How Songs Make Money

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.

This is the basic blueprint. There can be small fees attached for administration of copyright or Harry Fox collections, but the above info gives the big picture.