A music artist is an individual that creates and releases music through a record label or independently. Working as a music artist requires an immense amount mental and physical conditioning as music artist live very erratic, nomadic, taxing lifestyles. Music artists spend long nights in the studio recording music, travel constantly performing their music and also have to deal with the uncertainty of their income. Although it can be a lonely occupation, it is one of the most oversaturated occupations today.
Music artists are paid in a very different manner than most conventional occupations. Instead of receiving a wage from a single employer like most occupations, music artists have what are called income streams. These income streams are the different avenues through which the music artists receive compensation for their work.
Music Artists make most of their money from what are referred to as mechanical royalties. Mechanical royalties are the payment the music artist will receive per song per album sold. The current mechanical royalty rate is 9.1 cents per song per album. For example if a music artist releases a ten-song album that sells five hundred thousand copies, the mechanical royalties would equal:
500,000 (albums sold) x 9.1 cents (per song) = $45,000 $45,000 (per song rate) x 10 (ten-song album) = $450,000
At the end of each quarter, meaning at the end of every March, June, September and December, the artists will receive a check from their record label for their calculated mechanical royalties earned. Mechanical royalties used to be the way music artists made most their money but as record sales have decreased due to digital downloading this is no longer the case.
Performance royalties are monies a music artist is paid every time his or her song is performed. “Performed” in this sense is any time the song is transmitted digitally, performed live, broadcast and/or played in a public place. These monies are collected by Performing Rights Organizations (PROs). What these organizations do is retrieve money on behalf of the artist every time his or her songs are performed to ensure the artist is being properly compensated for their work. In the United States the three major PROs, ASCAP, BMI and SESAC. In order to be properly compensated music artists must choose which PRO they will have collect their performance royalties. Upon the release of their music to the public and use in different types of media, their PRO will start collecting their performance royalties. At the end of each quarter, meaning at the end of every March, June, September and December, the artists will receive a check for the performance royalties collected from the prior quarter.
Synchronization rights are the monies a music artist receives when their music is synchronized to a video, be it a music video, a movie, television show or commercial. A music artist can choose whether or not to grant a license to anyone interested in synchronize his or her song to a visual. This is a very common thing, especially if a music artist releases a very popular song. Companies will want to use that song in commercials to better market their products. Movie studios such as Universal acquire thousands of synchronization licenses every year for music they put in their movies. Because of the immense use of music in marketing, granting synchronization licenses has become the way in which music artists make most of their money.
Music artists also make money by licensing their songs to stores, restaurants and nightclubs that allow these places of business to play their music. Music artists usually grant these places of business “blanket licenses” that allow them to play a collection of songs instead of licensing each song individually. Stores such as Walmart, Best Buy, GAP are all holders of blanket licenses that allow them to play music.
Music artists are businesses in the sense of their ability to generate revenue from selling a product. In order to continue to generate that revenue they have to continue making product to sell. In order to focus on doing so, most music artists hire a team to handle everything they either do not have the time or knowledge to handle. This teams job, as a whole, is to ensure the music artist’s business dealings, legal matters and overall comfort are taken care of so they can make music and thus money.
A manager is an individual or company that guides the professional career of a music artist in the entertainment industry. The manager overlooks the day-to-day business affairs of the artist. This is usually the first person on the team of any music artist. In the early stages of a music artists’ career, the manager usually assumes the role of business manager, as well as booking agent. As the music artist’s career grows it will become necessary to hire individuals who’s sole duties are the responsibility of those position but until that becomes the case the manager usually handles them (10). The manager receives a compensation of 10-20% of the music artists’ gross income. The exact percentage, and sometimes the monies the percentage will be applied, is negotiated between the music artist and the manager. This commonly happens early in the music artist’s career before any major income is being generated.
An entertainment lawyer handles all legal matters for the music artist. As contracts and agreements are a commonality in the music industry, it is absolutely imperative that a music artist has an entertainment lawyer on their team. An entertainment lawyer’s duties include handling talent agreements, producer agreements, synchronization licenses, music industry negotiations and general intellectual property issues, especially relating to copyright. Most music industry contracts are lengthy, densely worded and are usually written to be negotiated. Thus every music artist should have an entertainment lawyer that can comprehend contract language and can negotiate terms favorable to the artist.
Because of the very strange means and irregular manner, compared to a standard occupation, a music artist receives his or her income an accountant is almost always necessary to have on their team. All income a music artist receives is untaxed. Mechanical royalties, performance royalties and money acquired from granting synchronization and general licenses all comes to the artist untaxed. Also, music artists receive several checks, from several different places that can easily become difficult to keep track of. Not only does this leave the music artist open to being unpaid, underpaid and/or have money stolen from them, this creates a nightmare come tax season. This could lead to immense problems with the Internal Revenue Services and even the demise of their career if ignored. For this reason an accountant is absolutely necessary. The high time demand of being a music artist makes it much too difficult for the artist to also keep track of their own accounting. The accountants job is to make sure other team members, as well as the artist themselves are paid on time and the correct amount. In most cases the accountant will also handle the artist’s taxes and make sure the artist’s filing done and is in accordance with the law.
^ a b c d e f Baskerville, David and Tim Baskerville. Music Business Handbook and Career Guide. Thousand Oaks: Sage Publications, 2009. Print.
^ Baskerville, David and Tim Baskerville. Music Business Handbook and Career Guide. Thousand Oaks: Sage Publications, 2009. Print
^ a b U.S. Copyright Office. U.S. Copyright Office. U.S. Government, 1 January 2006. Web. 10 November 2010
^ a b c d e Brabec, Jeffry and Todd Brabec. Music, Money and Success: The Insider’s Guide to Making Money in the Music Industry. New York: Schirmer Books, 2006. Print
^ a b c d e f g h Passman, Donald. All You Need To Know About the Music Business. New York: Free Press, 7th edition, 2009. Print.
^ Burr, Sheri. Entertainment Law in a Nutshell. Eagan: West, 2007. Print.
^ Moore, Schurley. Taxation of the Entertainment Industry. Washington: CCH. Inc., 2008. Print
See Wikipedia for more information