Understanding The Flow of Music Rights

In the intricate web of the music industry, revenue flows through various channels, often slow and unreliable, impacting artists, labels, performers, and rights holders alike. Unraveling these revenue streams' complexities and distribution mechanisms sheds light on the inner workings of the modern music business. Each entity plays a crucial role, yet the interactions and financial flows between them are often convoluted and opaque.

Imagine a bustling marketplace where every note, lyric, and melody exchanged has a value. In this marketplace, artists create, record labels distribute, publishers manage, and a myriad of other players facilitate the smooth operation of this ecosystem. From the creation of a song to its consumption by listeners, music rights travel through various channels, including DSPs (Digital Service Providers), PROs (Performance Rights Organizations), social media platforms, and more. Each channel requires meticulous management to ensure that rights holders are compensated accurately and promptly.

Breaking Down Music Rights

Master Rights

Master rights are owned by the entity that finances the recording of a song, usually the record label or the artist if they are self-financed. These rights pertain to the actual sound recording and its reproduction, distribution, and public performance.

• Distribution Rights: These rights pertain to the reproduction and distribution of the master recording. Record labels or artists, if self-financed, manage these rights and are responsible for the physical and digital distribution of the recording.
• Neighboring Rights: These rights cover the public performance of the master recording. Neighboring rights organizations collect royalties on behalf of the rights holders when the recording is played in public venues or broadcast.
• Synchronization/Licensing Rights: These rights allow the master recording to be used in synchronization with visual media, such as films, TV shows, commercials, and video games.

Publishing Rights

Publishing rights are divided into three main categories: mechanical rights, performance rights, and synchronization/licensing rights. These rights are typically owned by songwriters and composers and are often managed by music publishers.

• Mechanical Rights: These rights pertain to the reproduction of a song's composition. This includes digital downloads, physical sales (like CDs and vinyl), and streaming. Music publishers often manage these rights and collect royalties whenever the song is sold, downloaded, or streamed. Mechanical royalties are usually collected and distributed by organizations such as the Harry Fox Agency in the US or MCPS in the UK.
• Performance Rights: These rights cover the public performance of a song's composition. This includes live performances, radio broadcasts, and streaming on platforms such as Spotify or YouTube. Performance Rights Organizations (PROs) like ASCAP, BMI, and SESAC in the US, or PRS for Music in the UK, collect and distribute performance royalties on behalf of songwriters and publishers whenever the song is played publicly.
• Synchronization/Licensing Rights: These rights allow a song's composition to be used in conjunction with visual media. This includes films, TV shows, advertisements, video games, and other visual content. Music publishers often negotiate synchronization licenses to ensure that songwriters are compensated for the use of their music in these contexts.

Key Players in the Recorded Music Industry

• Performers: Responsible for recording music and owning master rights, performers can partner with record labels to manage their rights and collect royalties.
• Record Labels: Serving as artists' primary collaborators, labels offer financial support, handle A&R efforts, manage manufacturing and distribution, oversee marketing and PR campaigns, and facilitate sync opportunities.
• Distributors: Acting as intermediaries between labels and retail outlets, distributors ensure music reaches digital and physical platforms, consolidating revenue for labels in exchange for negotiated fees.
• Neighboring Rights Societies (CMOs): Tasked with collecting royalties for public performances of sound recordings, these societies distribute earnings to both labels and performers.
• Producers: Play a crucial role in the recording process, often working independently or partnering with artists and labels. In the independent music category, producers are significant stakeholders, contributing to the creative process and sometimes retaining a share of the master rights.
• Merlin: Merlin is an independent digital rights agency representing independent music companies and ensuring they get fair deals on digital platforms. Golda Bitterli, our VP of Sales, serves as a board member of Merlin.

Key Players in the Publishing Industry

• Songwriters: Songwriters contribute lyrics and music, entering agreements with publishers to represent their publishing rights and collect royalties.
• Publishers: As representatives of songwriters, publishers handle copyright tasks, including registration with collection societies, talent discovery, and synchronization opportunities.
• PROs: These organizations assist publishers in royalty collection, overseeing performance and mechanical rights licensing in their respective territories.
• Music Supervisors: Music supervisors work primarily in media, selecting and licensing music for films, TV shows, commercials, and video games. They play a crucial role in the synchronization and placement of music.
• Sync Agencies: Sync agencies specialize in securing synchronization placements for songs in various media, often working closely with music supervisors and content creators.

Sources of Revenue in the Recording Industry

• Streaming and Downloads: DSPs like Spotify and Apple Music pay royalties to labels, publishers, songwriters, and artists, with revenue distribution influenced by various factors, including streaming models and negotiation dynamics.
• Physical Products: While physical sales have waned, vinyl's resurgence underscores continued revenue potential. Distribution challenges and production costs shape revenue streams from physical formats.
• Sync: Music synchronization in film, TV, and advertisements offers more revenue opportunities, negotiated directly with rights holders and often resulting in performance royalty surges.
• Performance: Neighboring rights organizations license public performances of sound recordings, ensuring royalties reach rights holders globally.
• Reporting Mechanisms: Record labels distribute royalties to artists and publishers based on contractual agreements, facilitating revenue flow between industry segments.

