The Changing Face of the Music Industry

Probably the best way to understand the music industry and how it works, how money flows, is to look at its structure. This is the structure from the point of view of a Music Publishing Company, who will collect and market the artist and ultimately be responsible for paying them as well.

You'll see a whole bunch of things you might not have been aware of. There are organisations like PRS, who collect money on behalf of the artist.

Imagine your a band.

How you might get paid for your hit single, works like this:

A composer (the musician) assigns their copyrights (the music) to a PUBLISHER in a so called 'publishing deal'.

Publishers LICENSE the use of these copyrights to RECORD COMPANIES who record them.

Every CD manufactured and sold generates a 'mechanical publishing royalty' which is paid by the record company to the MCPS (in the UK) who then pass it on to the PUBLISHER who takes a cut and passes the rest to the COMPOSER

Typically a publisher will take between 35% and 15% of the royalty depending on their deal with the composer. A publisher will also try to license their copyrights to film and commercial makers in order to generate as much income as possible. A composer will benefit in three ways from such a deal.

1. Through a structure of foreign offices and sub-publishing deals the publisher will be able to collect royalties on behalf of the composer world wide.
2. Should a copyright infringement take place the publisher will have the financial might to sue the pirate on behalf of the composer.
3. The publisher will promote and seek additional exploitation of the copyrights thereby generating additional income for the composer.

Source: http://www.planetoftunes.com/industry/industry_structure.htm

PRS is the Performing Rights Society and they collect money on behalf of music used in broadcasting or film.

Here is all of the above in a diagram!

There is an even lovelier diagram at this link:

http://www.sloaneandco.com/images/universe_of_music.jpg

You'll notice straightaway there are a lot of people involved in the selling and promoting of music. The reason for that is there is still a lot of money to be made. Although things are changing rapidly.

Back to the money. Are artists getting a winning deal? Not likely. Not unless they are very powerful and have a massive back cataglogue. Industry is there to make money.


HOW THE INDUSTRY IS CHANGING

Okay. It's best you read round some of the current views on this to give yourself a wide and informed opinion on the changes in the music industry. Suffice to say, changes are huge. Here's links to interesting articles. You'll see one of the biggest effects on the industry is the change in distribution from physical (records and CDs) to digital (downloads). But that also shifted the power away from its traditional base.

Where money had come from: http://www.thephoenixprinciple.com/blog/2009/08/how-the-music-industry-has-changed-woodstock-sony-emi-rca-apple.html

Download Charts: http://andrewsullivan.thedailybeast.com/2011/07/how-the-music-industry-has-changed.html

A little about music industry management and the future: http://www.futureofmusicbook.com/2010/02/03/insight-in-music-business-management-from-mpn/

The future of distribution: http://www.futureofmusicbook.com/2007/10/21/new-artist-model/

Marketing direct to the right audience, labels doing it badly: http://www.artistshousemusic.org/videos/how+the+music+industry+has+changed+and+why+the+major+labels+don+t+get+it

Youtube and the future: http://www.themmf.net/showscreen.php?site_id=55&screentype=site&screenid=55&loginreq=1&blogaction=showitem&bloginfo=1338&blog_id=12&dc=21

Global Industry Sales and Shares (notice how the sales numbers have gone down): http://en.wikipedia.org/wiki/Global_music_industry_market_share_data

Amazon Cloud and the Big Four: http://notsocommonplace.com/2294/the-music-industry-is-running-out-of-last-chances/

The Demise of the One of the Big Four, EMI: http://gigaom.com/2011/02/02/will-the-music-industry-ever-learn-from-its-mistakes/


THE CHANGE TO DIGITAL

THE INTERNET ISN'T ALL GOOD NEWS

However, this isn't all good news for bands as it might seem. Below is a link to a diagram of what you have to sell online to make the basic wage (in America). A tad shocking isn't it.

http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/