Songwriting Percentages

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Seafroggys

Seafroggys

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So I'm getting closer and closer to finishing recording my musical, which means I have to start looking at how to split all those pennies that we'll earn on Spotify ;)

So my co-writer Alex and I agreed back in 2011 when we first wrote this, that we'd split the songwriting earnings 50/50 evenly between us. At the time I had done research on how that works for live theater performances, so I know how that works - but since I'm recording the album, what I like to know what percentage of 'record sales' goes to the songwriter(s).

Yes, I know all about Mechanical vs. Performance royalties, but I feel that overcomplicates what I want to do. So I completely self-funded the recording of the album itself, so I am the sole "Producer." Or, looking at it another way, I am the record label. Essentially, I am trying to figure out how much I should pay Alex per sale/stream/etc. I try and find examples online, but all I find are explanations of the mechanical/performance/sync royalties.

So, let's say we sell a digital copy on Bandcamp for $10. Bandcamp takes 15%, which is $1.50. Leaving $8.50 for us. Like, hypothetically, let's say the songwriters take 20% of gross (this is the number I'm trying to figure out). So Alex and I each get 10%, so he gets $1, I get $1. And then as producer/label, I recoup the rest, so $6.50. So Bandcamp gets $1.50, Alex gets $1, and I get $7.50 ($1 songwriting + $6.50 producing). I feel this is a much simpler way of calculating this. So I want to know what a typical songwriter would make. Is it a percentage of gross? A percentage of net after store takes their fees? Is 20% a good amount, or should it be higher or lower? And would that same percentage also work for streaming revenue? So if we make $5 from Spotify, for example, they've already got their cut, so I don't know how I'd calculate gross. But using 20% of that $5, that means Alex gets 50 cents and I get the remaining $4.50. Or maybe go with a slightly higher percentage in that example?
 
Why are you over complicating this. Until you make lots of money, it makes no sense at all, because you will never be able to reconcile your earnings. Essentially, you get an email. You log in and see money in your account. This is your component. They make it impossible to see any kind of gross figure for their commissions and charges. I have my income paid into my bank account. Some of it is for activity on shared music. So i have to filter out each track, and split the amount by three, or four depending on what it was, because on these, we agreed and equal share. The difficult bit is that this gets me involved in VAT. If I get (to make the maths easy), £120, this means generating an invoice to balance the income. I am registered for VAT. Strictly speaking, it would be possible to take the £120, me keep £30, and send out three £30 to the other three, in the same way as disbursement accounts work, as in, its not my money. My accounts software cannot handle this easily. My accountant says its possible, but for me, difficult to reconcile. My solution is take the £120, give £20 to HMRC, and we each get £25. The amount per year is not really worth the extra faffing around. However, if instead of £120, it was £12,000, it might be different. The current system works for us all, but we would need to change it if it became serious money.

One other thing. You agreed a 50/50 split. Look at history. The Gershwin brothers. They had a 50/50 split but it was music and lyrics. This means an instrumental does not benefit one, and now is public domain, but the words are still generating money? When you start to make serious money, you also have the payments to the people in the studio to consider.

Your system works while you get on. You will have income from numerous sources. This is your distribution. The thing about gross etc makes no real sense, because you dont know what it is. You do not get told. Some distributors charge you a fee each year, often more than you make so you get nothing really. Others tell you its a percentage, so you do know what they took. Does it matter? You get what you get. You deduct from that any costs incurred. What remains is split. Your partner benefits because you do all the work. My co writers and performers either take the money, or in one case, donate it to charity. I send them the pages and pages of the statement. It has a total. They see their 25% or whatever and they're happy.

When your income becomes substantial, or perhaps attracts the taxman, you need a proper legal agreement. I make it clear that the split is of the actual funds after expenses. If your bank charge you a currency conversion, like mine does for dollar payments, that comes off before the split, as does the VAT.
 
So you're asking I don't pay my cowriter at all until I make "real money"?
 
Are you in the USA or somewhere that has a similar compulsory licensing system? If so, you're obligated to pay your co-writer half of the compulsory songwriting royalties unless you negotiate a different rate with them. The rate is 12.4 cents per permanent sale, so if the album is 10 tracks long, you owe Alex 62 cents. Your math seems to be an over-estimate of what will actually sell, so you can absolutely just do that instead.
 
Oh wow, that low? Haha okay, thank you for that! Since there's 21 tracks, that'd be $2.604 per sale, so $1.302 to Alex, regardless of how much it sold for? Should be easy.

Although to complicate things, while I am in the US, Alex lives in France. Would we still go by US laws since that's where I'm based as "producer?"
 
I basically have the same sort of agreement with my songwriting buddy. We decided years ago that we would be equal partners in whatever happens during our song writing, producing, recording journey. Rob’s way seems the best. Get some revenue, pay the expenses, split the rest according to your agreement. Now only to get the revenue part lol.
Edit,
I think you would be wise to discuss the split with your partner again too. My guess is he’s gonna be pissed when 50% isn’t really
 
Well, I don't think that's exactly fair either. Alex hasn't put any money or effort into the production of the album. I even asked him back in 2012 when I first started floating the idea of making the album if he can contribute funds, and he said no. I just did some rough napkin math and I put in $7500 into the project so far (still need to pay for mastering, which will at least be another $1000) all from my own lower-middle-class income. Mostly to pay for musicians as well as some gear and studio time for recording the string ensemble. Alex has paid $0. Even beyond monetary contributions, he's also been hands-off the project *in general* after finishing the original lyrics and story. Like I put in my time to record most the musicians as well as my time to mix the project, which also has value.

