By Jeff Price

The last article talked about how the old school music industry found a way to steal money of yours that you never even knew existed. This article describes how some companies use “slight of hand” and complex copyright law to take money from right under the artist’s nose.

Here’s how it works.  In the United States, each time a song is “reproduced,” the songwriter (not the record label) is legally required to be paid $0.091 (a little less than a dime) for something called a “mechanical royalty.”

As an example, a song bought and downloaded from iTunes (or any digital store) is legally considered to be a “reproduction,” therefore each and every time a song is downloaded from iTunes the person who wrote the song (meaning you, or someone else if you covered the song) must be paid the mechanical royalty of $0.091.

If the song is bought and downloaded from iTunes one thousand times, the person who wrote the song must be paid 1000 x $0.091: a total of $91.  Legal statute requires the songwriter to be paid this “mechanical royalty” for each and every reproduction (hence the “statutory” rate).

In the United States, music services like iTunes, AmazonMP3, etc. give the record label the money owed for the “mechanical royalty,” and the record label must account to and pay the songwriter.  Outside of the United States the “mechanical royalty” is paid to a third party collection agency where it sits until you get it. If you don’t get it, they give it to others.  (you can read more about that here )

For example, let’s say you cover the song “Let It Be” written by John Lennon and Paul McCartney.  You then put your recording of that song on iTunes U.S. and it sells one copy.  iTunes U.S. pays out $0.70 and then, depending on how you got your music on iTunes, you get some or all of it.   From the money you get from the sale of your recording from iTunes in the United States, $0.091 must be paid to Paul McCartney and John Lennon (they wrote the song) for the mechanical royalty (they split the $0.091 50/50 as they each “own” half the song).

If you wrote the song that sold, this $0.091 goes to you.  That’s the law.

So here’s the slight of hand trick some use: let’s say an artist uses a company that takes a percentage of the money from the sale of music to get into iTunes.  A copy of the artist’s recording sells in iTunes U.S., so iTunes U.S. pays out $0.70.  The company takes a percentage — let’s say 9% of the $0.70.  Guess what, they just took 9% of the money going to the record label and 9% of the money going to songwriter.

That’s illegal.  And I can assure you John and Paul did not approve of this company taking 9% of their mechanical royalty money.  The same holds true for you.  If you wrote a song and someone covers it and it sells, this company would be illegally taking 9% of your mechanical royalty.

Now this other company might say: “No, we did not touch the $0.091 owed to the songwriter, we only took 9% of the money owed to the record label.”

Really?

They took 9% of $0.70 but they tell you, the artist, they are only taking 9% of what the you as the record label make.  Therefore, the percentage this company is taking from the artist is either higher than the 9% they claimed, (in which case they are misrepresenting to the artist how much of his or her money they are taking), or they stole from the songwriter.

Which one is it?   Steal from the songwriter or misrepresent the percentage they are taking?

Once again, complex copyright law allows these companies to use financial slight of hand to either illegally take money from the songwriters or misrepresent to artists the percentage of their money they are taking.  And once again, the complexity of copyright law allows for someone to give with one hand and take it back with the other without your even knowing it.

This really needs to stop.  And frankly, why the hell don’t they take a moment to explain these laws and processes to artists? (for more on this, see the articles on how they steal your money and how they don’t tell  you what you get paid.)  Is it ignorance, purposeful or something else?  We all work for you!  This is our job. Without you, none of these services, TuneCore included, would have a business.  This music business can be transparent and honest, the only thing holding it back is that there are people in positions of power choosing to operate in secrecy or prey on the less educated.  Fortunately, this has no choice but to change as more and more information comes to light.  It was hard to scream thief when you didn’t see them stealing from you, now you can.

The purpose of TuneCore is to make the world better for artists, and it takes the power of you to make that happen.  The more you know: how your rights make you money, where that money sits, how much you are supposed to be paid, and what your six legal copyrights are, the faster it will happen. Combine this knowledge with the transparency and efficiency technology brings and no amount of misdirection or slight of hand will be able to stop you from seeing what’s actually happening.

And that’s when they finally get driven out of town.

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AUTHORS NOTE ADDED July 20th at 9:50PM Eastern

As a few people are attempting to mislead readers of this article, I thought it best to provide the math:

a song sells for $0.99 in iTunes US
iTunes US pays out $.070
This service takes 9% of $0.70 = $0.063

That’s NOT 9% of “Your Money”.

(side note, sure hope they do not round up on you and take $0.07 or they would be lying again – in any event…)

The person that wrote the song (or the entity that controls the copyright) must get $0.091 for the “reproduction” of the song that occurred when there was a sale of the recording of the song.

If you covered the song “Let It Be”, you would owe the John/Paul $0.091 for the reproduction of the song when it was bought (not before it was bought).

Therefore, “your money” is not $0.70, your money is $0.70 – $0.091 = $0.609

They should only take 9% of $0.0609 NOT 9% of $0.70

But they take 9% of $0.70. Therefore the true % they take from you is 10.5%

If a song sells outside of the United States, the service only takes their 9% of the money owed to the label NOT 9% of the money owed to the label AND the songwriter.

Here is the math. Assume a song sells in iTunes in Germany. iTunes pays the label .68 Euros and the songwriter 0.021 Euros. They only take 9% of the .68 Euros.

Now lets go to the US.

iTunes pays the label $0.601 and the songwriter $0.091 but they take 9% of $0.70

So in the US the rate is over 10% whereas outside of the US their rate is actually the 9%

You tell me, since when does 10.5% equal 9%? Only in the old “screw the artist” industry

One last point, record labels in the US that use back-end model distributors have legal clauses in their agreements that state the distributor is only allowed to take a % of the record label share.

Jeff

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