The Hidden Money In Radio (…except radio is dying)

By Jeff Price

A thank you to Bob Lefsetz for His September 10th, 2011 article as it was the impetus for this one (you can visit the Lefsetz archive here).

In the old music industry, there were only three media outlets that could cause an artist to “break” nationally: MTV, magazines like Rolling Stone, and commercial radio.  Today, of these three outlets, only commercial radio is left, and the major record labels, in collusion with the station owners, control it.  Simply stated, if an artist is not signed to a major label the probability of getting airplay on a Top 40 or Hot AC station (or any other format that has an impact) is right up there with Congress getting along.  It’s just not going to happen.

There are a few important things to take away from this:

First, as of 2011, despite the still powerful (but diminishing) impact of commercial radio, and the stranglehold control on it by the major labels, the majors still have a 98% failure rate on their releases. Therefore, having access to commercial radio, or even getting played on it, does not guarantee success.  Now some good news: artists no longer singularly need commercial radio to “break”– there are other way to do it, in particular, social networking via YouTube, Twitter and Facebook.  Using these new outlets, many artists – such as Boyce Avenue, The Civil Wars, Lecrae, Jesus Culture, Blood On The Dance Floor, Kelly, Dave Days, Ron Pope, Chase Coy, Colt Ford, Ed Sheeran, Jon Lajoie, Rucka Rucka Ali, and tens of thousands of others – are achieving varying levels of success

Next, the potential money artists/songwriters can make from commercial radio is not limited to artist royalties from CD and other music sales.  As a matter of fact, over 98% of artists signed to a major label never see an additional penny of artist royalties beyond their first advance.  The additional money they can make from commercial radio play is tied into a copyright the songwriter controls, called “Public Performance.”

Under U.S., and most international law, the moment a song leaves your head and becomes tangible (meaning it has been recorded and/or written down) you get six legal copyrights.   One of these six copyrights is the exclusive right to “Public Performance.”  The right of public performance means that no other person or entity can publicly perform your song without a license from you.  Radio play is a type of public performance.

All radio stations must get a “public performance” license from the entity that controls this right.  The songwriter controls this right unless he or she has done a deal transferring it to another entity called a publisher or a publishing administrator.  Almost all songwriters and/or publishers outsource the job of issuing public performance licenses to third party organizations called Performing Rights Organizations.  These organizations deal with and license this one right on behalf of their members.

In the United States there are three performing rights organizations: BMI, ASCAP and SESAC.  Radio stations get public performance licenses and pay these organizations on behalf of the songwriter and/or publisher.  Each time a songwriter’s song is played on the radio, the songwriter/publisher is to be paid by the performing rights organization from the money it collected from the radio station.

Until the advent of television, the largest income streams for songwriters/publishers from public performances collected and licensed by the performing rights organizations came from commercial radio play. With the introduction of TV (a song being played in a TV show is a public performance), more public performance revenue was paid and the pot got bigger.  However, this just meant more money for the artists/songwriters who had their songs marketed and promoted by major labels.

As you move into the late 70’s, cable TV came into existence.  At first, the performing rights organizations dismissed cable TV as irrelevant in regards to generating revenue for public performances, over time this changed.  With the maturity of cable TV, and the arrival of MTV, the swatch of artists making money from public performances finally began to get a little wider.

As you move through the 90’s, the music labels entered their “golden years;” their control over market share and commercial radio was supreme.  In addition, CD sales, revenue, and numbers of releases were at a record high and it was still the artists/songwriters, and their songs being marketed by majors, that almost exclusively made significant revenue from public performances.

Which leads me to the next point: what happens when commercial radio as we know it goes away and the last control point for the labels is gone?

The power of commercial radio is already diminishing, listenership for music-programmed stations is down. Stations that used to play music have flipped to talk radio formats (news, sports, commentary) and advertising revenue is not what it used to be.  The final nail in the coffin will be when cars come with built in connectivity to the Net. At the moment, there are over 200 million cars in the U.S. with just about none of them wired to connect to Net.  But that’s changing.  And as soon as “connectivity” becomes as common as air conditioning, commercial radio as we know it will be dead. This is not a matter of “if,” it’s a matter of “when.”

The impact can already be seen. Oddly enough, over the past decade, as revenue and market share for the major labels and listenership for commercial radio have gone down, revenue collected for public performances has gone UP over 70%, and it’s not chump change.

