In our efforts to make available as much music business information as possible for Alabama music artists, Alabama Music Office.com has asked music business professionals from all over the world to share their knowledge and experiences.
Independent artists have never had access to so many customers. A single distributor can get an artist’s music into digital services around the world. U.S. artists were getting Spotify royalties before the service was available stateside. Now they’re getting royalties from Deezer, Bloom.fm and other services not yet available in the States. Since distributors have added their catalogs to YouTube, independent artists can reach listeners through the world’s most popular video service.
Access to consumers has meant hundreds of millions in revenue through the years. CD Baby has paid out more than $300 million since it was founded in 1998. TuneCore has paid out more than $330 million since it launched in 2006. This year, CD Baby expects to pay out $58 million — that’s cash to artists minus the company’s distribution fee. This year’s distributions should be about 9% higher than the $53 million paid out last year and 35% greater than 2011’s distributions of $43 million.
The future may be streaming, but independent artists get most of their revenue from downloads. CD Baby artists will receive 77% of their revenue from downloads, down from 80% last year and 81% in 2011. CD Baby marketing manager Kevin Breuner says that about 73% of digital revenue and about 61% of total revenue comes from iTunes.
Streaming revenue is small but growing. This year, CD Baby will get 8% of its revenue from streaming services, up from 5% and 2% in the previous two years. Subscription services like Spotify and Rhapsody are included in CD Baby’s streaming revenue. Noninteractive services like Pandora and SiriusXM, which pay royalties through SoundExchange, are also not included.
Also excluded from the streaming figures is YouTube, a service long used for promotion that is gaining as a revenue source. CD Baby has delivered its catalog to YouTube and the company is experiencing strong revenue growth. CD Baby has paid out more than $1 million, and the last quarterly distribution was about $300,000. “It’s something we think is just going to explode,” Breuner says.
Independent artists are aided by continued demand for physical product. CDs and LPs will account for 15% of artist revenue this year, even with last year and down slightly from 17% in 2011. Some of that revenue comes from CD Baby’s partnership with Alliance Entertainment that puts independent artists’ albums into brick-and-mortar stores. But those figures don’t tell the entire story. Not counted in CD Baby’s artist distributions are artist earnings from selling CDs and LPs themselves. Anyone who attends concerts frequently knows the venue merchandise table is one of the last bastions of physical product.
A song contains two different legal elements: 1) the underlying song or composition; and 2) the recorded performance of the song. Whenever a song is performed, a royalty is owed to the songwriter (or the songwriter’s publisher) for the use of the underlying song or composition. ASCAP and BMI collect and administer that royalty.
So how does a recording artist get paid when the record performance gets played? Traditionally, when a sound recording gets played on the radio or in a business, no royalty is owed for the use of the sound recording. That is, the sound recording artist (the band) and its label do not get paid for the use (playing) of the sound recording. Only the songwriter gets paid a royalty for the use of the composition.
However, the Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 granted a performance right for sound recordings. But it only applies to digital transmissions – internet and satellite radio must pay the sound recording owner (label or band) for the performance of the sound recording.
Sound Exchange is a private, non-profit organization authorized to administer and collect the performance royalty for digital plays of the sound recording. Sound Exchange issues licenses to internet and satellite radio and collects a fee. Sound Exchange monitors play of songs on internet and satellite radio. Sound Exchange then pays the sound recording copyright owner (label), the performing artist (the band), and even featured performers, a royalty based on the number of plays a song receives. And although the royalty rate is fractional, many plays can add up to significant revenue.
Because the performance right for sound recordings only applies to digital transmission, traditional radio and businesses do not have to pay a royalty for use of the sound recordings they play. This was traditionally seen as good promotion for the artist. But most songs receive the majority of its play on traditional radio and in retail, restaurants, bars and clubs. A major war is going on in Congress between record labels and artists against corporate radio over the Performance Rights Act, which would apply the royalty for use of the sound recordings to traditional radio and others.