Music industry structures
The music industry revolves around four recognised ‘rights,’ with income streams collected globally by third parties. These rights revolve around the concepts of providence, ownership, usage and of course remuneration:
To be protected by copyright whether it is the music or lyrics it must be “fixed,” that may be in the form of a recording or writing. If the lyrics of a song are reduced to writing the literary work is protected, as is the right of performance. The finished work may be the product of many different contributors or (authors). A publisher will accept the commercial risk by shouldering the cost of reproduction marketing and distribution in exchange for an assignment (usually) of the copyright. The better established the artist/writer the more negotiating strength because the risk to the publisher is reduced. Publisher may pay “advances” which may be recouped if the net revenue which the artist/writer is entitled to is less than anticipated. Otherwise, it will be deducted from the revenue before the artists/writes shares are paid.
is paid to whoever owns the rights to reproduce or record. This is generally defined by those that pay for the recording of the work.
are generated from the use of the song and master within film and TV.
are generated from the musician’s performance on a recording, sync, or live show. This royalty is not always recognised, for example the U.K. pays performance royalties, but the U.S. does not.
There are other royalty payments available; tickets for gigs, merchandise, etc. but these are generally paid directly to the creatives, as opposed to collected on behalf.
The entitlement to receive royalties is quite different from the ability to collect. Sometimes the cost of collection is greater than the amount of the royalty. When large amounts are involved, there is inevitably a greater leakage to those who are responsible for collection. There are many outlets, bars, shops, clubs, radio, film, TV, etc. all over the world where music is played, that need to pay for the right to play that music.
Royalty collection is expensive and limited to larger identifiable streams. Each link in the collection chain takes its cut, so the royalties are greatly diminished by the time they are finally paid out. With so many links in the chain It is incredibly easy for royalties to be miscalculated. It is estimated that over 75% of all royalty payments are incorrect.
Over 10 years ago TommyD, founder and creative director of Token||Traxx recognised potential problems within the credits system and founded the ‘Credit Where Credit is Due’ campaign, in conjunction with the Music Producers Guild (MPG) in the UK, to shine a light on inadequacies within the antiquated credits system and the problems around the digital industry.
“I knew something wasn’t right when I stared at my iPod wondering who the arranger of an Ella Fitzgerald album was and went on the internet to find three different conflicting names”
Many have tried to address the issues, but none have succeeded.
Deals with music creatives are heavily weighted in the music company's favour. Percentage splits of 85% to the company, 15% to the artist are standard, often with all external costs covered by the artist. The artists must then wait for the label to ‘recoup’ the advance, which could take years.
It is in the label's interests to keep the artist in perpetual debt to them, helped by a contractual situation where the label can drop the artist at any time, but it is virtually impossible for the artist to leave the label.
Artists, notably Prince, George Michael, and the Stone Roses, have defined themselves as slaves to the corporate labels. Historically music companies justified these one-sided deals through their huge initial financial investment in artists, paying for pricey recording studios to develop their sound, pressing, and distributing vinyl and CD and then the cost of promotion and collection. Those costs have been radically reduced by developments in digital technology. For both creation and distribution. The grip these three giants have over the entire industry is reflected in their dominance of the charts. Ninety percent of all top ten singles in the last 10 years are owned by one of those three. It is estimated that three major labels make £19 million a day from streaming alone.