The Business of Creativity

Houchin Consulting PLLC

December 06 Scene Magazine Column

Posted on | December 11, 2006 | No Comments

Mechanical Money

Where’s the real money in music? It’s not in playing cover tunes in bars – sure that’s fun, but you don’t make much money at it. The real money is in writing the songs. When you write the songs, you have multiple avenues of potential bucks including performance rights, mechanical royalties, synchronization licenses, instrumentals/karaoke, lyric reprints in books and magazines, corporate videos, computer games, sheet music, even those damn singing fish and cell phone ring tones.

So how does all this work? First, write the song. Second, spend the $45 to register the copyright in the song. Third, get to work marketing the piece. Let’s look at the three primary moneymakers: performance rights, mechanical royalties, and licensing.

Performance fees are based on feature performances such as visual vocal or instrumental on television or getting big airtime on the radio. These are collected and distributed through complex math by ASCAP, BMI, and SESAC.  To get a check, you have to be registered as an artist with one of these three organizations. The money you receive is variable based on which group you join because they all use different formulas to estimate the number and types of performances you song is enjoying.

“Mechanical” royalties are those fees you get whenever someone else uses your song in a CD, Record, Tape, etc. It can get complicated, but to simplify a bit, the artist recording your song must pay 9.1 cents total per copy as a mechanical royalty to the writer and publisher of the song. So, if you write a song that becomes a hit for Beyoncé and sells 10 million copies you’ll split $900K with your publisher. Not bad. Now just imagine you wrote the entire album of 10 songs and you’ll start understanding why Rob Thomas is smiling. It’s important to remember that if you’re recording your own original music as the performer, your record label is going to negotiate a reduced mechanical royalty payment for these “controlled” compositions. If you’re about to cut a CD that includes any cover tunes, be sure to pay those mechanical license fees before duplication or you could be facing some hefty copyright infringement damages.

Getting your song used as part of a TV show, movie, or commercial is what we call a “synchronization license” or “synch.” Think of the theme song for “Friends,” “CSI,” or theme songs to James Bond movies.  Publishers can get from about $15K-60K for a movie theme song, and the record company can get about the same for use of the masters. The artist’s cut of that is outlined in their contract, which is why those contracts can get long and complicated. Of course the exposure generated by the show or movie will pump record sales. Product advertising licensing for TV commercials can be a huge source of income for the songwriter: $75K – $750K per year for successful songs. Bob Seger and John Mellenkamp are raking it in for their recent pick-up truck commercial work.

The thing to remember in all this is that almost every license is negotiable, but those negotiations take time and attention. Most musicians I’ve met would rather write and play than read contracts. I can’t blame them, if I had the talent to write hits, I wouldn’t be practicing law!

Granted, there are many songwriters out there and most never make it big. It takes work and it takes luck, but hard workers are always more lucky. If you’re playing cover tunes, start writing and performing original material, sure some people get rich and famous performing other people’s music, but most start by making a name for themselves with their own work.

A great song is your property for 70 years after you die, so leveraging your creativity correctly can provide not only the nest-egg for your own retirement, but the college tuition for your grandkids.

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