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Look Into The Music Industry

Posted 9/30/2019

From The President of KHTZ-DB Radio Network


It has been said over the years look what happened to so and so with their music and label.  Each Artist, Musician, Publisher and Writer should understand how music royalties are distributed and the players involved.  But the fact is about 99% of Artist, Musicians and Writer’s in the entertainment industry have no clue what is really going on.

So let’s look at the Recording Artist, Publisher, Musician and Writer.

The Writer is the person who actually writes the song – this reflects the portion of the music that can be copyrighted. The Publisher would be the person that pays for the song/songs to be written or recorded.  This is generally the Record Label, Music Publishing Company, or speaking of this topic the independent artist, there family’s or friends. The Recording Artist is the person that plays on the recording.

The Musicians are also players that play on a recording.


Let’s look at the different royalties that are paid out.


Mechanical Royalty – a royalty paid whenever music is turned into some form of media (CDs, Vinyl, Tape, etc.). So if someone presses a CD with your song on it, they are required by copyright law to pay you per CD printed. In the United States there is a rate of 9.1 cents per song and goes up from there depending on the length of the songs.


Print Royalty – a royalty paid anytime a song is printed as sheet music.


Synchronization Royalty – a royalty paid any time a song is synchronized to some other form such as TV, movies, film, commercials, etc.


Performance Royalty – a royalty paid whenever a recording is broadcasted and or performed live. That’s how radio stations pay the artists they play on air. A lot of times radio stations and others venues pay a onetime fee allowing radio stations and venues to play all the music they want, if this was not done this way a contract would have to be written for every single artist they want to broadcast. In the US, the rate is determined by another agreement between the parties or associated in one agreement.


Digital Rights Royalty – a royalty paid any time a song is used when streaming, webcasting, downloading, and online “on-demand services”.


 Let’s look at a record deal I was involved with many years ago.


What did the label make on the sale of 50,000 albums? The labels make a killing at the expense of the Indie Artist? Let’s look.  The retailers had paid about $10 an album, which come to gross revenue for the label on those 50,000 CDs of $500,000 thousand.


Who knows exactly how much the distribution and manufacturing costs were. The companies all have a great deal overhead expenses.  Charge’s for manufacturing and distribution that add up to around $2.65 a unit.  As a rule of thumb, I was always told to assume about $1.00 a unit. The record company had a “real" cost of $1.65 per unit for combined manufacturing and distribution.


Here are the record company's expenses:

� Recording and recoupable marketing costs: $75,000

� Mechanicals: $30,000

� Non-recoupable marketing: $50,000

� Manufacturing and Distribution: $82,500

� Total label expenses: $237,500


This left a profit of $262,500.  Not Really. What comes next is all of the salaries of the people who work at the record company. These include the people who do the color separations for CD covers, who create Web sites for artists, and who make hundreds of calls to radio stations, journalists, and retailers. Struggling divisions spend more, but a healthy U.S. record company with a decent catalog allots around 20 percent of their gross revenues to overhead, or, in this instance, $100,000.

That still leaves the label with a profit of $161,500, right?  Heck yeah, and the middle-level artist has reason to gripe, but not without coming to terms that the record companys weren't established to enable artists to sell 50,000 copies. This is where the artist, writer, musicians and publisher split 60/40 of the $161,500.00 profit of the 50,000 units sold based on their agreement.


I hope you enjoyed this story and that I was able to shine a little knowledge I have learned over 30 years.





KHTZ-DB Radio Network