Presentation about the fundamentals of the music business given to independent artists and songwriters by Ben Stauffer, Vice-President of Finance for Centricity Music, May 2014

1. The Business of Music
May 20, 2014
Ben Stauffer
V-P of Finance
Centricity Music

2. What I’m Talking About
2
ª Developing Relationships
ª Types of Record Deals & Royalties
ª Who Gets Paid For Songs & Records – A BUNCH
of Stuff

3. The Business of Music
3
First – Your Questions?

4. Develop Relationships
4
ª Manager
ª Publisher
ª Record Label / Services Company
ª Booking Agent
ª Attorney
ª Business Manager / Accountant
Order to developing these relationships depends on your
needs and how far along in your career you are.

5. Connect With A Manager
5
Live Show
History
Manager
Management
Agreement
Songs
Talent and
Desire!

6. Connect With A Publisher
6
Song(s)
Publisher Single Song or
Long-Term
Publishing
Agreement

7. Connect With A Label
7
Record Label
Or
Services Company
Licensing
Agreement
Development/
Long-Term
Record Deal
Or
Demo(s) or
Masters

8. Traditional Label vs. Services Deal
8
Traditional Label Label Services
Agreement Type “Recording” “Licensing”
Master Ownership Label Artist
Recording Costs Label Pays Artist Pays
Marketing Costs* Label Pays Usually Label Pays
Distribution Costs* Label Pays Usually Label Pays
Manufacturing Costs* Label Pays Varies
$ Collection Label Collects Label Collects
Royalty Advance* Yes Yes
*Costs are typically “recoupable” from royalties earned before the
Artist receives additional payment, under either type of agreement.

9. What Is Record Royalty “Recoupment?”
9
• Label recovers up-front costs of production, marketing,
royalty advance, and other investments related to the services
provided to the Artist
• Artist Advance
• Like Songwriter Advance paid by Publisher
• Prepayment of Future Royalties expected to be earned by
the Artist
• Recovered from record royalties received by the Label
before additional payment to the Artist is made
• Recoupable costs spelled out in Artist/Label Agreement

10. Other Players On The Business Side
10
ª Distribution Company – Gets your record into stores
ª Royalty Administrator – Processes licenses and royalty
payments

11. First: Make Music!
11
Songwriter /
Artist
Song
(Music & Lyrics)
Song
Copyright
Created
Create it in a
“fixed, tangible
form,” and it’s
copyrighted.

12. Cut A Record
12
Recorded
Master
Song(s)
Producer
With Label
A&R Rep
Master
Copyright
Created
“fixed, tangible
form” = copyright
Artist

13. The Business of Music
13
Question Break #1

14. Master Revenue Sources – What They Are
14
Recorded
Master
Music Sales
Digital
Public
Performance
Film, TV,
and Other
“Syncs”
On-Demand
Streaming

15. Music Sales and On-Demand Streaming
15
Music Sales
Digital Album and
Track Downloads
Audio Streaming – “Ad-Supported”
and Subscription
Physical Product
ª At Live Events
ª Amazon / General Market
ª Christian Bookstores (CBA)
On-Demand
Streaming
“Ad-Supported”
Video Streaming

16. Digital Public Performance
16
Digital
Public
Performance
Other Online Radio

17. Film, TV, and Other “Syncs”
17
Film, TV,
and Other
“Syncs”
ª Movies and trailers
ª Television shows and commercials
ª Video games
ª Online web series

18. Who Gets Paid?
18
Record LabelDistributorRetailer Artist
Net Revenue
Music Sales – example: Sell 1 Album or 1 Track
Takes Wholesaler Fee Takes Distribution Fee
Artist Royalties
Earned Toward
Recoupment
Publisher(s)
Mechanical Royalties =
$0.091 / track
MasterRevenuePublishingRevenue
Songwriter(s)
Writer Royalties
Earned Toward
Recoupment

19. An iTunes Sale —The Math
19
Example: Album has 10 tracks, sell 10,000 Copies of the Album for $10 each
ª Total Revenue = $100,000
ª iTunes cut = ($30,000) 30% of Total Revenue
ª Distribution fee = ($14,000) 20% of Rev – iTunes cut
Net For Label/Artist/Publisher/Writer = $56,000
Publishing Income – ALL Writers:
ª Writers’ Share = $4,550 = $.091 x 10 x 10,000 / 2 – Standard rate
ª Publishers’ Share = $4,550 = $.091 x 10 x 10,000 / 2 – Standard rate
Total Is $910 Per Track
Other Label Payment:
ª Producer Royalties = ($3,360) 6% of Net For Label/Artist/Publisher/Writer
Label/Artist Share After Royalties = $43,540
Artist deals vary dramatically, from a set royalty rate (~10%-15%) to profit
sharing after the album “recoups” its costs (ex. 50%-50% Artist-Label).

