How the music industry works

Are you ready to make music your business?
Are you ready to make music your business?

The music industry in 2011 is a strange place indeed, with not even those who've been working in it for years knowing precisely what the future holds. However, systems for making money remain in place, and anyone who's thinking seriously about turning their music into cold, hard cash would do well to have at least a basic understanding of how they operate.

Hence this guide: it won't tell you everything about the music business, but it should be enough to give you a basic understanding of what makes it tick and to make you think about how you might become part of it.

Record companies

The 'traditional' path to music industry success involves your record being heard by a record label that'll sign you as an artist to release it. Better still, they'll release a body of your work which might span an EP, album or multi-album deal.

Effectively, the label acts as an investor in you and your project, paying for studio time, mixing and mastering and, hopefully, an advance, which is money up front and in your pocket to tide you over until your cut of the money from sales - known as royalties - starts coming in.

The label will also handle documentation for the release including royalty splits that detail what percentage of every pound earned gets paid to you and any co-writers and what percentage goes back to the label to cover their initial investment and, hopefully, generate a profit so that they'll be able to invest in you again.

Your cut of your music

The Mechanical Copyright Protection Society (MCPS) pays royalty shares on copies of your track. This means that the more units you sell, the greater the amount will be, but it also means that if your song ends up on compilation CDs, is used on DVDs or even placed inside a mechanical toy, you'll get paid.

Say a compilation album has 20 tracks on board and one of them is yours. That means you get 5% of the MCPS money generated by sales.

Publishing your music

Publishing is exploitation of your track in any form and publishing income can be gained from a wide number of sources. The term dates from when songs were literally 'published' and sold as printed sheet music but these days publishing money is earned whenever a song is played on the TV, radio or on a film soundtrack, when it's covered by another artist, when it's performed live, when it's played in Topshop's changing rooms… the list goes on.

In theory, whenever your track is aired in public you'll get paid. This system works thanks to collection agencies such as PRS in the UK or ASCAP in the US, which monitor such airings and collect and distribute the money accordingly.

TV, movies and more

One of the major growth areas in music publishing - and an increasingly important revenue booster for artists releasing their own material - is having music synced to TV, film and videogame projects. The advantages of sync are obvious: you'll be paid to have your track used; you'll generate a fresh revenue stream if your song makes it onto the film/TV show's soundtrack; and you'll raise awareness of your record as it'll reach a potentially huge audience who might not otherwise have heard your track.

Getting songs synced to TV and film projects isn't easy but there are specialist production companies who will act on your behalf to push your tracks in this direction and the majority of these act non-exclusively, so that you're able to keep doing 'other things' with your music while they're trying to push it to music supervisors at film and TV companies.

Making your catalogue of tracks available to a Library Music company (increasingly called Production Music companies) is therefore a no brainer and potentially the most lucrative thing you'll do. Typically, such a company will take a percentage of the sync fee as their payment, which is good for you as it means no money to pay them upfront to represent you and, better still, they don't get paid unless they're getting cuts, meaning they'll work the music in their catalogue as hard as they can.

Take a moment here to think about the Rembrandts' I'll Be There For You - aka the title music to Friends - and how many plays that must have racked up around the world…

So you didn't write or produce the track? Don't worry, you can still make money. PPL isn't a publishing stream owed to songwriters but an additional royalty stream paid by broadcasters to performers on records. Anyone who performs on your song (bass player, backing vocalists etc) is owed a small sum for his or her performance on a record. The categories for performers include Performing Producer so if you've played and programmed the track you've written, you're due a PPL royalty stream too.

Note that this is separate from a publishing stream, so doesn't eat into your royalties from elsewhere.


One of the key weapons the majors have at their disposal is the ability, if they so desire, to put the new Kylie album on sale in every high street retailer from Sydenham to Sydney. A distributor is responsible for shipping units of records from warehouse to shop and this is a task that - if you're creating physical content - you'll need to get covered by striking a distribution deal.

As we know, 'physical' music has been overtaken in popularity by digital, which is great news if you're starting your own label, as distribution is that much easier. Digital distribution means making sure your record is available for sale digitally in all of the places your fanbase will expect to find it, which means iTunes, Amazon and the like for pop/rock releases and, additionally, specialist sites for dance music such as Beatport and Juno.

Companies such as CDBaby offer distribution to these sites and more for a one-off fee, meaning that once you've uploaded your album to a company like this, they'll do all the MP3 coding and will make your record available for sale via a variety of sites with a minimum of fuss your end.

And finally

It's a lot to take in, but with this basic understanding of the industry's mechanics in place you should be ready to go and start making it work for you. Good luck!

Liked this? Now read: 14 money-spinning tips for musicians

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