Royalties from Writing a Hit Song with Justin Bieber

30 years ago the supply chain for recorded music went something like this:

Songwriter - publisher - recording artist - record label - wholesale distribution - retailer - audience.

Someone would write a song. Ideally they would have a publisher, whose job it is to help them maximise the commercial exploitation of that song. That song would be recorded by an artist, funded by a record label. The writer and performing artist may or may not be the same person or people.

A record label would sign a recording artist, and often pay them an advance against future recording royalty revenues. That advance - say $100,000 - was exactly that - an upfront payment, and until the artist's royalty payout hit $100,000 they did not make any more money and did not share in any profits the label might be making from the recording. At the point that they have paid back the $100,000 advance the artist has "recouped" and starts to get a share of profits.

The label would pay for the recording of the song, and then pay for mixing, master, and production of the finished product. They would then ship this product to a distributor who would get it into shops. The distributor would pay the label a unit price considerably below the retail price. The publisher representing the songwriter would get a small fee per unit shipped based on the wholesale price. The artist would get a small recording royalty per unit against the wholesale distribution rate - maybe 10% or 20% or whatever deal they had struck with the label.

Retailers would mark up from what they paid. Sales would be driven by a marketing campaign paid for by the record label - sometimes the publisher would contribute to this marketing spend. Marketing would comprise interviews/features/reviews in a limited universe of music publications and newspapers, some advertising spend, a radio campaign (convincing radio stations to play the music) and perhaps some TV slots. It was fairly manageable, and labels had good connections into major media so were quite easily able to generate good hype for artists.

If the record didn't sell, then the label had sunk a lot of money into marketing and promotion, and the advance to the artist. And if the record didn't sell, the artist would not begin to recoup against their advance.

Now the model is something like -

Songwriter - publisher - recording artist - record label - music platform

Someone still needs to write a song. Someone still needs to pay for that song to be recorded. Recording is easier and cheaper than ever though, so labels don't have to invest so much here. However, because it's easier and cheaper to record than ever before, it also means that more people than ever are doing it. Distributing physical product was HARD. And expensive. And now that you can quite literally with a couple of clicks send a recording to Spotify or Apple Music, that barrier to entry has also dropped. So it's easier and cheaper to record, easier and cheaper to distribute - and the audience has far more choice than ever before. Marketing music effectively is harder than ever - there are more channels to reach consumers than ever before, and labels have far less influence over these channels than they did before. So marketing music effectively requires a real understanding of the potential fan base for an artist, and real understanding of how to structure and run a campaign, and reach the curators who power the platforms.

The role of a label has changed considerably in the last 30 years. Do labels provide questionable value? Against the old model, yes - you can record and distribute your music without a label. To reach an audience and really cut through against all the thousands of other people recording and distributing music - you need real expertise, and considerable experience of what works and what doesn't work.

Running a record label in the old days was very different to running a record label now. But labels make money by being experts.

If I were an up-and-coming artist I would make music that I and my audience could love - and I would hire the BEST POSSIBLE PEOPLE to ensure that I'm maximising my chances in every possible area of my career, and cut them in for a percentage of whatever increased success they could bring me.

Are those experts working for a "record label"? Maybe, or maybe not. But they will definitely be doing this day in, day out, for similar artists, and they will be learning every day what does and doesn't work.

A lot of people in technology seem to think that music is a "build it and they will come" sort of thing. Just because your song is on Apple Music or Spotify does not mean that people are going to discover you. Once they discover you, you have to hope that they will stick with you on your journey, but actually because they way a lot of platforms work the music comes first and the "artist brand" comes second. It's a pretty widely acknowledged fact in the music industry that if you play a bunch of relatively well known songs to a bunch of kids they will probably know the songs, and be able to sing along. They probably WON'T be able to tell you the artist behind those songs though. Great songs deserve great audiences - but all too often great songs suffer because they can't cut through and find those audiences, and even when they do get listened to, converting someone who hears your music into someone who remains a fan and follows along on your journey is something else entirely.

A rights holder may or may not be an artist - quite often, the rights holder for the recording royalty is a record label, and the artist is getting a percentage of what the label takes. There is also the publishing (songwriter) royalty - and the songwriter may or may not be the recording artist.