Berklee today is the official alumni publication of Berklee College of Music in Boston, Massachusetts. It is a forum for contemporary music and musicians.
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Digital versus Physical Recordings and the Pursuit of Royalties By Andrew Clark By Andrew Clark Producing digital and physical copies of your music and tracking down royalties from other sources all feed the bottom line. There was a time when the life of a musician seemed so much simpler. Those were the days before iTunes, Spotify, and peer-to-peer sharing became essential terms in the artist lexicon. But now that contemporary musicians rely on dozens of revenue streams to make ends meet, the age of simply playing shows and selling albums out of a station wagon is long gone. Once upon a time, one of the most important words in a recording artist's vocabulary was "royalty." But, as we proceed further into the digital-download age, the importance of royalties has changed. Depending on your role in the music world, whether you're a new artist or the head of an indie label, the term royalty means something different to you. And this leads to the digital-age-old question: Is it feasible to make money selling music in the digital-only format, or should a physical release always be part of the equation? The answer you receive often depends on whom you ask. when songs are played on media such as Internet radio (e.g., Pandora). And neighboring rights royalties are paid from foreign performances of an artist's recordings. Finally, there are mechanical royalties, which are calculated on the licensed reproductions of physical and digital recordings and are paid to songwriters and composers. To show the complicated nature of today's royalty landscape, let's look at how mechanical royalties—which have evolved considerably over the past few decades—are calculated. The Harry Fox Agency calculates most mechanical royalties, though companies like CD Baby and record labels also pay them. Harry Fox, which bills itself as "the foremost mechanical licensing, collection, and distribution agency" in the United States, offers a statutory mechanical royalty rate for physical recordings and permanent digital downloads. For songs that are five minutes long or less, a rate of 9.1 cents is offered. However, a separate rate is offered for songs that are longer than five minutes, calculated at a rate of 1.75 cents per minute. For a song that is 10 minutes in length, for example, a mechanical royalty of 17.5 cents per download is offered. The current rate has been in effect since January 1, 2006. Initially, 2 cents was offered per song, with no distinction for longer songs. After 1978, however, the royalty rate was increased on 15 different occasions. Prior to the last rate increase, songs of less than five minutes had a rate of 8.5 cents , while 1.65 cents per minute was the rate for songs over the five-minute mark. So when it comes to digital downloads, how does an artist make money? In the Rolling Stone article "The New Economics of the Music Industry," Steve Knopper explored the financial breakdown for a song by a major-label artist that sells for $1.29 on iTunes. For each song downloaded, 90 cents goes to the record label and approximately 40 cents to Apple. The label then may pay up to 20 cents to the recording artist (depending on the terms of the contract and whether the label has recouped production, promotion, and other expenses). The label also pays the statutory mechanical royalty rate of 9.1 cents to the songwriter. The Many Flavors of Musical Royalties Royalties are a tricky business mainly because there are so many kinds. According to the Future of Music Coalition, a Washington, D.C.–based nonprofit that specializes in education and advocacy for musicians, there are five different kinds of musician royalties: mechanical, public performance, Alliance of Artists and Recording Companies (AARC), neighboring rights, and digital performance. This revenue comes in addition to retail, digital, and CD sales at shows. So what do all these royalties mean? Well, when it comes to public performance royalties, money is paid when songs are played in public spaces, such as on the radio or in restaurants. But that money, which is paid by rights organizations such as the American Society of Composers, Authors and Publishers (ASCAP) or BMI, goes only to songwriters, composers, or publishers. Then there are AARC royalties, which are paid by the eponymous organization for digital recordings of artists' songs, foreign rentals, and foreign private copying levies. One new kind of royalty is the digital performance royalty. The nonprofit SoundExchange pays these royalties Spring2013 19