Troll
08-05-2006, 10:15am
What A Hit Song Earns
By Jack Williams, CPA O’Neil Hagaman, PLLC,
One of the more enduring myths about our industry, embraced by the “civilian” world, is “Write one hit song and you’re set for life!” Most of us know better, but there are still some misconceptions about just how much the writer of a hit song can expect to earn. So let’s dispel the myth and take a look at the facts.
Mechanical and “Other” Royalties
There are a number of variables in how mechanical royalties can be calculated, so we must first briefly address the assumptions under which our calculations will be made:
• There is no co-writer involved—all of the earnings calculated are based on a 100% writer’s share.
• The writer has a “basic” publishing deal, as opposed to a co-publishing or administration arrangement. (See our November 2004 article “Songwriter Deals” for more detail on these.) Also, any advances received and demo costs incurred have been fully recouped from past earnings.
• The writer is not also the artist; the license between the publisher and record company does not incorporate the typical “controlled composition” provisions for artist/writers, such as a reduced royalty rate, or non-payment for distributed free goods. Rather, the rate is to be the full statutory mechanical rate for U.S. sales, currently 9.1¢ for each single or album distributed. Writer and publisher share this equally, each receiving 4.55¢ per unit.
• For simplicity we assume that club sales are insignificant, and estimate additional income from sources other than US album sales (foreign, print, synchronization fees and sales of the single) as 5% of album mechanical royalties.
With our assumptions in place, let’s do the calculation. (See Chart 1)
Performance Royalties
Royalties from radio and television performances are usually measured relative to the peak position achieved in the Billboard “Hot Country Songs” chart. But total royalties associated with a given chart position can vary substantially, depending on the number of weeks the song remains on the chart. The amounts below represent a reasonable average of royalties earned at various chart positions, but the income for a specific song could easily differ from these amounts by 20% to 30% or more. (See Chart 2)
Timing of the Payments
Total royalties for a number one song on a platinum album, about $280,000 according to our calculations, would certainly make for an impressive check. Unfortunately, it does not arrive all at once, and sound financial planning must take into account the “when” as well as the “how much.” Performance royalties are paid quarterly, and due to the performance rights organizations’ reporting procedures, the first payment could arrive as long as nine months after the song’s initial airplay, with receipt of the total amount extending over two years or more. Initial mechanical royalties will be paid out over a two year period as well, due to reserves withheld by the record company. And finally, for all sources except performance royalties, earnings are reported initially to the publisher, who must in turn process the information and issue statements to the writer, delaying receipt of the monies even further.
Writing a hit song may not be the jackpot many outside the industry believe it to be, but it can certainly produce substantial earnings. But it’s important that the writer anticipate the inevitable delays we’ve described, and exercise patience and restraint until the money, eventually, rolls in.
http://www.musicrow.com/graphics/articles/ARN003678/Financial8-06.gif
http://www.musicrow.com/graphics/articles/ARN003678/Financial8-06.gif
musicrow.com
By Jack Williams, CPA O’Neil Hagaman, PLLC,
One of the more enduring myths about our industry, embraced by the “civilian” world, is “Write one hit song and you’re set for life!” Most of us know better, but there are still some misconceptions about just how much the writer of a hit song can expect to earn. So let’s dispel the myth and take a look at the facts.
Mechanical and “Other” Royalties
There are a number of variables in how mechanical royalties can be calculated, so we must first briefly address the assumptions under which our calculations will be made:
• There is no co-writer involved—all of the earnings calculated are based on a 100% writer’s share.
• The writer has a “basic” publishing deal, as opposed to a co-publishing or administration arrangement. (See our November 2004 article “Songwriter Deals” for more detail on these.) Also, any advances received and demo costs incurred have been fully recouped from past earnings.
• The writer is not also the artist; the license between the publisher and record company does not incorporate the typical “controlled composition” provisions for artist/writers, such as a reduced royalty rate, or non-payment for distributed free goods. Rather, the rate is to be the full statutory mechanical rate for U.S. sales, currently 9.1¢ for each single or album distributed. Writer and publisher share this equally, each receiving 4.55¢ per unit.
• For simplicity we assume that club sales are insignificant, and estimate additional income from sources other than US album sales (foreign, print, synchronization fees and sales of the single) as 5% of album mechanical royalties.
With our assumptions in place, let’s do the calculation. (See Chart 1)
Performance Royalties
Royalties from radio and television performances are usually measured relative to the peak position achieved in the Billboard “Hot Country Songs” chart. But total royalties associated with a given chart position can vary substantially, depending on the number of weeks the song remains on the chart. The amounts below represent a reasonable average of royalties earned at various chart positions, but the income for a specific song could easily differ from these amounts by 20% to 30% or more. (See Chart 2)
Timing of the Payments
Total royalties for a number one song on a platinum album, about $280,000 according to our calculations, would certainly make for an impressive check. Unfortunately, it does not arrive all at once, and sound financial planning must take into account the “when” as well as the “how much.” Performance royalties are paid quarterly, and due to the performance rights organizations’ reporting procedures, the first payment could arrive as long as nine months after the song’s initial airplay, with receipt of the total amount extending over two years or more. Initial mechanical royalties will be paid out over a two year period as well, due to reserves withheld by the record company. And finally, for all sources except performance royalties, earnings are reported initially to the publisher, who must in turn process the information and issue statements to the writer, delaying receipt of the monies even further.
Writing a hit song may not be the jackpot many outside the industry believe it to be, but it can certainly produce substantial earnings. But it’s important that the writer anticipate the inevitable delays we’ve described, and exercise patience and restraint until the money, eventually, rolls in.
http://www.musicrow.com/graphics/articles/ARN003678/Financial8-06.gif
http://www.musicrow.com/graphics/articles/ARN003678/Financial8-06.gif
musicrow.com