Income Sources from Copyrights in the Music Industry

In discussions with various artists, it has become evident that there is significant confusion about the rights that arise from the creation of songs and the revenues associated with these rights. Since collecting fees from rights generated by songs is one of the primary ways to earn money from music, and since every artist project and professional needs income to finance their career development, we feel it is essential to talk more about these rights and the income sources related to them.

Seeing the potential of artists and songwriters (especially when they collaborate successfully), we wish to contribute our knowledge to prepare future stars for success. It is not possible to convey all the information about master and copyright rights in one or two articles, but the basics and foundation for further articles can certainly be established. To draw inspiration for future articles, your detailed questions are very welcome!

Let’s start with the fact that a song that has been created, written, and recorded generally encompasses two types of rights: copyright and master/phonogram rights (technically: related or neighbouring rights). Both rights are legally and commercially the most important rights that authors/musicians can use in various ways for profit. Additionally, each category of rights involves different roles and activities that determine where and to whom certain rights arise. Since the distribution of rights is not explicitly dictated by law, we will offer our vision and recommendations based on general (independent part of) music industry practices and business principles. Since master rights derive from copyright and the object created therefrom, we will first examine copyright rights, and in the next article, we will discuss master rights.

Copyrights

Roles related to rights: songwriter, composer, lyricist, lyric writer.

Generally, every song starts with the idea of a composition and/or lyrics, which is developed and from which a recording of the song is created. Copyrights, briefly, are rights that arise for literary, artistic, and scientific works, which include musical compositions (both with and without text/lyrics).

Therefore, if your original lyrics and/or composition (for example, in musical notes) are expressed in some form outside your own thoughts (for example, in writing on paper or digitally on a computer), you have already created intellectual property eligible for copyright protection. You, as the author, obtain property and personal rights to your created lyrics and/or composition.

These rights allow you not only to earn fees from your work but also to copy, record, distribute (for example, upload a recording to Spotify or YouTube), make adaptations (such as remixes), perform publicly (generally the recording), allow your work to be used by other authors (for example, lyrics to an instrumental), and even transfer these rights to others (temporarily or permanently).

Since the list of personal and proprietary rights includes a few more items, those interested should consult the full list in copyright laws in their respective country.

Splitting the difference

If my friend and I write a song together, where my friend composes the instrumental melody and I write the lyrics, both of us develop copyright rights to the jointly created song. But how should we fairly divide the copyright that arises between us? While the law does not explicitly or specifically define who gets how much of the copyright, a good practice has emerged in the industry that 50% of the song's copyright belongs to the composition/instrumental melody, and 50% to the lyrics and lyrical melody, thus dividing my and my friend’s copyrights exactly in half.

If both of us had someone else helping in the creation process, then everyone, according to their input, has the right to their share of the copyright, which we need to agree upon mutually. If my friend had two other friends helping write the instrumental, then they should agree among themselves how to divide the 50% attributed to the instrumental, and I should divide the 50% belonging to the lyrics/lyrical melody with my helpers.

Generally, such distributions in these situations go by a mix of contribution and gut feeling, but if that fails and we cannot agree, then we might allocate each person's share based on the proportion of notes/lyrics in the whole song or use an automatic distribution from a copyright association. In cases where the song has no lyrics, 100% of the copyrights go to the composer, and if the song has only a small amount of lyrics (for example, just a few phrases throughout the song), it would be reasonable for the composer to retain a larger share of the copyrights (for example, in a 90%-10% split, according to contributions).

I recommend that the splits for such co-creations be agreed upon from the beginning, preferably in writing, so if the collaboration does not yield results, then all creators remain the authors of their work. This means that I can take my lyrics and match them to someone else's instrumental, and my friend can take his instrumental and develop it as hew/she wishes. Such an agreement also means that we cannot use each other's creations without permission (neither I his/her instrumental nor he/she my words). This ensures creative freedom for both parties and prevents a situation where a songwriter or lyricist’s creation ends up forever lying at the bottom of a drawer due to a collaboration gone sour.

Since my friend and I have now agreed and distributed the copyrights, we could next join a copyright association to collect fees from our work and represent our rights.

Collecting Royalties

Copyright societies are organisations created to represent authors and manage the public performance (e.g., concerts, restaurants), transmission (e.g., radio, TV), reproduction (both digital and physical copies), and public availability (e.g., streaming or downloading) of works, thereby collecting royalties for these uses. Technically, they administer the property rights of compositions for mechanical and performance rights. Typically, every country has its established copyright society, and they operate on a membership basis. In The Netherlands, for instance, Buma/Stemra allows authors to register and appoint them to manage and collect royalties worldwide after membership registration.

Although generally part of the public domain, such societies operate on free market principles, meaning authors have the freedom to choose which country's organisation they want to administer their rights. An author can be a member of a copyright society as long as there is no situation where rights for the same territory have been granted to multiple societies for representation.

This means that if, for example, you wish to have your rights represented in the EU through Buma/Stemra (The Netherlands) and your rights in the US through ASCAP or BMI, you should sign membership contracts with Buma/Stemra and either ASCAP or BMI, and register your works accordingly with each organisation.

Once the works are registered, the copyright society begins collecting royalties based on these rights, which are distributed to the authors according to each society's royalty distribution principles. There can be differences in service quality and functions between different copyright societies (e.g., the detail of your royalty statements, the presence and quality of a client portal, etc.). We recommend exploring different options to find the best fit for you. In addition to traditionally established copyright societies, there are private companies like Songtrust that also manage royalty collection and administration.

In addition to collecting fees, societies generally also offer consultations on copyright issues, so feel free to contact them with any questions!

To summarize the distribution of royalties for authors, it typically happens as follows:

1. Registration and Membership: First, you register with a copyright society and become a member. This step is crucial as it legally enables the society to act on your behalf in collecting royalties.

2. Royalty Collection: The society collects royalties based on the public use of your registered works. This includes performances, broadcasts, reproductions, and digital streaming.

3. Distribution: The collected royalties are then distributed according to the society's rules, which usually consider the frequency and type of use of each work.

4. Reporting: Members receive periodic reports detailing the usage of their works and the corresponding royalties collected, allowing transparency and tracking of earnings.

The process is designed to ensure that authors receive compensation for the use of their work, reflecting the principle that creators should be paid for their contributions to culture and the arts. Collaborating with a copyright society simplifies the management of your rights and ensures that you receive royalties without having to negotiate individually with each person/organisation that would like to use your music.

By understanding and utilising the services of copyright societies, you can effectively manage your rights and ensure that your creative output is not only protected but also profitable. This partnership empowers musicians and authors to focus more on their creative endeavours while leaving the administrative complexities to experienced professionals.

Conclusion

Understanding the intricacies of copyright and mastering your rights as a creator is essential for anyone looking to thrive in the music industry. By aligning with the right partners and making informed decisions about rights management, artists can secure their financial future and continue to innovate without compromising their creative integrity. Remember, your music is not just art; it's an asset that, if managed well, can provide significant returns and contribute to your long-term career success.