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The Music Biz

The Music Biz

Tuesday, February 8, 2011 • BSR Admin

One of the interesting unintended consequences of the trend away from albums and back towards singles is that there is now less mechanical income being generated for writers.

Originally posted at: TuneCore | Written by: George Howard
One of the interesting unintended consequences of the trend away from albums and back towards singles is that there is now less mechanical income being generated for writers. Remember, a label must pay the copyright holder of the song (i.e. the writer and/or publisher) for the right to "mechanically" reproduce the writer's song on the label's release (be it on CD, vinyl, download, etc.).
The current rate, as set by statute, is nine point one cents ($.091) for songs under five minutes in length. Labels often insert a clause into recording contracts that reduces this amount when the artist signed to the label is also the writer; this so-called controlled composition clause reduces the mechanical royalty that is paid by the label to the artist by as much as 25%.
Whether the writer receives the full-rate or a reduced rate, this mechanical income is very material. Typically, mechanical payments must be paid to the artist from the label from this first record sold, and these payments should not be cross-collateralized against the artist royalty. What this means is that, as is the case for many artists signed to labels, even if an artist's account is un-recouped (meaning they have not made back in sales what the label has paid to sign, record, and (often) promote their record), the label still must pay the writer of the song(s) a mechanical royalty. This mechanical payment is thus often the only money a writer sees from the label.
During the album era, if you wrote all of the songs that were released on the album - and for easy math assume the typical album had ten songs on it, and that you were getting a reduced mechanical payment of seven point five cents per song - this meant that for every record sold, you, the songwriter, were owed seventy-five cents (the reduced mechanical of $.075 for each song multiplied by the ten songs on the album). If you were to sell a hundred thousand records, you were owed $75,000. This is not chump change, and there is a compelling argument to be made that the true benefit to signing with a label was that they were the promotional engine that drove mechanical royalties.
The advantage of this for the songwriter during the album era was, of course, that there may have only been one or two songs that captured the public's imagination - the hits on radio, for example - but the writer still got paid for all of the songs on the album that she wrote, even if the majority of people bought the album just for those one or two songs.
Even during the 7"-single era (i.e. small vinyl), savvy artists and managers would make sure to put a song they had written on the b-side so that when the record was purchased because of the a-side, they made some (or double) the mechanical income. This strategy of putting an original on the b-side of a single with the a-side as a cover is in some respects the reason why The Rolling Stones, for example, began writing their own compositions.
Today, we've largely left behind not only the full-length album, but also the 7"-inch single. Customers download specific individual tracks. In so doing, this results in non-single tracks on the album not being downloaded, and thus not generating any mechanical royalties for the writer.
Certainly, there are artists who still sell "albums"; i.e. their customers either still buy the full-length CD (or vinyl) and/or download an entire album, but clearly the trend is towards à la carte downloads (or streams) of singles.
This impacts, of course, not only those performers who are signed to the label, and also write their own material, but also writers whose work is covered by a performer. Unless this writer's song that is covered is the single, the chances of generating the type of mechanical income that was derived from sales during the album era is pretty much nil.
It will be interesting to see how this economic reality impacts the creative output of artists. If there is less economic incentive to write material that is unlikely to be a "single," will artists write less or write differently? It's frightening to think that in today's single driven market (one without even b-sides) that the Stones might have contented themselves with being a cover band - never writing - and releasing records only so they could tour.
What are your thoughts? Does the "album" concept still matter, given the lack of economic incentives? Leave your thoughts in the comments.
George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: twitter.com/gah650
Tuesday, January 11, 2011 • BeatsBySwiss.com

Distributors are responsible for selling, positioning and marketing a record label's or artist's music with any outlet where music fans buy music including traditional retailers, online download services, online subscription based services, ringtone providers and mobile downloads.

Distributors are responsible for selling, positioning and marketing a record label's or artist's music with any outlet where music fans buy music including traditional retailers, online download services, online subscription based services, ringtone providers and mobile downloads. Most major music outlets, traditional and online, won't deal directly with record labels or artists and order exclusively through distributors. Distributors range in size from those owned by the big 4 record labels to independents to those that only distribute to online outlets. They typically charge the labels they distribute a percentage of price the retailers pay, 20% for example.
Inventory and billing management are keys to a distributor's success since retailers can return unsold inventory they purchase at any time. It is not uncommon for a retailer to return an order to the distributor prior to their invoice coming due then turnaround and place the same order they just returned. Since the distributor must accept any and all returns from retailers they typically require exclusive distribution agreements with the record labels they distribute. Retailers also typically want to deal with only one distributor on a CD release so they know who to order from and where send returns to as needed. Distributors must manage their inventory levels to make sure they can fulfill orders from retailers but not have too much inventory in stock that's not selling. They must coordinate shipments to and from both record labels and retailers. Many times distributors will also coordinate the manufacturing of the CD's for their labels since they can often times get better pricing due to the volume of CD's they can produce.

Retail Sales & Marketing

Distributors have sales people who call buyers at the retailers and get them to order inventory of their labels CD's and stock them in their stores. Retailers will often tie the amount of inventory they order to the amount of money the distributor is willing to pay in marketing programs and advertising with them. These marketing programs include special product placement within the retailer's stores, listening posts, giveaways and promotions, and often include print and online advertising. Distributors have a staff to coordinate the retail marketing programs with their labels, agree to marketing budgets, get ad artwork and send retailers the artist one sheet summaries of the release and promotional CD's to the buyers at the retailers. The costs of these marketing programs are charged back to the record labels and usually become a recoupable expense against the artist's royalties from sales .

Digital Distribution

Distributors must keep up with the constantly growing options for digital music and make sure their content is appropriately licensed and distributed by the wide array of digital music outlets available to music fans. Distributors who sell music through digital retailers and mobile providers must build and maintain an accurate database of each track and its related metadata (artist, album, track name, art, publisher and related information.) and create an ISRC code for each track in their catalog. The tracks and metadata must then be formatted to meet the format standards for each digital retailer and mobile provider before transmitting a file to them since there is not an industry standard that has been developed. Many distributors have developed web-based tools that allow each record label they distribute to upload their catalog and new releases directly to the distributor's database.
Today there are a growing number of companies who have bypassed the traditional retailers and focus all their efforts on digital distribution like the IODA Alliance.
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