File this under “Reasons we’re happy to not be signed to a major label anymore”.
Record labels are asking a panel of copyright judges to lower the rate they pay music publishers and songwriters for the use of the lyrics and melodies with which they create sound recordings.
The current rate is out of touch with reality, the RIAA argued for the labels in papers filed with the Copyright Royalty Judges. The rate hasn’t been adjusted by the government since 1981. Meanwhile, the labels, songwriters and music publishers have been able to make a deal.
The music industry has undergone such fundamental changes, the RIAA contends, that it’s time for the government to step in.
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Basically what that means is that the RIAA, the group that represents all the major labels, is asking the government to step in and officially lower the “mechanical royalty” rate that they have to pay to artists and publishers in order to have the right to reproduce and sell their music. That’s right, they want to lower it. As if it’s not low enough already.
For those of you lucky enough to not have to figure out how all this stuff works, the mechanical royalty is the money the record labels pay to the writers and publishers for a piece of music.
This is separate from the royalty artists get from record sales. (I use the word “get” loosely here) That percentage is different depending on the artist and is negotiated when the artist signs the record deal, although only the most successful artists can negotiate a decent royalty… most bands get somewhere in the 10-15% range. And even then, with all the advances and deductions the labels make (sometimes without any good reason), most bands won’t make very much from actual sales royalties (if anything at all).
So a good place for an artist to actually make some money is from publishing. Artists receive publishing royalties from a variety of sources, including TV and radio stations that use their music. Another source are these mechanical royalties I keep mentioning.
The current mechanical royalty rate in the US (as far as I know) is something like $0.08 per song. Sounds pretty low already right? It gets better…
Based on that rate (which may be slightly off, but just for the sake of argument let’s say it’s not), if we released a new album with 14 songs on it, a label should be paying the publishing company (in this case, us) $1.12 for each album sold. The royalty is actually split between the writers and publishers, but in a lot of cases (as with us) the artist is both the writer and publisher. The labels apparently didn’t think that was fair so they decided to change the rules.
In most cases, a label will “negotiate” to pay you only a % of the going rate (usually around 75%). And on top of that they’ll cap the payment at 10 songs, so even if you release an album with 14 songs on it, you’re only getting paid for 10.
Instead of getting $1.12 per album sold, we’re now getting $0.60. On one sale it’s not much of a difference, but multiply that by a couple hundred thousand or a million and it starts to really add up.
This is how the system currently works. There’s a “statutory rate” that most labels don’t even pay and now they’re asking the government to officially lower it. I guess so they can not pay that lower amount and give artists even less money.
Their reasoning is supposedly that the system is now “out of whack” because publishers have found new ways of making money that don’t involve the record labels, ringtones being one of the big ones. Honestly I just don’t see how the two things are related. The labels’ business is selling records. What artists and publishers do outside of that world shouldn’t have anything to do with how much a label pays for the music it exploits to make all of its money.
To me it just sounds like the loser trying to change the rules and deal themselves back into the game.
