How Songs Make Money
People often ask how one makes money with songs. There are
certain misconceptions about how one gets paid and where the money comes from.
I’d like to make it clear how your songs can make you money.
To begin with, when you write a song alone, and are not
under any publishing contract, that song belongs totally to you: 100%. So far,
the song’s value is still hypothetical. At some point it needs to be formally
copywritten (even though the song is by nature copywritten as soon as you write
it.) You also need to publish the song. You can start your own publishing
company. This is done through a performance rights organization such as ASCAP,
BMI or SESAC. Bottom line is, you want to get your song published.
Every song has two halves in terms of ownership—the writers
share and the publisher’s share. If you start your own publishing company, you
own the publishing, so you own 100% of the song and get 100% of the revenue the
song may make. I you sign your song with a publisher, you just gave 50% of your
song away. That might sound like a bad deal, but you need to consider the fact
that pitching songs is a full time job in itself. It is what publishers do. If
you have inside music business contacts that want to record your songs, you may
want to run your own publishing company. It is not that hard. If, on the other
hand, you need somebody to pitch and promote your tunes, splitting the profits
with a publisher can make solid sense. Without their help and expertise, your
song will make nothing—even though you won 100% of it.
Now, the last thing to consider in splits is how many
writers are credited on a song. Typically, “writer’s share” is divided up by
the number of writers. So if you have three writers, each should get 33 1/3%.
The publishers share will not change—they still get all of the other half.
So, back to square one—how does a song make money? Let’s
look at the ways. First, there are the mechanicals, which are sales of the
CD’s, downloads, sheet music and musical greeting cards, etc. Harry Fox Agency
states:
The current statutory mechanical royalty rate for physical
recordings (such as CDs) and permanent digital downloads is 9.1¢ for recordings
of a song 5 minutes or less, and 1.75¢ per minute or fraction thereof for those
over 5 minutes. This is then multiplied by the number of recordings you wish to
make.
In most cases, it means your song earns 9.1¢ for every CD or
download sold. So, if someone sells 100,000 copies of a CD and you have one
song on that CD, the song makes a mechanical royalty of $9,100.00. If your
publisher owns half, you will make $4550.00. If you co-write the song, you will
make $2,275.00 Obviously, if you have more songs on the CD, you can make more
money. If the CD sells a million copies, you can multiply these figures by a
factor of 10.
But wait—there’s more! I haven’t talked about “performance”
income. What is performance income? It is royalty income from radio, television
(major network, cable and dish), restaurants and bars, film use and internet
use. This is where a hit song generates strong income—especially if it lands on
rock, pop, r&b/hip-hop or country radio. The more stations in your genre,
the more times a day your hit song will be played across the country and in the
world. ASCAP uses a weighted sample based on credits and BMI uses radio station
playlists that are submitted regularly.
Radio and television pay royalties for use of the songs.
Restaurants and bars pay yearly fees to the performance rights organizations if
they use music in their businesses. Internet music providers pay royalties too,
but the amounts are very small compared to terrestrial radio and major network
television stations.
A song can be used in a commercial either as a buyout, or as
a royalty per play item—depending on your clout and how badly a company wants
to use your song.
Finally, your song can make money by being placed in a film.
In the US, it is a flat fee negotiated between publisher and filmmaker. In
Europe, however, songs in film get paid a royalty rate based on total
screenings.
Finally, there are performance royalties for live
performances. When name acts play large venues, they submit their playlist of
original songs to their performing rights organization and the performances get
tallied, just like radio plays do.
People sometimes ask me, “How do you sell a song?” I tell them that, when dealing with a
publisher, there is no exchange of money. All I am doing is giving that
publisher the rights to 50% of the income of that song in the future. The
contract can be for a lifetime, for three years, one year or even six months.
There are many different agreements.