Income Stream Basics for Musical Creators

An article written by Eldar Manor and published on the IndiEarth Blog:

When a song is performed, recorded and finally distributed, various income streams ensue. What are these income streams, what are their sources, who is entitled to them and how do we ensure that at least a better part of them comes our way? These are some questions any aspiring musician should be asking themselves when setting out on a career in the music business.

Income from Copyrights

In this context, income streams are those sources of income that are generated by usage of creative properties. Creative properties are made up of various elements such as the song, the performance and the recording in the case of a musical track or the visual recording, the artwork and other creative elements in the case of a video clip. Given that there are property rights in each of these elements, when a musical track or a video clip is broadcast on TV, played on radio, streamed or downloaded online, synchronized as part of an ad or a film, included in an album in various formats etc., money is usually generated. These property rights are: a copyright in the song, a copyright in the sound, visual recording & artwork and a performance right in the performance.

Permission & Collecting Societies

Owning a copyright means that use of it requires permission from the rights holder. And granting permission to use a copyright work may mean that income may follow. In the case of use of a musical track, permission is usually required from the copyright owner of the song and the copyright owner of the recording (and in some cases also from the owner of the performance right in the performance).

In some cases, such as when use of a song or a recording is required for use in advertising, direct permission from the copyright owners may be required in each and every case. But obtaining direct permission from each and every rights owner may not be feasible in all use requirement situations. Thus if a radio station, whether terrestrial or online, would have to clear rights directly with the rights holders of all creative elements in all the tracks that that radio station planned to play, then it may just as well close down its operations given the disproportionate resources that it would have to invest in clearing rights. In order to facilitate the licensing process, some copyrights are administered by collecting societies.

Collecting societies are bodies that represent a large number of rights holders of a certain copyright. Different collecting societies have different roles but in general, their main function is to license, police and administer the copyrights of the members they represent. Some such collecting societies are those representing performance rights holders in songs (such as PRS in the UK, AKUM in Israel, IPRS in India, ASCAP and BMI in the US), those representing mechanical rights holders in songs (such as MCPS in the UK, AKUM in Israel, Harry Fox in the US), those representing rights of performers (such as Eshkolot in Israel and PPL in the UK), and those representing recording rights holders in recordings (such as PPL in the UK, IFPI & PIL in Israel, PPL in India, Sound Exchange in the US).

One of the greatest advantages of collecting societies for those entities making widespread use of creative properties (such as radio and TV stations) are blanket licensing schemes. These allow access to collecting society repertoire with “relative” ease in return for pre-agreed remuneration terms for the particular collecting society.

Access to Revenue Streams Is Changing

A creator’s access to and size of share of revenue streams may depend on what rights he has in the particular creative property. Thus, owning the copyright in a recording may mean a larger share of the income from the recording.

In the past, the roles of parties involved in the creative and business aspects of the music industry were clearly defined, whereas today roles have become blurred. With fast paced technological developments, lesser label investment and greater access to fans and potential markets, creators are taking on both creative and label responsibilities.

Today, many independent artists own the copyright in their recordings and are more often than not also the publishers of their own songs. This is of great advantage to creators given that this state of affairs allows them to divide the rights pie into parts that suit their needs. It also allows them to ensure that they not only keep a larger share of the ensuing revenue streams but that their relationships with distributors and publishers may be limited in time and in scope.

Change is also occurring even in areas where traditional models still apply. Recently, well-known rapper Eminem, won a court case in which it was found that music downloads from iTunes are licenses and not sales. The distinction is important for those creators who do not own the copyright in the sound recordings they perform in. This is because in most “older” recording agreements labels pay royalties from sales and royalties from licenses. Royalties from sales are traditionally lower than those from Licenses. The distinction may mean earnings worth many more millions of dollars for larger selling artists. You can read an article about this here.

This distinction though may be a short lived victory given the downhill path that download revenues are taking as a result of the meteoric rise of subscription and streaming services, which essentially means lower royalties for creators (streaming a track cost less than downloading it).

Distribution & Publishing

Notwithstanding their greater independence today, creators do still require the expertise of others. Nominating the right distributor and publisher may be key to gaining effective access to markets and ensuing revenue streams. Reaching the most popular online retail stores does usually require a digital distributor, and ensuring proper management of uses and revenue from collecting societies does require an experienced music publisher.

When a creator nominates a distributor or a publisher he is in fact giving a share of his earnings to an entity that should have the required experience, legal acumen and organizational skills to ensure a proper dealing with his creative properties. Sadly, this is not always the case. It is thus always recommended, when granting distribution and publishing rights, to do so for a limited period of time. This will ensure that in the long run, if one is unhappy with a distributor or a publisher, one can always move elsewhere.

Pushing Borders

The “long tail”, a term well known to independent musicians in connection with revenues emanating in the digital distribution arena, is also relevant today to other revenue streams such as collecting society income and income from sync licenses. For this reason, creators are for forced to constantly diversify their “work portfolio” to sometimes unchartered waters. Pushing borders means exciting times for the independent creators. After all, isn’t that what art is all about?

