Wednesday, November 25, 2009

The New Music Publishing Reality In Music 3.0

Music publishing has always been the quiet, but steady money maker of the music business. Even though it's perhaps the least glamorous of just about any part of the entertainment industry, it made its participants vast fortunes. The real money makers of hit records were always the songwriters and publishers and not the artists, a fact that few are aware of unless you're actually in the business of songwriting. That's what makes the new publishing reality in Music 3.0 so important.

Before Music 3.0 (the era of paid digital music), it was pretty easy for a songwriter and publisher to make money if the records or CDs were selling. Each song on an album brought in 9.5 cents, which the songwriter and publisher would split (called a mechanical royalty). That means if a writer had 10 song on an album, he would generate $.95. Multiply that by a few million and you have some real money. Plus the song would generate additional revenue when played on the radio (called a performance royalty), as determined by a rather obtuse allocation of a larger pie paid to either ASCAP or BMI.

In Music 3.0 (M30 for short), that's all changed as the post regarding Lady GaGa and her earnings of $169 from Spotify for one million plays indicated. While a paid download from a digital distributor like iTunes still pays the same 9.5 cent mechanical royalty, a stream pays only $.0018 in 2009 with an increase to $.0019 in 2010! That's less than a fifth of a penny per stream!!

Now by my calculations, that should still end up being $1800 that Lady G should have generated so the 169 bucks seems way off, but it does illustrate an important point about publishing in M30. Many publishers are terrified that a subscription model of digital music (where you pay $10 a month or so for as much music as you can stream) will be adopted. The reason? Greatly diminished mechanical royalties, and less that a fifth of a penny generated for every stream played.

Indeed, publishers are finding that their administration costs in accounting for streams are far greater than the income generated, and that's the heart of the matter. In streaming, the creative part of the business (artist, songwriter, and by proxy, publisher) look to be making a whole lot less income than in a download world. Plus, most artist's record label contracts don't adequately cover how much of what the label takes in from streaming will actually be paid out to the artist, so you can bet that it'll be the very least amount possible, or even less. All this adds up to a new music publishing reality in M30.

But it's not all bad. Publishing does have its bright spots and we'll cover the ways the a writer can make money in M30 in the next post.

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