Tag Archive: royalties

I’ll just skip to the chase. I think Spotify is a disaster for the music industry and here’s why.

Search for “spotify piracy” on Google and you will see that they have done a fantastic job painting a rosy picture as being an alternative to piracy.  Truth is, they probably are.  The restrictions on the free version are bearable enough for anybody who prefers not to break the law to put up with, and $5 a month for no ads pretty much means you can listen to whatever you want without breaking the law and without advertisements.  Alternative to piracy?  For most users, I believe it.

We talk a lot about royalties on the Earbits blog because digital broadcasting royalties are a very big issue for sites like ours.  Most sites and companies paying these royalties struggle to break even and claim they are too high, while artists and their advocacy groups claim that artists should be compensated handsomely for their work.

There is no question that artists should be paid for the use of their music.  If online radio companies, music blogs and other music websites want to offer music as a way to attract an audience, and then they profit from having that audience, musicians ought to be compensated for the part they play.

Major Record Labels Drive Net RoyaltiesYou might think internet radio royalty rates are not that interesting, but the current laws and rates drastically affect whether online radio companies like Pandora, Last.fm or AOL Music are able to operate profitably, and ultimately survive.  Considering they’re some of the fastest growing websites on the net, it would seem that their survival would be very important to a lot of people.

Online radio royalty rates can also largely affect the music these companies play, and the amount of commercials, fees and other undesirable aspects of the experience they have to bother you with.  If some music is cheaper to license than others, they may choose to play music that is more cost effective to them.  And, if rates are too high, you can expect more commercials, subscription fees or ads to offset those costs.

Royalties Add UpIn the past few articles I talked about how to license music. In this article I’d like to talk about the next step, how to collect your royalties.

How Do Royalties Work?

Royalties work differently than the upfront license fee. Royalties are payed for the public performance of music, either live or as a sound recording. This includes music on television, radio, internet, concert halls, clubs, stores, elevators, and more. The royalties rates vary and depend on the type of use of the music.

PROs

TOOL at Epicenter 2009For those of you who have missed our other discussions about Pandora and the crippling royalty rates they and other online radio services pay, it goes like this…

Online and satellite radio providers pay performance rights royalties to SoundExchange of .19 cents for every song they stream, per user. So, if you listen to 15 four-minute songs in an hour, it costs them about $.03. It doesn’t sound like much, but with over 20+ million active Pandora users streaming an average of 10-14 hours per month, it adds up quick – nearly $30 million in 2009 paid by Pandora alone.

Online Radio RoyaltiesThere are a few different types of radio royalties.  There are royalties that are tracked through ASCAP and BMI, which cover songwriting and publishing fees.  Everybody who broadcasts a song is required to pay these fees.  Then, there are the performing rights royalties tracked through SoundExchange:

“SoundExchange is a non-profit performance rights organization that collects statutory royalties from satellite radio (such as SIRIUS XM), internet radio, cable TV music channels and similar platforms for streaming sound recordings.  The Copyright Royalty Board, which is appointed by The U.S. Library of Congress, has entrusted SoundExchange as the sole entity in the United States to collect and distribute these digital performance royalties on behalf of featured recording artists, master rights owners (like record labels), and independent artists who record and own their masters.”