Currently, the three U.S. performing rights organizations ASCAP, BMI and SESAC collect over 2.3 billion dollars in public performance royalties.  The increase in revenue for public performances is coming from more places paying the performing rights organizations for public performances.  Connectivity combined with a proliferation of hardware devices like smart phones, iPads, the Roku, Apple TV, computers, and so on have significantly increased the volume of public performances and the entities that need to pay for them.  There is just more money in the pot.  In addition, the legal definition of public performance has been expanded to include a stream.  Every single time a song is streamed — be it in a YouTube video, via Pandora, Slacker, LastFM, Spotify, a website etc., – money is to be paid to the songwriter/publisher for a public performance.

In the old world, songwriters made public performance money when their music was played on the radio.  In the new digital world, the songwriter generates revenue each time their song is played on devices via a plethora of interactive and non-interactive music services (think Pandora, LastFM, Slacker, Spotify, Mog and so on).

Unlike commercial radio, the majors do not control the future digital streaming music industry, consumers do.  This means that although there will still be some mega superstars earning a disproportionate amount of public performance revenue, for the first time there will also be hundreds of thousands of new artists/songwriters making money of some significance from public performances.  Each time anyone listens to a song via a stream, the songwriter of that song is owed money.

The problem then becomes getting these artists/songwriters their money.  Unfortunately, the traditional performing rights organizations are not very good at this in the digital world.  There is no transparency as to what is being charged and/or collected, and there are huge gaps of time between when they collect their money and when it is paid out.  In addition, as they do not have an efficient way to pay out money to songwriters that have earned below a certain threshold, they have earning minimums,

With the shift in public performances moving from terrestrial based radio to the world of digital streaming, there must be a system that gets songwriters more of their money more quickly, with transparency and an “audit” trail to assure accuracy. For example, if an artist’s recording streamed ten times, the songwriter should be paid for ten public performances.

This to me is the future of the music industry, and this is why TuneCore is now spearheading this change on behalf of the new emerging music industry.  It’s crucial for artists to understand that, whether they like it or not/whether they want it or not, they’re increasingly in control of their destiny.  The motto of the new music industry is transparency. Via unethical practices like Payola (see George’s article), and the inability to adopt to technological transformations, the labels and the old school systems are no longer efficient and have lost and/or abdicated much of their power. Those artists (and the members of their team) and new companies who both understand the emerging landscape and embrace its opportunities will fill the power vacuum.

  • http://pulse.yahoo.com/_L4BE63DB5DOCC2HYCZNXHBRDA4 M O

    Great article looking forward as well as back. Thank You.

  • Paul St. Savage

    Excellent article! Its on the horizon definitely. These drones at the radio stations and major labels are on a sinking ship. Power to the artists! 

  • Shark

    Jeff. We need an article about the HFA, and how it differs from GEMA — i.e. why is it that GEMA and SACEM collect on mechanical usages in some normal way, whereas the HFA does — well, I don’t really understand it myself – ask someone who has seen payments from both entities and they’ll tell you the difference.  I’ll leave it there, maybe you can figure it out. 

  • Garykaluza

     As a songwriter and touring musician, I have had the good fortune / misfortune to signed-dropped-signed and dropped by one or two major labels and their associated publishing arms over the last 25 years.
    This article is so clearly written that it gives me the shivers. I won’t be crying over the grave of the majors.
    Welcome the Internet, long life to the independent artist and with any luck there will be a new way of gathering income owed to those who attempt to make a living as a musician.

  • Guebill

    Jeff, I have a YouTube channel where the tracks on my childrens music album get streamed often. How do I use TuneCore to collect on those streams?

    • Anonymous

      @guebill

      if you sign up for the TuneCore songwriter service we can get your paid for any streams of your recordings in YouTube videos
      if you are interested, emails us at getmymoney@tunecore.com with the subject: songwriter service
      In the email please include the email address associated with your TuneCore account and we will flag your account to have the songwriter service option appear
      jeff

      • classicalgirl

        Jeff, following up on guebill’s question: my classical music ensemble has some tracks (works by Mozart) on the Youtube Channel of a friend. There, it gets streamed a lot (over 200’000). Is there any way of collecting on those streams? And then: who would have to pay? My friend with the Youtube channel? That would not be acceptable. Can TuneCore help collect on those streams?

