You’ve just laid down a bunch of tracks that add up to a new, mind-blowing sub-genre of house music. Local DJs are enthusiastically spinning your tunes and the people are definitely up on their feet.
No doubt, you’re feeling pretty good about things. But you know what would make you feel even better? A bunch of big bills plumping up your wallet…
Just ask Wolfgang Amadeus Mozart (who died penniless, by the way.) Earning money from doing what you love can be tough when what you love is composing music. But unlike Mozart and other composers of his day, your music is totally portable—or to be more specific, streamable. When your music is streamed through a service like Spotify or Pandora, you are entitled to collect per-stream fees known as royalties. So let’s take a look at how to add music streaming to your revenue stream.
Streaming music services are now the single greatest generator of revenue in the music industry. There are dozens if not hundreds of them out there. Each has its own submission requirements and royalty structure. And while you could take the time to approach all of them individually, there’s a faster and more effective way.
The first step in making money from streaming music is to engage one (or more) of the many digital music distribution companies that have established themselves in recent years. Each of these companies has its own fee structure. Some distribution companies extract a portion of your streaming royalties under their contracts, while others charge various flat fees to earn their money. Depending on the contract you sign, your distributor may simply submit your tracks to such sites as Spotify, Tidal, and Pandora. Others will, for an additional fee, distribute your physical CDs and promote your music. There’s no limit to the number of distributors you can engage, so you may want to work with several and see which work best for you. There is one catch though: you can’t retain more than one distributor for any one track. Exclusivity is part of all distribution contracts.
It’s important to note that some music streaming services (like Spotify) simply will not work with individual artists, so a distribution company provides the only means of access to their listeners. When considering which distributor(s) to engage, find out which streaming sites with which they partner. Not all distributors collaborate with the same streaming services.
That brings you to your next consideration: which streaming services do you want to focus on? Some streaming services, like Beatport and TraxSource, cater specifically to EDM fans. Others stream a much more diverse catalog and help you reach a correspondingly larger set of listeners.
In general, those services that allow listeners to curate their own sets (interactive services like Spotify and Apple Music) pay higher royalties than those services that deliver pre-determined programming to listeners based on the genres and artists they specify. Pandora and the satellite radio service Sirius XM are examples of non-interactive sites. If yours isn’t yet a household name, it’s arguable that non-interactive sites have the potential to increase your listener base and renown. So the higher royalties interactive sites pay do come with a trade-off, particularly for lesser-known artists.
Every streaming service figures royalties according its own formula. Most follow the model of “pro-rata” payment. Under a pro-rata system, services determine your royalties by taking their total monthly revenue, dividing it by the total number of streams delivered, and multiplying that by the number of streams your tracks inspire. A few services employ what’s known as a “user-centric” approach. Under user-centric arrangements, each user is considered as a separate revenue stream. You are paid a portion of the subscription fee each user pays, depending on what portion of their streams your songs represent each month. The user-centric model gives listeners more power to determine in whose pocket their money lands and potentially levels the playing field between big-name and up-and-coming artists.
Paid subscription streaming sites offer higher royalties than free sites like YouTube. Tidal and Napster are among the most generous of the subscription sites. But don’t ignore sites that pay lower rates. What they don’t pay you directly per stream, they can more than make up for by making your music more easily discoverable. Spotify attracts only about 7% the number of listeners as YouTube. That wider audience can definitely pay off.
Now that you know a little about earning royalties, your next question might well be, “How do I collect them?” There are three different kinds of royalties you can collect—mechanical, performance, and synchronization royalties. Mechanical royalties are the type you earn each time a listener downloads one of your songs from a streaming service or each time a label presses another copy of your CD. You earn performance royalties whenever your work is performed or streamed in a bar, dance club, fitness studio, or other public venue. You also earn performance royalties when another musician covers one of your songs. When someone synchronizes one of your tracks with visual material, you are entitled to synchronization royalties.
Partnering with a digital music distributor offers one colossal benefit: distributors collect mechanical royalties and pay them directly to you. Synchronization royalties are typically paid in lump sum payments by collaborators when you agree to let them use your tracks in a video, film or other visual vehicle. The toughest royalties to collect are performance royalties. To maximize your royalty receipts, you will need to register your tracks with a Performance Rights Organization (PRO). Public venues—coffee shops, cruise ships, pretty much any joint that’s got a juke box—all pay a blanket annual fee to PROs in order to legally play music. The revenue PROs collect is then distributed to artists on a per-performance basis. Some of the best-known PROs are BMI and ASCAP, but there are smaller organizations out there, too.
Regardless of who you partner with, you retain ownership rights of the music you create. Essentially, it’s all on you to monetize your music. But if you don’t give yourself the royal treatment, who will?
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This article was written by the guys over at https://www.consumersadvocate.org.
Check out their Royalties Calculator here, to see what you can expect to make from streaming your music! https://www.consumersadvocate.org/music-streaming-services#toc-h2-vlyg7c
