How Music Makes Money

Our next area of focus concerns the uses the of a song or composition and the recording, and the revenue streams these uses create.  Songs/compositions and sound recordings are two of the eight categories of creative work protected under federal copyright statutes.  The rights are the same for both.  These rights include the right to copy, the right to distribute (make public), the rights to control the public performance and public display of the work, and the right to make derivatives from it.  The sound recording enjoys a sixth right to control the digital transmission of the work (Spotify, Apple Music, Pandora, et al).  

It’s important to note that for a song only the words and melody are protected by copyright statutes.  If more than one person is involved in creating either one of these elements, it is a joint work and everyone is paid according to songwriter contracts and agreed upon royalty splits.  All those involved in a joint work have an ownership interest in the work not in just the lyrics or melody that they may have contributed to.

The sound recording is another one of the eight categories of copyright protection.  (The others are visual works (painting, sculpture, photography, etc.), audio-visual works (films, videos), literary works (books, poetry, blogs), architecture (you can’t copyright a building but you can copyright the plans that built it), dramatic works (plays, musical theatre), pantomime and choreography (because you can write down the steps and moves).  The owner or owners of the sound recording have to pay owners of the songs on the sound recording for the use of the songs.  The rate for the use of a song for audio recording only, is the statutory rate and currently 9.1 cents per use; that is per CD, LP or download manufactured or sold.  This is not true for streaming, which has its own royalty rate set by the federal copyright commission pursuant to federal copyright statutes.  Rates for other uses, like in film or TV, are negotiated and vary greatly depending on the use.

The video below touches on some of these uses followed by an infographic to provide a visual representation of the revenue sources.  The attached audio file explains the uses in more detail.