How Musicians Make Money in the Modern Music Industry

How Musicians Make Money in the Modern Music Industry

The music industry has changed beyond all recognition in recent years. Gone are the days when music was dominated by a handful of big labels – today, even an amateur musician has the ability to reach a global audience with a modest amount of effort. Few musicians are capable of doing all of the work themselves, however; you may have a producer who records your songs for you, or perhaps you are a producer yourself, or a vocalist. All these roles are essential to the modern music industry, so how does everyone get paid? Let’s find out!

Advances

Getting an advance used to be seen as a mark of success; if you were good enough to have a major label provide you with an advance, then they obviously believed that your music was marketable and had the potential to make them some money. This type of payment structure still exists today but is far less common than it once was as songwriters are likely to seek a music licensing agreement from a streaming site to establish themselves in the industry before they approach a major label to try and get signed. More on that later.

If you are paid an advance, you are expected to produce an agreed number of songs within a given timeframe. The advance may also come with other stipulations – any advance that is paid to a songwriter, producer, or musician, is accompanied by a contract which sets out all of the requirements that they must meet. You are contractually obliged to meet the requirements set out in that contract, and you really do not want to find out what happens if you fail to keep up your end of the bargain!

If you do keep to all of the terms of the advance payment, keep in mind that the amount you received will be deducted from any monies due as a result of your work in the future. Additionally, if you are a smaller artist and the label believes that they are taking a significant risk by providing you with an advance, they may take a large percentage of future earnings on top of the value of your advance. This could be just a few percent for less risky artists and producers, whilst those at the other end of the scale may find themselves only receiving a few percent of future earnings. Be sure to negotiate your end of the deal before accepting any advance payments.

Royalties

Everybody has heard about royalties, and they assume that artists are being paid these royalties every time their songs are included on compilation albums or played on the radio. In reality, the royalties received for one individual song can be very low, and the amount a musician receives will often depend on how good their publisher is at making sure the song is registered with all of the performing rights agencies in all of the countries where the song is released.

Normally, the composer and the publisher will split royalties 50/50, although percentages can often be negotiated. Sometimes there are more parties involved, too – if you have a song where a vocalist is credited as “featuring …” their name, they will also be entitled to a split of any publishing royalties. If you are a producer and create the beat for a song, whilst another person wrote the lyrics, you must establish a fair agreement on who gets what when it comes to the royalties. 

Licensing Agreements

If a third party wishes to use your song as part of their production, you have effectively hit the jackpot! Say your song is going to be used on YouTube, a DVD, a commercial, or a TV show, a licensing agreement will be drawn up that usually involves a large upfront payment as well as ongoing royalties which could be linked to the number of listens on sites such as YouTube, Spotify, and Tidal, or perhaps the number of DVD’s produced, the number of times a TV show is going to be shown, or the number of commercials that the third party has paid for.

This type of agreement is sometimes called a synchronization license and is required no matter how small the portion of your song that is being used may be. Licensing agreements are great for musicians as they will often result in a regular payment; the licensing agreement pays specify that you will receive money each quarter for example, and you could easily be surprised by the size of your next payment – what if that YouTube video featuring your song went viral and had millions of views? Or maybe the third party paid for another round of commercials; whatever happens, having licensing agreements in place for as many of your songs as possible should result in a regular income.