Hi, I'm Tony van Veen, CEO of Disc Makers. Do you know that when you distribute your music digitally via a distributor like our partner CD Baby, the royalty that you get paid depends on the type of distribution service that you've signed up for? In order to explain this, let me go back to the basics of music rights.
Every song that you hear on the surface like Spotify basically consists of two main intellectual property rights. There's the right to the recording and there's the right to the composition. The right to the recording is basically the song that you hear, the recording that you hear, the version that you hear, which is usually owned traditionally by a record label or by you the artist if you're an artist who's releasing your own music. The right to the composition is basically – this is owned by the songwriter who wrote the composition or frequently by a publisher. So what happens is streaming companies pay out their royalties typically as a percent of the revenues that they collect and it's a pretty significant percent.
It can range for many streaming companies between sixty and seventy percent of their gross revenues they pay out in royalties. But they don't pay that out in one lump sum. The streaming companies actually pay separately royalties for the recording and royalties for the composition and the public performance. So let me give you an example of how these dollars work in a hypothetical.
So let's assume streaming company revenues of $100 and in our example the hypothetical streaming company pays out sixty five percent of revenues to the rights holders. So the streaming royalties paid $65. Now, they don't pay just sixty five dollars automatically. If you sign up just for standard distribution – distribution only – all you're going to get paid by CD Baby, by Distrokid, by TuneCore, or whoever your distributor is, is the recording rights – the royalties for the recording – which will run in the neighborhood of fifty five dollars. So you're leaving ten dollars on the table. So in order to do that, in order to collect that, you need, in addition to the standard distribution, you need to collect the publishing and you need to collect public performance. CD Baby has a service, and many other distributors have a similar service, called CD Baby Pro that, in addition to standard distribution, also collects the publishing, i.e. – the composition , through their partner Songtrust and then the performance royalty will get paid through BMI or ASCAP – your performance rights organization.
This 10% – that's like another, this ten cents or ten dollars, that's another eighteen percent on top of fifty five. So. we know, I hear a lot of complaints streaming royalties are tiny, and they are per stream, but if there's lots of streams the numbers really add up. And since you are in streaming, in a business of fractions of pennies, why leave any fractions of pennies on the table?
Why collect fifty five in this example when you can collect sixty five? Now these are hypothetical numbers but generally there's an extra ten to twenty percent in royalties that you can collect for publishing and public performance. So next time you go to distribute your music digitally, be very mindful of what service you sign up for so that you don't leave any money on the table.
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