Wednesday, June 3, 2009

Dividing Music Income

Dear Rich: I have read your book, Music Law: How to Run Your Band's Businessbut there is an issue that still confuses me. My bandmates and I are at a loss as to how to divvy up the various possible income streams (MP3 sales, CD sales, TV sync license fees, and royalties, etc.). I am the sole songwriter in the band. We record music and are trying to market it through various means (online and brick and mortar). If there is no record company to take a share of sales income, how, generally, is that income split up? What about songwriter royalties and publisher's royalties? What about SoundExchange royalties? Who gets a cut when we sell something?  Any help you can give would be greatly appreciated. I'm so glad you asked. One simple way to look at things is to divide up the revenue sources into two groups: music publisher/songwriter income and band (or non-songwriter) income. Your band has a few choices for dealing with songwriter income (as discussed in the book). The main decision is whether the songwriter keeps it all, or divides it among band members -- for example, you can create a music publishing entity and split that income based on an agreed-upon percentage, perhaps rewarding the songwriters with a higher share of the pot. As for band (non-songwriter) income, that's usually split equally after deducting expenses and payments to the usual suspects (manager, tour manager, agent, etc.) In the new edition of Music Law, I'm going to break  down the sources of music income into more detail.  Since that won't be out until August 2009, the Dear Rich staff has prepared this table that summarizes the common income sources based on whether it is songwriter or non-songwriter income.

Type of Income
Live Performance
Payment to band from club owner or booking agent. 
CD Sales
Payment to band, either: direct payment (if sold from website  or at shows); store payment (if consignment); distributor payment (if you have a distribution deal); or record company payment (if you are signed).
Payment by record company to music publisher/songwriters for mechanical license fee (per unit).
Digital Downloads
Payment to band either: direct payment (if sold from your website); or distributor payment (if you have a distribution deal).
Payment by record company to music publisher/songwriters for a mechanical license fee per download.
AM/FM Over-the-Air Radio Play
Payment to music publisher/songwriters from performing Rights Societies (ASCAP, BMI, SESAC).
Webcast or Satellite Station Play
Payment to music publisher/songwriters from performing Rights Societies (ASCAP, BMI, SESAC).
Payment to band (or sound recording owner if you have a record company) from SoundExchange. 
Movie/TV Soundtrack
Payment to band from movie/TV production   company for master use license; additional payment(s) if sound track recording is released.
Payment to music publisher/songwriters from movie/TV production company for sync license; payment from performing rights societies (ASCAP, BMI, SESAC) to music publisher/songwriters when television show is broadcast or movie is shown; payment to music/publisher/songwriters if soundtrack sold as DVD or CD soundtrack for mechanical license fee (per unit).
Endorsements/Corporate Sponsorships
Payment (or other compensation) to band from corporate sponsor.
Advertisement Featuring Song
Similar to movie/TV payments with additional twists if song is used in nontraditional ways (free downloads, etc.).
Subscription Sales
Direct payment to band; or, if managed by third-party  distributor, treated like digital downloads.
Video Game Featuring Song
Treated like movie/TV soundtrack payments.
Payment to band/record company by ringtone distributor for master use license fee.
Payments to the music publisher/songwriter by ringtone distributor for mechanical royalties (per unit); additional payment made by ASCAP or BMI to the music/publisher songwriters.
AdSense or Affiliate Payment
Payment to band from online company (Google, Amazon, etc.) for ads or links that appear at band-related sites.