20. The Business of Music
20
Question Break #2

21. Who Gets Paid?
21
Publisher
Record LabelDistributor
Net Revenue
On-Demand Streaming – $0.002 to $0.008 per Stream Starting Rate
Negotiated royalty Takes Distribution Fee
Artist
Artist Royalties
Earned Toward
Recoupment
Service
Harry Fox
Agency
75% to 85% net
to Distributor
15% - 25% of
net to royalty
agency
Takes Admin. Fee
MasterRevenuePublishingRevenue
Songwriter
Writer Royalties
Earned Toward
RecoupmentNet Revenue

22. Who Gets Paid?
22
Publisher
Record Label
Digital Public Performance – % of Service’s Total Revenue (varies)
Takes ~5% Admin. Fee
Artist /
Union
MasterRevenuePublishingRevenue
Songwriter
Service
PRO
50%
50%
“Writer’s Share” = 50%
“Publisher’s Share” = 50%

23. What Is SoundExchange?
23
ª A non-profit organization that collects royalties from the
performance of sound recordings on:
ª Satellite radio (SiriusXM) and
ª Internet/mobile digital radio stations (Pandora, iHeartRadio,
and many smaller webcasters playing music)
ª Does NOT collect for recordings played on YouTube, Rdio,
Spotify, and similar "on-demand" streaming services
ª Does NOT collect royalties for compositions (songs). Performing
rights organizations (ASCAP, BMI, and SESAC) and The Harry Fox
Agency pay songwriters and publishers for rights
in compositions.

24. How Does SoundExchange Pay?
24
ª SoundExchange pays royalties as follows:
ª 50% directly to the Owner of the Master (usually
Label, or Artist if he/she retained master rights)
ª 45% directly to the Featured Artist
ª 5% to any non-featured performers through unions
ª Because SoundExchange pays money directly to Artists,
you need to register with SoundExchange yourself to get
paid. Your label will not pay you any of these royalties.
Register here: https://register.soundexchange.com/welcome

25. Performing Rights Organizations
25
ª A Performing Rights Organization, or PRO, represents song
copyright holders by licensing and distributing royalties for the
public performance of their copyrighted works.
ª These public performances include, but are not limited to:
ª Commercial radio stations (AM/FM)
ª Restaurants and bars
ª Other businesses playing music
ª Pandora and other online radio stations
ª SiriusXM satellite radio
ª Live performances
ª Three major PROs represent songwriters in the U.S.
• ASCAP and BMI – not-for-profit, accept all applicants
• SESAC – for-profit, chooses who it wants to represent

26. Who Gets Paid?
26
Publisher
Record Label
Film, TV, and Other “Syncs” – Amounts earned for these “placements” vary
depending on prominence/extent of use in the feature, size of audience, time
period of use, and other factors
MasterRevenuePublishingRevenue
Songwriter
Writer Royalties Earned
Toward Recoupment
Licensee Artist
Artist Royalties Earned
Toward RecoupmentEx. Film Production Company
ª Note that the use
of a Recording
requires two
separate licenses.
Master
Song

27. The Business of Music
27
What major music listening platform haven’t we discussed yet?

28. Commercial Radio
28
ª Question: What is the royalty rate paid to Labels/Artists for a
song played on Commercial Radio in the U.S.?
ª Answer: $0 L – The U.S. is the only major music market that
does NOT require broadcasters to pay master royalties for
Commercial Radio play.

29. Commercial Radio
29
ª Question: Are royalties paid to Publishers and Songwriters for a
song played on Commercial Radio in the U.S.?
ª Answer: Yes J – performance royalties are paid to the PROs who
then pay publishers and songwriters, like they do for digital
performances
Publisher
Songwriter
PRO
“Writer’s Share” = 50%
“Publisher’s Share” = 50%

30. The Business of Music
30
Question Break #3

31. Other Publishing Revenue Sources
31
ª Church Income (Christian Copyright Licensing International) –
songs performed in churches generate money from computer
projections, song/lead sheets, bulletin inserts, service
recordings, and more
ª Print – from sheet music and songbooks sold commercially
ª Other digital uses – custom mixes and tracks from demos, used
for leading worship

32. Who Gets Paid?
32
Other Publishing Revenue Sources
Songwriter
Writer Royalties Earned
Toward Recoupment
Licensee –
book
publisher
Church
Income
Print
Other Digital
CCLI
Licensee –
ex. Church
Publisher
Licensee –
Multitracks

33. Revenue Summary – Masters vs. Publishing
33
Masters Revenue Publishing Revenue
Music Sales Distributor Pays Label Label Pays Publisher
On-Demand Streaming Distributor Pays Label Harry Fox Agency
Digital Performance SoundExchange PRO
Film, TV, & Other Syncs Directly to Label Directly to Publisher
Commercial Radio L PRO
Church Like a Sync CCLI
Print N/A Licensee Pays Publisher
Other Digital N/A Licensee Pays Publisher

34. Other Sources Of Income
34
How Do You Make Money Touring?
ª Guarantees / % of the House – flat fee per show and/or
share of gross ticket sales or profits
ª Sell Merch! – CDs, t-shirts, hats, bumper stickers, etc.
ª Sponsorships – brands and non-profit organizations
ª “Love Offerings” and Donations

35. Other Sources Of Income
35
ª Become A Session Player / Background Vocalist
ª Become A Producer
ª Other ideas?

36. Recommended Reading
36

37. The Business of Music
37
Ben Stauffer ben@centricitymusic.com
Final Questions?