The Essentials Of Revenue And Royalties For Artists
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Sources Of Income For Musicians
There are several options for effective monetization of your work as an artist. Get to know these in more depth, and action the ones that are likely to be the most manageable and effective for you:
Items inredrepresent revenue sources that are linked to distribution and digital activities
- Advertising revenue: advertising space can be purchased on your content and social pages to promote services or products that are well matched to your audience.
- Paid streaming revenue: listeners can opt to pay a monthly subscription fee on most platforms to receive a premium service with no adverts, improved audio quality, offline downloads and full access to music catalog.
- Direct revenue & paid features: sales generated in online stores, where buyers can pay to download music files directly or paid features that the user can activate.
- Short Form Video User-generated content (UGC) revenue: users can express themselves through music, and royalties will be generated for that usage.
- Physical sales: including the purchases of CDs, vinyl and merchandise. Sales of physical goods are tied to a fixed contract, even if the buyer can purchase them within a digital marketplace.
- Mechanical royalties: mechanical royalties are payments to the writer of a song whenever that song is reproduced in some form (includes streaming, downloads, radio, TV, or sync and brand content).
- Performance royalties: these revenues are generated at the occasion of the public broadcast of music (for example when you perform a concert in a festival or concert hall).
- Non-interactive streaming royalties: collection societies & neighboring rights.
Check your contract with Believe to gain a full understanding of the of type of revenue that you can expect to generate.
A central focus should be on developing the top 4 revenue streams from the distribution and digital models. Let’s explore these further:
1. Advertising Revenue
Types of ad formats
Brands and other organisations will pay for space on content that is likely to gain interest from their own target audience. These can come in the form of: • Pre-roll adverts (displayed before the content) • Mid-roll adverts (displayed during your content) • Post-roll adverts (displayed at the end of your content) • Display adverts (a banner, like a billboard, on your social pages or other public spaces)
One drawback for advertisers is that all of these options have the possibility of being blocked by Ad Block plugins.
Business Model
Principle of revenue share of gross revenue generated by advertising (based on the number of ad impressions)
Each time an advert is placed on content, the generated revenue will be shared between the platform and the content owner.
Platforms
- Youtube
- Youtube Music
- Spotify
- Deezer
- Apple Music
- Amazon Music
- Using a service’s free streaming option, with adverts included, is called “Freemium”.
2. Streaming Revenue
Definition
Users pay a monthly subscription fee to get an access on a music catalog, with more features compared to free-to-user ad-supported services (such as no advertising, improved audio quality or offline caching).
Business Model
Principle of consolidated market share
All paid subscriptions are collected by platforms. Then, after deduction of sales tax and other costs, this revenue is split according to each artist market share.
Paid subscription audio streaming or video streaming are based on the same model.
Simulation
Imagine a streaming platform where the subscription fee is $10 per subscriber. The platform has 1 million subscribers. On a monthly basis this platform collects $10 x 1 million users = $10 million total. The sales tax, costs and margin represents 50% of this, leaving $5 million to be divided up between the content owners. As an artist, if your catalog represent 0.01% of all plays (aka your market share), you will get 0.01% of $5 million = $50,000 per month.
*Note that the number of plays/streams will vary each month depending on usage on the platform.
Platforms
Youtube Music
Spotify
Deezer
Apple Music
Amazon Music
“YouTube Premium” is their paid-for subscription service, allowing viewers to enjoy videos without adverts.
3. Direct Revenue & Paid Features
Definition
Users pay to download an audio or video file directly, according to the available quality, this may include Digital Rights Management (DRM). This kind of consumption formed as a natural progression from owning physical records to owning digital files, as music became more present online.
According to each platform, users can also activate a specific feature that is unlocked after a paiement.
Business Model
Principe of fixed prices
All transactions of digital video and audio files are managed directly by the platform. The platform then pays the corresponding supplier of the material based on a fixed price per transaction.
Platforms
Spotify
Apple Music
Amazon Music
On YouTube, Super Chat and Super Stickers are considered as paid features.
Google closed its music store in 2020, and these types of purchases are not available on Deezer.
4. Short Form Video UGC Revenue
Definition
Short Form Video User Generated Content (UGC) are content uploaded by users (directly or via an audio library facilitating the inclusion of music), or medias, including your audio content.
Business Model
Principle of fees
Despite their close proximity with more traditional ad-supported services based on a revenue share model, most of these new types of platforms are temporarily based on a fixed fee commercial structure.
Music rights owners are typically paid each time a creator upload a new content including a music asset. It encourages creativity, challenges and virality.
Platforms
TikTok
YouTube Shorts is not monetized by ads. There is a global compensation provided by YouTube and split according to market share (by views)