Reality though means not only a shifting in the structure of a creator’s activities but also in the ensuing revenue streams. Greater freedom, coupled with technological advances and a more accessible and communicative world means greater collaboration, exploration and potential exposure for creators in places and cultures which were impossible to reach in the past. In terms of revenue streams this diversity also means a greater need for effective management of creative properties, a skill which creators do not always have or do not want to have. But this though, we shall have to leave for another post…




Rights Clearance Basics For Creators

An article written by Eldar Manor and published on the IndiEarth Blog:

Creators setting out in the audio-visual industries may spend endless hours in pursuit of their creative desires. They may write songs, record them, create video clips and do other amazing things, but understanding some of the basic legal rights that make up their creations are sometimes overlooked.

Complexity of Rights Involved in the Content Creation Process

When a song is written or recorded, complex multi-layered intangible properties are created. Multi-layered, because there are rights in every aspect of a creative property:  In the song, in the performance, in the sound recording, in the visuals and in the graphics. Such rights can be bought, sold, licensed and otherwise dealt with in ways similar to tangible properties such as a house or a car. The ability of content owners to deal in such creative properties (rights) without hindrance may depend on how such rights are dealt with during the content creation process.

Usually, the creative process involves the input of more than one creator. Thus a song may have been written or arranged by more than one person, a recording may include session performers not forming part of the “band” recording a particular album or it may include a sample from another recording owned by others, the script of the video clip for a song may have been written by a hired writer and the album’s cover graphics may have been created by an external graphic designer.

The complexity of rights involved making up creative properties means that those who create and aspire to own such properties, need to legally deal with the creation of such rights in an orderly way so as to ensure that the creative property they want to end up with is actually one that can be licensed, sold or otherwise dealt with without undesired obstacles. An owner of a sound recording wishing to license that sound recording for various uses, will need to ensure that he is not only owner of that sound recording, but that he also has all the necessary permissions from other rights owners whose creative properties are included in such a recording, be it owners of samples used or of performers whose performances are included therein.

In the past, the roles of parties involved in the creative and business aspects of the music industry were clearly defined. A music publisher published songs, a record label produced, marketed and handled the distribution process of albums and the artist or band were more involved in the creative side of things. Today, roles have become blurred.

With ever-changing technological developments, a band may be taking on both creative and label responsibilities. This “content owning freedom” comes at a cost though. It requires from such content owning creators acute awareness of the legal and business aspects of their trade which were once vested with record labels or publishers and it means in practice that such creators cannot focus only on creation.

Creators Signing Content Licensing Agreements

When creators are in control of their content, they will most probably be the entity negotiating and signing agreements relating to the commercial exploitation of such content. One of the basic terms in any content licensing agreement will be a requirement by the party receiving use rights that no third party rights will be infringed by the particular agreement and any of the uses granted under it.  In order to be able to make any such declaration, the content owning creator will need to ensure that he has agreements in place with all those involved in the content creation process, which deal with the rights contained in such content (and that may mean songs, recordings, performances, artwork, graphics, visuals etc…) so as to try and cover as much as possible all desired content use scenarios.

Copyright & Rights Clearance Misconceptions

One of the biggest misconceptions that I come across over and over again in the context of clearing rights in the content creation process, concerns who owns the copyrights in commissioned works. It is usually wrongly assumed that those who commission creative works are those who own them. That logic does not always work in the case of creative rights.

If a band commissions a graphic designer to create a logo and packaging graphics for an album, we assume that the band would own the copyright in such logo and graphics. We also assume the same when a producer of a video-clip hires a writer to write the script for such video-clip. In both examples, unless an agreement is signed between the parties that transfers or assigns such rights to the commissioning party (or if the work is a “work for hire” in the US), then the first owner of the copyright in the creative work commissioned may be in many jurisdictions the creator and the not the commissioning party.

Given the diversity of content uses and the speed in which technology changes both content forms and their platforms, the best case scenario for the content owner who desires to pursue commercial exploitation of his content is to have worldwide rights for all possible uses in the songs, the sound recordings, the visuals and graphics and of the various elements making up any video clip produced (such as the script, the direction and the artwork) and other creative elements making up such content. If that is not possible, the content owner will need to secure those rights that are essential for him in the content exploitation process.

The complexity of the rights clearing process is further highlighted by the fact that even careful rights clearance planning is not full proof against possible claims. Moral rights, which are personal rights designed to protect the creator’s integrity and his right to be identified as creator of particular creative work, are separate from the economic rights in creative properties and are treated differently by different jurisdictions. Thus in certain jurisdictions like the UK, these rights can be waived by the creator. But in other jurisdictions, this may not be possible. This means that in the UK environment, content creating owners may have more legal certainly in the rights clearance process than in other jurisdictions.

Final Notes

Content creation rights clearance requires careful planning and a series of agreements. Such agreements should not be handled alone. Seeking legal advice from a specialist lawyer is highly recommended.

There are two major obstacles that deter creator content owners from dealing with the contractual side of the rights clearing process (and therefore undermining the strength of the creative properties they may own):

  1. Creator content owners are usually reluctant to spend money on legal advice: Content owners are advised to treat their creative properties as they would their house or car.
  2. Creator content owners are deterred by making agreements: Agreements may create awkward situations between people involved in the content creation process. It is advisable to deal with such awkwardness now, then having to undo legal entanglements later on.