Last week, SoundExchange, the non-profit entity that collects and distributes digital performance royalties announced its plans to send out more frequent payments to eligible artists and labels. In the past payments were sent quarterly, but beginning this month payments will be deposited monthly.
As SoundExchange President and CEO Michael Huppe said, “By making performance royalties available sooner, we are making it easier for recording artists and record labels to focus on creating the music we all enjoy.”
This might sound like a minor accounting tweak. But for middle-class recording artists and struggling indie labels, it could be massively helpful. Here’s why.
Remember, musicians typically piece together a living from a variety of different income streams, and each of those income streams generates money in different ways and at different paces. Some streams might come in occasional one-time windfalls, like licensing a song to a commercial. Touring income only comes in when a musician is touring—it stops flowing in when an artist needs to break for writing, recording, etc. Royalty checks from labels, publishers, or composition PROs (ASCAP/BMI/SESAC) typically only come quarterly. Session gigs or sideman work may ebb and flow. Any reliably and frequently disbursed stream of income can help cushion the somewhat unpredictable differences in income and expenses from month to month. Say, for example, you earn $3600 in digital performance royalties over the course of a year. Monthly deposits averaging $300 provide you a better baseline buffer for financial management than you’d get from quarterly deposits averaging $900.
It’s a similar story for independent labels. Historically, the mechanics of physical distribution has created cash flow problems for labels without deep pockets. Checks from physical distributors typically arrived quarterly. That means even for a new release that performs well, the label had to spend money up front for production, manufacturing, and promotion of a release, but then wait months before any money from physical sales through distributors flowed back in. This is, in part, why indie labels have generally been enthusiastic about the iTunes download store; the reliability of monthly checks from Apple has helped them keep the lights on and make payroll. Similarly, monthly SoundExchange income could help even out the ebb and flow of cash flow, making it easier to stay in business. (SoundExchange pays 50% of royalties to sound recordings owners, usually labels; featured artists get 45%, and 5% goes to backing musicians; check out our infographics Music and How The Money Flows to see how this compares to other streams).
The changes don’t yet apply to every artist and label. To get paid on the monthly schedule, you must be signed up for electronic payments and have royalties of $250 due. Artists and labels that are below the minimum threshold will continue to be paid quarterly, though SoundExchange indicates that the threshhold may be reduced over time. This will be important to watch, as it can be hard to clear that $250 bar; per-stream payouts for most uses remain small and performance royalties may be divided among multiple band members.
Kudos to SoundExchange for taking this important positive step to better serve music creators!