        • Anonymous

          @classical girl

          Unfortunately, for the moment, you would have to be the songwriter as well as control the recording and then use TuneCore for distribution and sign up for the songwriter service in order for TuneCore to collect any money generated from YouTube streams.
          However, there are ways to copyright public domain songs as new works and then control those copyrights
          My friend George knows more than I about that. I will ask him to post more here about that
          Jeff

          • classicalgirl

            Thanks for this! My ensemble and I are very curious to hear what George knows and thinks. 

          • http://twitter.com/gah650 George Howard

            If you create an arrangement of a public domain work, and that arrangement is significantly original to be deemed a new arrangement – you add elements, etc. –  you can get a (c) in the arrangement of the work. 

            this does not, of course, preclude others from making arrangements of this work.

            When Johnny Cash, for instance, re-recorded the traditional song, “Delia’s Gone,” which is in the Public Domain, he added verses to it, and was able to get a copyright for the *new* elements he introduced.  This doesn’t preclude others from covering the traditional song, but if they cover Cash’s version (i.e.the one with his new verses), they’d have to honor the obligations ( geti.e. a mechanical license, etc.).

            Does that help?

            George

          • classicalgirl

            Yes, thank you. If I understand it right, it means that unless we add significant elements to the classical piece of music (remixing, arranging etc.), we cannot claim a (c) and cannot collect any money from Youtube streams, right? That’s unfortunate as the number of views is so high but probably can’t be changed. If there was a (c) and we could use the songwriter service: how much can be collected per Youtube click?

  • http://twitter.com/tpandesco Travis Piccard

    My local Hip Hop group has gotten consistent weekly play in several markets for years, only after building relationships, so it isn’t impossible (if the quality is consistently good). Radio is not dying either, 93% of the population in the USA uses it. Radio play only adds credibility to all of the new avenues of promotion for artists as it is less invasive or “spam” received from the listener if you will. As an example, we have seen a great steady lift in sales for our singles selected as well. Our last lead single from our album was our greatest gainer in sales as a direct result of the radio spins charting at 167 on mediabase nationally.  In addition, local radio has something no other platform can provide, local personalities behind the message. Finally, and most recently, iHeart radio  (owned by clear channel radio) and its recent upgrades has brought terrestrial radio( what you hear in your car) back to the forefront more than ever! Some examples, iHeart radio is free, all you have to do is like it on Facebook; besides being able to listen to any station in any market by genre or location, you can build your own playlist with a much more advanced algorithm than pandora; you can also socially comment on friends selections; research the artists info, lyrics; and even see the on air personalities profiles with all their info. So how does iHeart radio help local artists? Every single location in the country listening to that station on iHeart can now hear Johnny Rap Star from down the street on their smart phone, online, xbox, playstation and more to come. On the fllipside, Imagine if Tech N9ne(#1 independent music artist) got played as much as Katie Perry….  

    • http://twitter.com/gah650 George Howard

      you make a really important point with respect to “local personalities behind the message.” this is what we lose if we go all streaming (pandora) or all subscription (rdio, etc.). there needs to be the curation AND the voice/personality.

      George

  • invisipics

    I don’t know if other people have had the same experience, but one can get a lot of radio play on non-commercial stations and there always seems to be some excuse for not paying any royalties.  The station doesn’t have a big enough turnover to pay royalties, the song wasn’t on the list returned because the sample was taken at another time etc etc.  

    In a sense, the radios – internet or otherwise – that ask you to sign a release form confirming your acceptance that you won’t receive anything from the airplay are more honest.  Even Jango, who use royalty payments on tracks as a sales argument, don’t pay up.  My PRO said the songs hadn’t appeared on the returns.

    In my experience, the idea in this article that one receives payment for airplay automatically needs to be taken with a pinch of salt – unless you were only talking about commercial radio and even so.

    I live in Switzerland, so the process of receiving royalties from US stations is probably more complicated, but even so.  I’ve been grateful to get a fair amount of play on Radio Swiss Jazz, which has paid royalties.

    Good luck to all and keep the aspidistra flying.

    • http://twitter.com/gah650 George Howard

      it’s a good point, and the only real hope moving forward is that we get far better tracking, and far better reporting, and far better collecting/payment with respect to public performance.

      i know this is something TuneCore is aggressively working on.

