How Do Musicians Actually Make Money?

SOURCE: Rolling Stone

The economic principle I’m exploring is “People generally respond to incentives in predictable ways”

My research question to help me study the economic principle is “How does the music industry incentive artists to make popular music?” The article published in Rolling Stone titled “How Do Artists Make Money- or Don’t at All- in 2018” demonstrates this economic principle by explaining what copyrights are and by showing the multiple ways that artists and record labels can make money. 

To begin, it is important to understand what copyrights are in the music industry. A copyright is any “ownership of songs and albums as creative works” and they are often much more complicated than the average music fan would think. Another important idea to understand that connects to copyright is what “royalties” are. In the music industry, “royalties are the sums paid to rights-holders when their creation is sold… or monetized in any other way.” At the most basic level, these copyrights and “royalties” are how artists and their record labels make money from the music they create. Before these copyrights can be distributed for artists to make money, songs are divided into two types of copyrights; composition copyrights and sound recording copyrights. The former refers to the actual composition of the song (who could have guessed that), so that entails the lyrics, melody, etc. The former, refers to the literal recording of the song.

What I found most interesting about this is that with many chart-topping songs today, the composition copyrights and sound recording copyrights go to two separate parties because the person performing the song did not necessarily write that song. An example of this would be when a newer band performs a cover of an older song. That new band still receives money from performing it, but the original writer also gets money, even if they had no part in the new recording of the song.

 Next, once artists have gotten their songs copyrighted, they need get that song played in order to actually make money. One of the most popular ways for artists to do this today is through digital music stores like iTunes and Google Play. When songs are sold on formats like these, both copyrights receive money, but the profit that each copyright receives is determined through the record label and “specific negotiations” between the artists. As for on-demand streaming services like Spotify, all parties involved in creating the song receive the same “dual-copyright payout” as with digital store purchases. One of the biggest ways artists make money from their songs today is synchronization, or when artists put “music in film and television and commercials.” What is unique about synchronization is that it serves as a “discovery platform” for up-and-coming artists that haven’t reached radio success because most filmmakers choose to put music in their films based off of it’s sound rather than its popularity. Another one of the biggest ways artists make money is through radio. With radio copyrights, radio services will “determine payment rates on mass scale” rather than at individual, artist-to-artist level. What I believe is most interesting about radio copyrights is that for some reason non-Internet radio services (AM/FM) actually only have to pay composition copyrights and do not have to play the recording artist at all when they play their song on their station. To conclude, there are actually several other ways that artists can make money that don’t necessitate copyrights at all. The most common way that we see today is live performances. Whether concerts or music festivals, live performances are “quickly shaping up to be the most lucrative space for musicians in the digital-music era.”

At first this may seem surprising, however when we look closely at how music is consumed today, it is clear that many listeners are becoming “inundated” with the constant access we have to music. Because of this never-ending access to practically every song ever made, it is clear to see why so many are choosing to spend their money on live performances of their favorite bands. Another way artists can make money without the use of copyrights is through advertising. This is something we see a lot today through partnerships between artists and specific brands like how Cardi B recently teamed up with Pepsi for their new ad campaign. These paid partnerships are very popular because they allow artists to have “access to an additional revenue stream.”

Finally, artists can make money through the merch and other non-music products they sell. Selling items like t-shirts, perfumes and other paraphernalia is an easy way for artists to make even more money and is something “artists have been taking advantage of for decades.” It is clear to see that today there are several ways for artists to make money with and without copyrights and “royalties.” It is also clear that these copyrights are much more complex than most people realize, and have a huge impact on how music is created and distributed.

 In my next blog post I will research the question: How is popular music distributed today?