With the development of digitalization, a certain part of the income of musicians – artists and composers – is revenue from placing music on streaming platforms (Apple Music, Spotify, YouTube). Unfortunately, most musicians are skeptical about this category of income, explaining it by the low percentage of monetization. This also applies to other cash flows that make up royalties (payments for use). For example, from rotation on the radio, reproduction of music in restaurants, nightclubs and other public places, TV broadcasts and others.

At the same time, there are examples of successful management of artists, which allows them to have a significant additional profit from royalties, directing it to the further development of the music business. 

Understanding how the music industry works and what revenue channels exist helps to effectively set up an inflow of capital. In this context, it is important to know who owns the rights to receive revenues, which players work in the music market, as well as how they are involved in the structure of generating income for a certain artist.

Charlie Phillips* identifies three groups of copyright holders in music:

• songwriters/composers (author`s right)
• performing artists (performer’s right)
• recording companies/DIY (producer or master`s right)

He explains that rights recognize and reward the contribution in music when songwriters and performers make a creative input, and recording companies – financial in creating a musical product. 

“Contributor DATA flows out, REVENUE flows back to right holders”. The data collected by collective management organizations form royalties, which are paid from the proceeds from the sale of licenses for the use of music (by nightclubs, radio stations, streaming platforms, etc.).

Musicians just need to join (become a member of collective society), and then update the society on new works,  recorded performances, or their own sound recordings:

• authors collective society for songwriters and composers (for ex., PRS in UK)
• performers and producers collective societies for performers and producers respectively (PPL in UK)

Songwriters have a choice of how to work with author’s collective societies – directly or through an intermediary – a publisher, which greatly facilitates conducting music business and frees up time for creativity.

Publishers representing the rights of songwriters/composers interact with authors’ collective societies.They are responsible for ensuring the songwriters and composers receive payment when their compositions are used commercially. In addition to the administrative function, publishers can also perform other functions, depending on the request – search for sync, make advance payment to the songwriter, etc.

The function of the publisher in the case of performers is provided by the record company that contacts the distributors. However, performers should also sign separate contracts with performers` collective society and producers` collective society, where they transfer information about their performances and recordings and receive royalties. In the UK, both rights – performer`s and master`s – are registered by the same collective management organization – PPL.

Distributors/aggregators (Soundrop, Awal, Distrokid, CD Baby, Routenote, Bandcamp, Amuse, Fresh Tunes) help distribute music on  digital music services and take a percentage of the royalties collected on behalf of the musician or record label.

The record label (in case of cooperation with the artist) pays a share of royalties to the artist (performer) from the income from streaming platforms and physical sales.

To regulate relations in the music business in the field of rights and licensing, it is advisable to sign contracts with all involved parties, such as:

• Band agreement
• Artist management agreement
• Booking agent agreement
• Guest performance/live appearance agreement
• Collecting society agreement (authors society)
• Producer agreement
• Publishing agreement
• Record label agreement (and/or) DIY distribution agreement
• Collecting society agreement (performer and producer societies)
• Music licensing agreements (sync etc)

As Charlie Phillips states, “Proper licensing of all rights ensures you receive all revenues you are due!”. 

*Сreated based on the materials of the lecture by Charlie Phillips