      Best,George

  • http://pulse.yahoo.com/_S5EQ3ATI3V6AGCN2DNZOPX4GWY Brian

    As an Ann Arbor author and musician who used to be an electrical engineer in LA, I find this article particularly poignant in regards to Ann Arbor publishing giant Borders Books closing its doors today in finality.  One of the major power players in publishing has tumbled.  The reason?  No “branded” digital platform like Amazon’s “Kindle” and Barnes & Noble’s “Nook” eReaders.

    The same will be true with the music industry.  As a former engineer in LA who made friends with powerful percussionists because of my racquetball prowess (they played racquet sports at my health club), they were happy to make “stupid money” that promoters paid them as “hired guns” who didn’t get a percentage of the royalties. 

    Yet, in this new digital age, there’s no reason the artist who is smart enough to file for the simple and relatively inexpensive copyrights with the Library of Congress to get their just due… IF… they have a successful product that appeals to one and all.  Thus, do you subscribe to being paid an hourly wage for “the Man,” or do you risk the chance of becoming a success with a percentage of the royalties should something you legally own go “viral.”

    Blessings for the digital age and all those unknown artists who show true talent… in this day and age of sampling and stealing other people’s successful riffs… simply because those people didn’t take the time and years of blood, sweat and tears to perfect their portfolio of Talent.

    Talent should be rewarded!  You can find me at http://www.PassionHero.com for my eBooks and music… blessings to those of you who pursue your talent and believe in YourSelf!  PassionHeroDotCom
     

    • http://twitter.com/gah650 George Howard

      it’s imperative for artists to register their (c)’s and make sure their submittal forms to the various clearinghouse agencies (ascap, sound exchange, etc.) are turned in.

      George

  • Heritage1j

    Excellent article! I am a musician and music producer and as so many other real music producers that are obstructed from the airways, I agree that something need to be done to reclaim radio as it should not belong to a hand full of wealthy social influencers but the people. The real bad part of this article is that regardless that radio is on a major decline these greedy morons will still take the path of trying to sell this garbage with the usual suspects they call “artists” with little or no talent!!! The entire world is beginning to realize this as we are increasingly tired of this!!!

  • Andy King

    Great David & Goliath story!  I’m rooting for David, by the way!

  • Bluemorblaze

    Thanx, another enlightening article.
    Bluemor Blaze
    http://www.facebook.com/bluemorblaze

  • Anonymous

    >>>Under U.S., and most international law, the moment a song leaves your
    head and becomes tangible (meaning it has been recorded and/or written
    down) you get six legal copyrights

    This is not true. You get one copyright on the song and one copyright on the recording, if applicable. That copyright grants the exclusive rights you’re talking about. But there are not six copyrights.

    Also,
    >>>only commercial radio is left, and the major record labels, in collusion with the station owners, control it

    Isn’t it sort of obvious that commercial radio is controlled by station owners? Isn’t TuneCore controlled by its owners?

    • http://twitter.com/gah650 George Howard

      You are absolutely correct that when an original work is “fixed” in tangible medium, two (c)s are generated: 1. for the “master” (recording), and one for the song itself.

      however, in the US (and most countries that are signatories to the berne convention docs), these respective copyrights give the author/owner a “bundle of rights.”

      included in this bundle are the 6 rights the article references.

      George

      • Anonymous

        @twitter-759630:disqus Yes, that ONE copyright encompasses SIX rights. You are agreeing with me. It is also important to note that all rights do not apply in each case. For example, I believe digital transmission only applies to sound recordings; there’s no equivalent right for compositions, since they would be covered by the public performance right. And how public display would apply to a sound recording I can’t even imagine. 

        • Anonymous

          @Levine

          for Public display, you’re right, it applies more to books/poems etc than music. However, some examples of public display tied into music are: lyrics in a book, on a t-shirt on a website, printed lyrics etc
          For digital transmissions, there have been classified as public performances.

  • Anonymous

    thank you

  • Shamarcus Dickinson

    I am a little late reading this one but I found it very informative.  On a beginners level.  What are the steps in getting paid for youtube and website streams.  I noticed in a below comment you spoke on having to register with a songwriter link with tunecore?? please step by step the process for me.

    thanks

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