their assumptions. Like in a song, when the dog starts to howl, or your friends struggle not to laugh, its time to rewrite.
What you say counts: Winkler advises your words to be golden droplets in the minds of those who experience them.
Step away from your piano and guitar: Just as the tune can stand on its own, so the business plan must pass the smell test. All the fancy footwork will not sway a savvy investor. Oh sure, there are those who can stomach any heavy metal song with a lot of distortion and Marshall amps, but the songs that live in the hearts and minds of the hearer need more. In your business plan, make sure you transfer your passion to the investor.
A song is not a poem: A business plan is not an MBA thesis. You are trying to convince people to part with their money. Dazzle them with brilliance, but don’t baffle them with bullshit.
Your lyrics must sing: So should your business plan, and it must not be a requiem.
Need I repeat–repetition of words: What message are you trying to convey about your new business? Is it the same thing that others have done? Are you creating your own blue ocean where competition becomes irrelevant?
Know your genre: There are many diverse rules in business. Are you a manufacturer? An e-tailer? What about a record company? You must know what is NOT working in these industries. As I said in a previous article, you must know the industry, and more importantly, know the target market. What are they clamoring for that the industry is not providing? What expensive service or good, is the industry providing that the target audience does not need?

Business plans and song writing require a set of skills. Most times you only have one chance to sell what you are offering. Make it count.

Finance Your Business with your Future Income? Ask the US Government, they Do It All of the Time

So, you have a business plan and you are looking for financing? But the banks want nothing to do with you. Hey, what about your nice steady income of royalties? Ya, that’s the ticket! So, you jump to the Wall Street Journal and read the article on how others are doing it. Yes, you can do it! You can sacrifice your royalty income as collateral for the loan.

So, you meet with a company that specializes in this and they offer $7 million @ 14% interest, plus a stock option and 2% of your incremental revenue. Why not? The US Government are using future income to finance current debt.

As a preparer of strategic plans and business plans, I initially see a potential problem in this story. And that is the decision-maker is emotionally involved in starting the company, but is considering sacrificing secure income for a speculative one. Considering the success rate of new businesses, the downside is not a pretty picture.

Compare this to venture capital, where the business owner is giving away a large chunk of the business. In this second option, the risk is spread among a number of companies or individuals, the reward is smaller, but in a worst case, the business owner can still rely on the royalty income if the whole venture crashes.

Business owners always have to look at the downside of any decision to measure the risk. In addition they should have someone who is not emotionally involved that can give them a straight answer.

So, what should you do? Well, one thing to consider is, to do both. Take in some venture capital, sacrifice a little royalty income, and give away a smaller amount of equity. This way, your upside is not as large, but your downside is protected. Every deal is different, but don’t forget to measure your personal risk when deciding which avenue to take.