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5:02 pm
June 19, 2015
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QuoteHi,
I'm wanting to get some advice from anyone who is profitable about business models. As an independent musician I feel that the record company model is not entirely relevant.
Firstly, where there are co-writers involved, what percentage of an album unit do you ascribe to songwriting royalties? (To be clear, I'm not talking about dividing songwriter royalties for an individual song - this has already been done and recorded with the relevant collection body.) I believe in the industry this is a little less than 50%, and almost 50% is assigned to publishing rights. But I would be interested to hear how some indies divide up the worth of an album where there are royalties to be paid.
Secondly, I'm currently making a small profit for the first time in many years (hurray!) and I hope to scale up. If I am to start paying royalties to contributing songwriters, is it fair that I wait until I am not only profitable, but have also recouped my business losses over the past several years (album recording costs, marketing costs etc.). I believe record companies just recoup the money spent on that particular album project. However, as I am only one artist, all of my past expenses are directly relevant to my profitability today.
Has anyone else had to deal with this issues yet? I'd love to hear thoughts! Or even recommendations of people I might be able to direct my questions to.
Cheers,
Rachel
10:51 am
June 7, 2011
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Hi Rachel,
If I am understanding you correctly, you are asking for advice on how to split things directly with people you are working with, rather than established artist's whose songs you have covered. If that's correct than it's all negotiable and I personally think anything is fair that you can justify.
If this is a co-write situation, I would personally treat it like any other cover and propose that you pay the going rate of 9.1 cent USD for each use of a song on an album. I forget with the fee is per download so you'd need to look it up. But then split that between you and the co-writer. So if you sold 1000 albums with a song that another person co-wrote, they would get $40. This is the same rate the Rolling Stones would get if you licensed their songs so it would stand to reason that the fee should not be any greater. If they co-wrote all of the songs and you sold 1000 albums, they would receive $400.
You could offer them a small advance to guarantee they make some money and quarterly settlements if over $100 or annual settlements if under $100 (just to make it easier on you.
I think it's pretty negotiable and that still reserves enough money to market and sell the physical albums and make a profit.
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4:11 pm
June 19, 2015
OfflineThanks for your thoughts John. I'm interested that you don't suggest paying the co-writer only after expenses have been deducted? Is this because the 9.1 cent is quite low?
The other model I'd heard was a 50/50 split of publishing rights (which I'd get) songwriting rights (which would be split according to divisions on songs etc.) I believe this is what many record companies do, but they pay off their expenses first. In this model the co-writers would have a larger cut, but wouldn't see any of it until expenses were paid off. (So if it cost me $7000 in advertising to sell $10000 albums, then they would only receive their cut of the $3000 profit.
From a book-keeping stance your model certainly sounds easier though...
Thoughts?
5:13 pm
June 19, 2015
OfflineHi again John,
I've just done some more research since my last reply. Apparently CD Baby (which I do use) follows the model you explain, and divides 9.1US cents between the various writing parties according to the royalty splits (which CD Baby does ask you to enter upon uploading an album or song). In their case, there is no recouping of expenses.
However, the overwhelming majority of my sales are coming through my own store with PayPal. So the question remains, do I recoup my costs first as a record company would? And how are "costs" defined? Does it include all losses of the business thus far, seen as I am only one artist and all previous expenses are relevant to present and future sales? (eg. advertising costs to build the list that will future albums, and the cost of my first few albums which I paid for upfront.)
I guess this comes down to me asking your personal opinion regarding this issue, as like you say, it comes down to what the relevant parties can agree to.
Appreciate your thoughts!
Rachel
9:17 am
June 7, 2011
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Hey Rachel,
So, keeping in mind that this is not my area of expertise, this is how it works as I know it.
There is a mechanical royalty generated for the use of every song (09.1 cents USD). This goes to the songwriters and/or publishers. There is a portion of this (the writer's share) that must always go to the writer(s) regardless of whether they sell their publishing rights. It is the other half that is up for grabs in a publishing deal. This is like this because too many writers got ripped off back in the day.
When a label puts out an album, they pay this mechanical royalty off the top. They do not recoup expenses on this. An artist also typically negotiates points on the album. This is what the label does not pay until they recoup.
So in your case, if you are the label and the artist, and a 50% writer of all the songs, then you would pay your co-writer .0455 cents per album sold (the rate is different for different mediums such as streaming). But that is all. The rest of the money would be yours in this situation. You, as the label, are essentially just licensing the song from yourself and the other writer.
However, if the other writer is also on the recording of the song then you would need to negotiate points and pay them after recouping, unless they negotiated getting paid before recouping (which happens).
What you could recoup or not recoup just depends on what is agreed to in the contract. You wouldn't normally recoup your business expenses as a label, but you would recoup the portion of your business expenses that were dedicated to this project.
That all make sense?
You could of course, double check this with a lawyer but I'm pretty confident that is correct, and it's my understanding of my own deals - which I pay no attention to 🙂
Having trouble with your marketing? Wish you could have an experienced direct-to-fan marketing expert look over your actual campaigns, music, or content and offer feedback? Or perhaps you’re just looking for a little one-on-one assistance so you can ask questions that pertain to your specific goals and get a second, more experienced, perspective? Click here to book a session with me now.
4:06 pm
June 19, 2015
OfflineThat's great, John. It confirms my understanding of what I managed to research yesterday. Thanks for taking the time to explain!
12:54 pm
June 7, 2011
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My pleasure!
Having trouble with your marketing? Wish you could have an experienced direct-to-fan marketing expert look over your actual campaigns, music, or content and offer feedback? Or perhaps you’re just looking for a little one-on-one assistance so you can ask questions that pertain to your specific goals and get a second, more experienced, perspective? Click here to book a session with me now.
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