Sources of Revenue in the Publishing Industry

• Mechanical Royalties: Generated from the reproduction of a song’s composition, including digital downloads, physical sales, and streaming. These royalties are collected by organizations like the Harry Fox Agency in the US, SACEM in France, UBEM in Brazil or MCPS in the UK.
• Performance Royalties: Earned from the public performance of a song’s composition, such as live performances, radio broadcasts, and streaming. PROs like ASCAP, BMI, and SESAC in the US; UBC, Abramus, Socinpro, Assimor in Brazil or PRS for Music in the UK, collect and distribute these royalties.
• Synchronization Royalties: Arising from the use of a song’s composition in visual media (films, TV shows, ads, video games). Music publishers negotiate synchronization licenses to ensure compensation for songwriters.
• Print Music Royalties: Revenues from the sale of sheet music or songbooks, managed by publishers and collected whenever the music is printed and sold.

Navigating Revenue Models DSPs

DSPs and social media employ different revenue allocation models, from pro-rata distribution, advances to user-centric models. Understanding these models is essential for rights holders navigating revenue streams effectively. Streaming platform revenues are divided between rights holders (~67% of the revenue) and the platforms themselves (~33%). The specific distribution of streaming revenues hinges on agreements between the platforms and rights holders, along with specific payment models. Currently, most major streaming platforms use the pro-rata model, which allocates payments based on a recording’s proportionate share of the total monthly streams.

• Pro-Rata Model: The most common payout model, used across all major streaming platforms (Spotify, Apple Music, Amazon Music, YouTube Music), calculates royalty payments based on the individual stream-share of a recording: the total number of streams of a recording as a proportion of the total number of streams on the platform in a given month. For example, if a recording makes up 5% of the total streams on a platform, the rights holders for that recording will receive 5% of the total royalty payments made by the platform that month. Spotify recently announced changes to its royalty payout model, introducing a rule that tracks must reach at least 1,000 streams in the previous 12 months to generate recorded royalties.
• User-Centric Model: Prioritizing individual user usage, this model has been adopted by platforms like SoundCloud and recently Deezer, where subscription fees are allocated to specific recordings based on user preferences, potentially impacting royalty distributions across genres.

Social Media Platforms (UGC content)

• YouTube: YouTube employs a multifaceted approach to music licensing, combining automatic content management through Content ID, direct revenue sharing from ad revenues, lump sum advances to secure rights to large catalogs, and subscription-based revenue sharing with YouTube Music.
• TikTok: TikTok primarily uses "buy-out" agreements with record labels. These deals involve paying a lump sum advance to the labels for a set period, typically two years, to use their music across the platform.
• Meta: Meta also uses "buy-out" agreements with record labels but has introduced a new music revenue-sharing model for videos on Facebook. This model allows video creators who use licensed music in their videos to earn 20% of the in-stream advertising revenue. The remaining 80% is split between the music rights holders and Meta.

Enter Revelator: Simplifying the Complex

At Revelator, we believe that managing music rights shouldn't be a Herculean task. Our mission is to bring clarity and efficiency to the process, empowering stakeholders to focus on what they do best—creating and sharing music.

• Comprehensive Rights Management: Revelator offers a centralized hub for managing music rights. Whether you're an artist, label, or distributor, our platform provides the tools you need to track, manage, and monetize your music rights seamlessly. We integrate advanced technologies to ensure accurate metadata management, royalty calculations, and rights tracking.
• Transparency and Control: Transparency is at the core of what we do. We provide real-time insights into the status of your tracks, including whether they've been recognized and matched across various platforms. This transparency ensures that your content is properly identified, helping to protect your rights and maximize revenue streams. Our intuitive dashboards and reporting tools give you complete control over your music business.
• Seamless Integrations: Revelator integrates with a wide array of industry-leading tools and platforms. From DSPs to social media platforms, our platform and marketplace offer direct access to cutting-edge technologies that enhance your creative and revenue opportunities. These integrations aren't just tools—they're opportunities to take your music business to new heights.
• Efficient Royalty Distribution: We understand that timely and accurate royalty payments are critical. Our platform utilizes blockchain technology to streamline royalty distributions, making it easier to split and track payments directly to digital wallets controlled by rights holders. This innovation reduces administrative burdens and ensures that everyone in the music value chain is compensated fairly and efficiently.

By harnessing the power of technology, we're not just solving problems—we're creating a new standard for rights management. Our commitment to innovation, transparency, and efficiency empowers music creators and businesses to thrive in an increasingly complex landscape.

Join the Journey

At Revelator, we're passionate about music and dedicated to making the industry more equitable and efficient. We're just getting started, and the best is yet to come. Join us on this exciting journey as we continue to improve the flow of music rights and help you grow your music business.

Stay tuned, because with Revelator, the future of music rights management is bright. 🚀