Remuneration in the Age of Downloads

In response to Richard Burgess’ article Producer Compensation: Challenges and Options in the New Music Business.

Much of Richard Burgess’ excellent and well-researched observations apply to the UK music industry as well. Many of the larger producer-managers are adopting the production company model: signing the artist directly and funding at least the initial recordings before raising further finance through licensing on to either a major or, increasingly, independents. Individual tracks can also be licensed in this way—this has been standard practice in the dance world for some years. The key point to aim for is retention of the recording copyright with 2-3 year terms. The advantage of licensing to a larger label, as well as their greater marketing and promotion muscle, is that they tend to be more reliable in royalty accounting—and bigger companies are subject to auditing regulations that allow access to records.

Another model, recently applied by a well-known producer, is a staged advance. An initial advance of only £3-5,000 is accepted, with further monthly payments over as much as a year, adding up to a reasonable £60k or so. The attraction of this approach is that it lessens the burden on the artist/manager’s cashflow. This works particularly well when the artist has a strong live program and future earnings can be predicted with some certainty.

As Burgess notes, these arrangements work best when the producer owns, or has access to, professional quality studio facilities. And having experienced management capable of making the deals and tracking performance is essential. For the aspiring producer the way is less clear. Best advice is to find a partner with business skills.

Regarding the position with Phonographic Performance Ltd (PPL), the status of Performing Producer has been achieved after many years of tireless campaigning and persistent dialogue by the Music Producers’ Guild . PPL licenses public performance (or broadcast) of recordings. “If you play recorded music or music videos in public, or broadcast them (or copy them in order to do so) in the UK, you will be infringing copyright unless you are appropriately licensed by PPL” (from the PPL website). Performance income is paid to producers in the UK, but with some resistance from European collection agencies, many of whom do not recognise the performance right for producers. PPL have been very supportive in this area and try to arrange lump sum payment agreements for UK-generated recordings, avoiding the issue of how distribution is made.

The way this income is split is, perhaps not unintentionally, complicated. It goes something like this: 50/50 between labels and performers—though in reality performers only get around 30% to the labels 70% as ‘non-qualifying’ performance income [e.g. US originated tracks which currently achieve 40% of euro airplay] goes 100% to the labels—as you can imagine this is a burning issue.

Of the performer share the split is 65/35 (of the 50%) in favour of the contracted artist[s].
However, the 35% which non-featured performers (including studio producers) share is split into a maximum of 7% per performer. No performer claims more than one performance per track, even if they played ten instruments i.e. no one performer can earn more than 7% of performer share per track. In real terms that is 7% of the 50% performers share, or 3.5% of the gross performance income.

And it gets better: if there are fewer than 5 performers therefore, they get less than 35% between them and the residue goes to the featured contracted performer. If there are more than 5 non-featured performers they get an equal share of the 35%. Simple… but at least there is something to split, which is a lot more than the nothing available in the US currently .

The reason this source of revenue is becoming increasingly important to everyone in the recording industry is that, more and more, music use takes place online. Digital radio and music streaming have expanded exponentially as the internet has grown. PPL has moved with the times: there are two PPL licences available for non-interactive online radio, the PPL Small Webcaster Licence for small-scale services, and the PPL Standard Webcaster Licence (from their website again).

Certainly, the music industry is undergoing a period of profound change, and the return of entrepreneurial producers in the Sam Phillips and Joe Meek mould seems the most fruitful outcome. The history of the recording industry shows that the mainstream industry is time and again wrong-footed by new music scenes that spring out of unexpected centres of creative endeavour—from Memphis to Liverpool, Seattle to Bristol, the story is one of inventiveness and imagination. Of youth redefining the music they need to articulate their generations condition. And producers are always to be found at the heart of it!