By, Wendy Day from http://www.WendyDay.com
The “masters” are the rights to the actual physical sound recordings. So when you hear me say that in the original deals both No Limit and Cash Money owned their masters, that means they owned the master rights to all of their sound recordings. This right gives them the ability to license their music to anyone willing to pay for the use (use in TV or film, commercials, video games, sampling, etc).
Most artists give up the master rights in exchange for the financial support and marketing and promotional know-how that a label offers when signing a record deal. Whoever owns the master rights gets to choose who can license those rights and/or who can reproduce the music. This means if the label owns the masters and they want to license your music for a commercial, or even for gay porn, they can. They don’t need the artist’s consent, permission, or approval. Additionally, if the artist has not recouped all expenses, the licensing fees would go to the label and not be shared with the artist. Once the artist recoups, fees are split with the artist as indicated in their contract.
Many of the companies today that license music for film, TV, and gaming only work with artists who own their own masters. They find major labels difficult to negotiate with, too time consuming with the approval process, and the contractual process to be fraught with red tape and bureaucracy (further slowing down the approval process). This is where an independent artist has a big advantage over an artist signed to a major label.
Owning your own masters, as an artist, is key today if your goal is to maximize your monetization opportunities to make as much money as you can with your music. Of course, in a perfect world, every artist would be independently wealthy so that all decisions about their music could be made based on what’s best for the song or the artist instead of based on needing money or income.
The streaming sites like Spotify, Pandora, Slacker, Rhapsody, etc, along with mobile phone carriers that stream music (like Cricket) pay artists for the streaming of their music. The download sales sites like Amazon, iTunes, eMusic, etc, pay the master rights owners for sales of their music (iTunes, for example, pays 70% to the owner of the music). Every time your music is played or purchased, the master rights holder receives a payment. Additionally, YouTube has become a decent revenue stream for artists who own their own masters.
While songwriters and producers (provided they own their publishing/copyrights) in urban music have always been compensated when songs are played on radio on streaming services, those who own their own masters have additional revenue opportunities available because they can decide quickly whether or not to license their songs. That being said, if you are signed to a record label, it is VERY difficult (and rare!) to retain the right to own your own masters.
I’ve seen artists signing a record deal have the right to own a portion of their masters based on reaching a certain sales threshold (at 500,000 units sold, the artist gets 50% ownership of their masters), or based on time (after 2 to 5 years or so, the master rights revert back to the artist). Labels are willing to do these atypical deals IF you have a lot of leverage when negotiating. Leverage would be a bidding war (more than one label vying to sign you to a deal), a hit record that’s blowing up, or a huge regional buzz.
Lastly, if you are an independent artist without a record deal and you own your masters, it’s up to you to push your songs for licensing deals, or to hire a middleman to do so for 15%-25% of all licensing earnings (a master license deal). You still own and control your masters, but are able to make money with your music without having the proper connections or relationships to license your music.
Make certain that you register your copyright, and that you register with SoundExchange.com, along with the performance rights societies: ASCAP, BMI, or SESAC. According to SoundExchange’s website, “the royalties that SoundExchange collects and distributes are for the featured artist and the sound recording copyright owner. ASCAP, BMI and SESAC collect and distribute royalties for the songwriter, composer and publisher.” SoundExchange differs from the performance rights societies by paying the master rights holder for Internet streams, satellite radio (Sirius/XM), webcasts, Internet radio, cable music channels, etc.
The key to being a successful independent artist is to build your fans, market and promote to them directly, and monetize your music to create as many income streams as possible. The more you learn about the music business, the more you can learn to monetize your music either doing it yourself or doing partnership deals with others who have the access, relationships, and connections. By retaining ownership and control, you in fact become your own record label and you control what, when, and to whom you give up a share of income. But you always retain ownership, control, and collect the lion’s share of the income. It’s what labels have been doing for decades solely because they had the access and know-how. Now you have it…so go get it!