Music Business Royalties in the Digital Age by Don Passman

Posted by Don Passman
Monday, 23 November 2009
A graduate of the University of Texas and Harvard Law School, Passman is listed in The Best Lawyers of America. He is the author of the nonfiction bestseller All You Need to Know Aboutthe Music Business , which has sold more than 150,000 hardcover copies in print. Passman has lectured extensively on the subject of the music industry, including teaching a course at the University of Southern California Law School’s Advanced Professional Program, and lecturing for the UCLA Entertainment Law Symposium, Harvard Law School, the American Bar Association, the Practicing Law Institute, the USC Entertainment Law Institute, and the Los Angeles Copyright Society.


Assuming an independent musician has no record label, is the sole songwriter and owns their copyright and has digital distribution for a flat annual fee – How would they earn royalties from the sources below? Who collects and pays the royalties for each?

– Non interactive radio (Pandora)

Answer: There’s some question whether Pandora is “interactive” but for now, a court has held it is not. Assuming that’s correct, there is a compulsory license under the copyright law for the masters, and the monies are collected by a nonprofit company called Soundexchange.

ASCAPBMI (performing rights societies) collect for the songwriting.

The artist (who is also the record company and publisher in this example) affiliates with each of these companies for payment.

– Streaming services (Spotify)

Answer: Interactive streaming requires a license for the master from the company; there is no compulsory license, so they can charge whatever they can get. There are “aggregators” (like Tunecore and Orchard) who put together small companies and re-license the digital rights to masters. That would make sense for an owner/user like this example, because it’s hard to get streaming services to make one-off deals.

Songwriting is collected by ASCAP / BMI.

–  Digital downloads (iTunes)

Answer: Master rights are also licensed directly, or through aggregators, as above.

Publishing rights are done directly, or through Harry Fox.

– Subscription download service (eMusic)

Answer: I assume you mean a streaming subscription with a number of downloads included? If so, they need all the licenses above.

– Video streaming (YouTube)

Answer: The record company makes a deal with the site. Songwriting isn’t totally settled. Mostly, the record company gets paid by the site directly, then pays the songwriter / publisher.



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