Income Sources for Songwriters
By Frank Imani Jamal

The average person is aware that songwriters receive money for their work once it becomes part of a CD and sells, but most people do not realize that these sales comprise only a fraction of the money a songwriter receives.

Songwriters receive, as just mentioned, income in the form of “royalties” when their song is sold as part of an artist’s CD. These royalties are sometimes referred to as “mechanical royalties”, which derives its name from the mechanical license agreement which is required under current copyright law to allow a writer’s creation to appear on someone else’s record. Current law dictates that 8.75 cents be paid to the copyright holder for every copy of the creator’s song contained on the CD. Most people are aware of this particular payment because of all the media attention given to “gold” and “platinum”records which sell millions of copies and make stars of the artists performing them.

Songwriters also receive money from the airing and broadcast of their material through radio stations around the globe. These payments are called “performance royalties” and are paid to writers for each and every time their song is broadcast. Performing rights organizations like ASCAP (www.ascap.com), BMI (www.bmi.com) and SESAC (www.sesac.com) were established to help members accurately monitor the usage of their material. These companies charge radio broadcasters a yearly fee in the form of a “license” which allows these stations to broadcast the material. Furthermore, ASCAP, BMI, and SESAC monitor how accurately these stations use their member’s material through data provided by the stations including log sheets and program listings. To further ensure the accuracy of such data, the performing rights organizations conduct random samplings of the stations and cross- check data with other organizations who track broadcasters for various reasons, such as Nielsen and Arbitron which gather information that indicates how many people are listening to a particular station. 

Concert arenas, nightclubs, shopping malls, and skating rinks are among the many other places that contribute to a songwriter’s bank account due to their having to obtain a license from ASCAP, BMI, and SESAC to play music publicly. These venues are charged a fee based on many factors, including how often live or pre-recorded music is performed, and the seating capacity of the facility (e.g nightclub, concert hall, stadium, etc.).

Another source of income comes from songwriters licensing their music for use in movies, CD-ROMS, TV shows, video games, and web sites. This music is used by producers and developers of these media through what is called a “synchronization “ license. This license, unlike the compulsory mechanical license, is one whose price is open for negotiation, meaning the songwriter--usually through his or her publishing company--charges whatever price they can get. Songwriters have found a gold rush of sorts in recent days thanks to commercial advertisers using their compositions in regional and national ads. Movie soundtracks which contain nostalgia-laden tunes run a close second in terms of money-making abilities under synchronization rights.

Thanks to the recent fad of karaoke bars, songwriters have found another income bearing medium. Karaoke bars allow the average person to sing along with hits recorded by their favorite stars. The CDs these songs are contained on as well as the clubs that they are played through all must be legally sanctioned by the respective owners of the material before they can use the material--a process that involves a licensing fee.

Print music sales comprise still another avenue for songwriters to earn money. Print music is usually done by way of a publishing house sub-contracting with a sheet music publisher (Hal Leonard Publishing is one of the largest in the US) to produce printed versions of their songs. These printed versions find their way into the homes of consumers who want to practice material of their favorite artists, or with schools, colleges, and universities who buy the notated arrangements for instructional purposes of their marching and jazz bands; choral groups; and stage plays. Sheet music of current hit songs is also included in the packet of material amateur musicians receive when they purchase their first instrument, thereby creating even more money for the songwriter.

Composers of music also have to thank the ever-present cell-phone as contributing to their healthy bottom line. Consumers purchase ring tones--small snippets of a pre-recorded songs, usually by a hit artist like Beyonce or Jay-Z--so that when their phone rings, it will play that snippet instead of the customary ring. This practice has become so popular--and so profitable--that BILLBOARD magazine announced that they will soon begin listing a chart of the top-selling ringtones.

Finally, another source of revenue for songwriters includes foreign sales of their songs and sheet music. Whenever a song becomes a hit in the US, it is a good bet that it can or will become a hit in some other market such as in the Caribbean, Africa, or Europe. The many nations that comprise these regions account for a huge piece of the songwriting revenue stream since every way that the song was utilized or exploited domestically can now be replicated there: print sales; synchronization rights; public performance rights; and mechanical licenses. Due to all these money-producing opportunities, songwriting has been called--and rightfully so--the most profitable end of the entertainment industry. Now go out and get your profits.


Can A Songwriter Really Make Money?

The music industry news article below provides an insight to the amount of money being made by successful songwriters. The news article states Bug Music, Inc an independent music publisher has been issued a line of credit in the amount of two hundred million dollars and can raise the credit line to two hundred fifty million dollars, if needed.

In today's credit market, large banks do not issue loans in those amounts without doing in depth research. Clearly, they believe there are vast sums of money to be made in the music publishing business. Music publishers normally receive 50% of royalties earned by the songs in their catalog. The other 50% goes to the writers of the songs earning those royalties.

Read the news article and answer the question. "Can people really make money writing songs?" After you've answered that question, ask yourself if you have enough talent to get a slice of that huge pie. But, talent alone isn't enough. The world is full of highly talented losers. Talent is only a key which unlocks the door. Persistence and determination are required to push it open. Success is not easily acquired, in anything. The larger the reward the more persistence and determination will be required to attain it.

Successful songwriters are earning tens of millions of dollars. Please notice, I did not say talented songwriters. I choose my words carefully, just as you do when writing a song. Most talented people give up and quit. They make excuses. They accept defeat. Successful people have all three. They have talent, persistence, and determination.

Bug Music Secures New $200 Million Credit Facility Led By JP Morgan

Bug Music, Inc., one of the world's largest independent music publishers, has secured a new $200,000,000 credit facility, which can be increased to $250,000,000. The facility, priced at the London interbank offered rate (Libor) plus 2.50%, was led by investment bank JP Morgan, it was announced today by Bug Music CEO John Rudolph.

"Our sound business fundamentals and practices continue to be rewarded as reflected by the facility size and attractive rate, in spite of a very difficult credit market. The significant upsizing of our credit facility will enable Bug Music to continue to have the financial resources to pursue acquisition opportunities and will enable us to continue to grow the company effectively," stated Rudolph.

Rudolph added, "Jason Somerville and the JP Morgan's team in the Entertainment Industries Group are a great partner and have again demonstrated their ability to deliver. In the past two years, our competitors were often overly aggressive in their M&A activities whereas we were viewed as conservative. Now this discipline is paying off and is evidenced by JP Morgan and eight other sponsor banks joining the facility. Bug Music is a rapidly growing, highly profitable publisher with great prospects for continued growth."

Thomas McGrath, Bug Music's Chairman, noted, "Bug Music continues to show "best in class" management and profitable growth through its M&A activity and its creative collaborations with its valued writers. With a music library of more than 250,000 copyrights, and offices now in seven cities across the US and Europe, Bug Music has emerged as the largest, most important independent music publisher dedicated to building a business for the long-term. We are excited to be a part of this great growth story in music publishing and look forward to continuing our long-term partnership."

Bug Music's recent activity has begun to redefine the nature of the traditional publishing company, by creating unique and innovative deals that allow for more creative collaboration beyond administration. The company's most recent deals have included the signing of Kara DioGuardi, American Idol's newest judge and one of the industry's hottest and most sought-after songwriter and producer; the acquisition of DioGuardi's vast catalog of hits by such artists as Christina Aguilera, Jonas Brothers, and Celine Dion; an equity stake and partnership agreement with Arthouse Entertainment; the acquisition of music production leader Selectracks; and the acquisition of Iggy Pop's catalog.

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