Be an entrepreneur in the music industry: This is how it works
There are a variety of reasons why you might want to start a business in the music industry including:
- You may be an artist that wishes to release your own records
- The style of music that you are interested in is underrepresented and could do well with some exposure
- You come across a skilled artist with a lot of potential who doesn’t have a record deal
- You discover a brilliant record that you think would be successful if it were released
- Your band (a) has been dropped by a larger label and/or (b) has a large following at gigs and/or online and you feel that you can successfully sell records
Many people entering the music business for the first time may not fully appreciate the complexity of the industry and how revenues are generated. As a consequence, it can be very difficult to prepare a business plan that demonstrates a good general understanding of rights, royalties, revenue deals etc.
However, regardless of whether you are looking at starting a business from the perspective of an artist, label, music publisher or manager, you should have a good understanding of three main areas; namely, what are the various rights that exist in the music industry; how do you acquire them; and how can you commercially exploit them.
Michael Fuller, with over 20 years experience in the music industry, has worked at the Association of Independent Music since 2001, and here provides an overview of some of the key issues that anyone wishing to start a music business will need to think about.
What are the main copyrights and rights that exist in the music industry?
It is now possible for fans to engage with music in lots of different ways. You can listen to radio; play CDs; download tracks from iTunes; stream music from Spotify or YouTube; attend a gig or festival to name just a few.
The challenge for music entrepreneurs is to identify how income can be generated from these activities and develop strategies that enable them to maximise this income.
Looking at things from the perspective of a music fan, they are simply buying a CD, a gig ticket, a download, or watching television, or listening to radio in order to hear their favourite songs or artists. But, from a music entrepreneurs’ perspective, what is actually happening is that the copyrights and other music rights that they own or control are being consumed in a way that allows them to generate income.
The three main rights that music businesspersons’ need to be familiar with are composition copyrights, sound recording copyrights and performers’ rights.
Compositions: There are two main copyrights contained in compositions, namely (a) music that is protected in copyright law as a musical work and (b) lyrics that are protected in copyright law as a literary work. However, it is common for them to be referred to as a joint copyright and they are usually owned and controlled by music publishers.
Recordings: Recordings are protected in copyright law as sound recordings and they are usually owned and controlled by record companies.
Performers Rights: Performers have rights granted on them that allow them to control who is entitled to commercially exploit their performances. There are two main types of right:
- Non-property rights: The right to object to the first recording or broadcast of their performances (that can’t be assigned), and
- Property rights: The right to object to the copying of a recording containing their performances (that are usually assigned to a record company). It should be noted that even if these rights have been assigned, performers still retain a non-assignable right to receive equitable remuneration when recordings containing their broadcasts are broadcast or publicly performed.
How do you get them?
Copyright comes into existence when an original work (e.g., composition, sound recording, etc.) is created and is reduced to physical form, which usually means that it has been recorded in writing or some other form (tape, CD, etc.). At this point, the work will automatically qualify for copyright protection under UK law. The author of the work is generally considered to be the first owner of the copyright, although works created by employees in course of their work are regarded as being owned by their employer.
Once a copyright has been created, it will last for the following periods:
- Literary works (lyrics): the life of the author plus 70 years.
- Musical works (music): the life of the composer plus 70 years. For works that have been co-written, the life of the last surviving author or composer plus 70 years.
- Sound recordings: generally, 70 years from the end of the calendar year of release.
Copyrights are exclusive property rights and just like any other items of property they can be sold (assigned) or licensed to another party in accordance with the wishes of the copyright owner.
So publishers and labels can either acquire copyrights by (a) signing exclusive deals with songwriters, performers and recording artists to create exclusive content for them, or (b) assigning or licensing content from third party individuals or companies.
Once you get them, how can they be commercially exploited?
The basic concept of copyright is that anyone that copies a work without permission is infringing that copyright. The Copyright Designs and Patents Act 1988 has added some additional acts that will amount to infringement if done without the copyright owners permission, including:
- Issuing copies of the work to the public
- Renting or lending the work
- Performing, showing or playing the work in public
- Communicating the work to the public (broadcasting and making available)
- Adapting the work
So what does this all mean in practice for the music entrepreneur?
Well let’s go back to where we started and take a closer look at some of the main ways in which consumers engage with music, namely buying CDs, downloading music, streaming music, listening to music on radio or television and attending gigs.
The business owners’ task is to firstly to get to grips with the various routes to market so that their music is available in all of these platforms and then to put arrangements in place that will ensure that the monies that is generated flows back to them as rights owners when their music is consumed. So, in technical terms, it is up to the owners of compositions (music publishers) and sound recordings (record labels) to do the necessary deals to receive income for these activities.
There are now a very good selection of distributors or aggregators that will get their music into stores and distributed to online platforms without too many problems, and there is an appreciation that good promotional efforts are required in order to get their artists’ music played on radio or help artists secure television appearances.
But how do you get paid if your music is played on radio; or performed at gigs; or played in clubs? It’s clearly not practical for tens of thousands of small artists, labels, songwriters and music publishers to continually approach broadcasters, venue owners, promoters etc. asking for payment whenever their music is consumed.
Thankfully for all concerned, music rightsholders mandate various collecting societies that licence their copyright works collectively on their behalf. The benefits to rightsholders is that they don’t have to negotiate numerous individual deals themselves with several multi-national companies, and the benefits to music users is that one blanket licence gives them access to thousands of copyrights that they can use in different ways.
The main UK collecting societies are:
PRS for Music, which licenses organisations that play, performs or makes available copyright music on behalf of its members that includes composers, songwriters and publishers
Mechanical Copyright Protection Society (MCPS) that licenses users that reproduced their members’ music including composers, songwriters and publishers.
Phonographic Performance Limited (PPL), that grants licences and collects royalties for the public performance and broadcast of sound recordings on behalf of performers and record labels.
So once you have acquired the necessary rights that you need to operate your business, make sure you join the appropriate collecting societies and register all of the copyrights that you own.
Want to set up your own record label?
If you would like to find out more about how one of the most successful UK independent labels does it, you should come to the AIM/Virgin Startup Label Masterclass on 23rd March 2016.
Special Guest: Chris Goss (Managing Director, Hospital Records)
Date: Wednesday, 23 March 2016, 18:30 – 21:00hrs
Venue: Virgin HQ, Battleship Building, 179 Harrow Rd, London W2 6NB
Cost: £25.00 (inc. VAT)
Chris Goss, MD and Co-Founder of Hospital Records will be giving an insight into the many practical issues that goes into running a successful record label. Regardless of whether you are just starting out or you have already commenced trading, this is a unique opportunity to learn how successful labels do it.
Places are very limited so you should book early.
To book your ticket go to http://www.eventbrite.co.uk/e/virgin-startup-and-aim-how-to-set-up-a-record-label-tickets-22265433511
Who are AIM and Virgin StartUp?
AIM are a trade organization for independent record companies and distributors in the UK. AIM represents over 800 member companies, from the largest and most respected labels in the World, to small start-ups and individual artists releasing their own music for the first time. AIM promotes this exciting and diverse sector globally and provides a range of services to members, enabling member companies to grow, grasp new opportunities and break into new markets.
AIM are also a delivery agent for Virgin StartUp and handle applications for funding from the