Now I of course still think Alex deserves a cut, he is the co-writer after all and deserves it. But a straight 50/50 across the board is completely unfair to me (concerning the album). And I do believe Alex is aware of 50/50 songwriter cut, again its been a long time since we had the talk but I do remember explaining to him how songwriter royalties work for theater productions and performances, so he's aware that its a smaller percentage of overall. He also does songwriting for bands (he himself doesn't play music) so I'm pretty sure he knows how the game works.

EDIT: And I'm fully aware that unless by some stroke of luck, I'm never going to recoup my costs on this. I'll be lucky to make even a tiny bit on this. I have no delusions about that. I still want to be fair to all parties involved, myself included.
 
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You see now you are revealing the hidden costs. When you slap material up nowadays you are always asked for the splits, and you can also add in 'featured artists' - 50/50 works well, but the payments vary in how they are presented. If you get money, from say Songtradr (to use mine as an example) then if the other partner is not signed up with them, you get it all - and you distribute it, but your costs come off the bottom line, you both get 50/50 of the remainder. With PRS income, if the named partner is a member, what I get is already the 50%, the other member gets the same, paid direct. If the others are not members, I get the full amount and I have to divvy it up.

If you have production costs in the thousands, you really need a proper, legal partnership agreement. At the very least, neither of you will see any returns till that is recouped - and that will need explaining. At 0.0000002 cents a stream or whatever, even a few million is not going to repay the production costs. The actual money from streams vs sales can be tiny.

You mentioned paying for musicians - buyout or points? If you just paid them with no mention of royalties, they could want more, unless they agreed to waive royalties.
 
Yeah I have to start thinking about PRO, thanks for reminding me. I signed up for BMI like 16 years ago but didn't do a whole lot with it, and that one production I was the sole songwriter so it was easy. I'll need to start looking into *that* again, its been years since I've read/learned about it so I need to refresh my memories.

EDIT: None of the musicians have royalty agreements. It was all just paid in cash up front for their service. Most of this was recorded back in 2013-2015. Practically every local musician I worked with would rather be paid up front than having royalties, so I went that route. In the years since then, I've joined my local union and realized they strongly encourage both, but as I've finished up recording the last few singers in the past couple of years, I kept the same system I had in place in 2014 just in fairness. Next production I do will be different though!

I've also spent the past couple of days trying to get a hold of everybody, and there's still like half a dozen singers/musicians whom I can't get a hold of. It would suck for me to release this project and they not being aware of it.
 
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Yes - of course, but when your track they played on suddenly gets featured and goes crazy, those people will stick in a claim for their services, and without you being able to dispute it, they'll get it. The old story about bass player Herbie Flowers and walk on the wild side is a good example. He took the cash - but the record company kept the paperwork. Money, no points. If you just gave them some money - their playing is still their playing - not yours. Very unlikely to cause you grief, but those old recordings might well already have their names to it. PPL - who look after this in the UK, allow their members to add their names to every recording they have played on - it asks title, dates, instruments etc. Many do this just in case. I certainly have done it for over 30 years - only occasionally does money come from it, but a few pounds here and there still suddenly appear.
 
Slightly off topic and not very useful but...



Justin Tranter wrote some big hits, look him up if you don't know who he is.
 
I think that is very pertinent. There is a knock on advantage to the punters though? More bands are touring than ever before because that generates real money if done right. Lots of bands saw touring as losing them money, so stopped. Now we stream at tiny amounts per stream, a few arenas can put the caviar back on the table.
 
Seafroggys said:
Yeah I have to start thinking about PRO, thanks for reminding me. I signed up for BMI like 16 years ago but didn't do a whole lot with it, and that one production I was the sole songwriter so it was easy. I'll need to start looking into *that* again, its been years since I've read/learned about it so I need to refresh my memories.

EDIT: None of the musicians have royalty agreements. It was all just paid in cash up front for their service. Most of this was recorded back in 2013-2015. Practically every local musician I worked with would rather be paid up front than having royalties, so I went that route. In the years since then, I've joined my local union and realized they strongly encourage both, but as I've finished up recording the last few singers in the past couple of years, I kept the same system I had in place in 2014 just in fairness. Next production I do will be different though!

I've also spent the past couple of days trying to get a hold of everybody, and there's still like half a dozen singers/musicians whom I can't get a hold of. It would suck for me to release this project and they not being aware of it.
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You need paperwork - from the musicans playing that they are all work for hire (no royalties) which they are - but you didn’t get a written agreement. Your songwriting partner and you need paperwork that shows neither get anything until the record costs are recouped - and finally you need paperwork on the agreement you have - the 50/50 split after you’ve paid your streaming/posting services -
 
Eh, if one of the musicians/singers pressed for royalties, I wouldn't exactly be mad. Like I said, if I started a project now, I would do that. I considered adding that to the guys I've been recording now, but didn't in fairness to the people from 10 years ago. And I'm actively trying to get a hold of everybody who worked on it, and there's still like 5 people I haven't heard back from or don't even have contact information for. But if someone really wanted to press it, if for some reason this is big, it wouldn't be the end of the world.

Yeah, in 2011 I was 24 and gentlemen agreements were fine with me. I think I might do a contract with Alex though, wouldn't be a bad idea.
 
Contracts, even if done totally amateurishly can be useful if they contain details. I often use emails that contain questions rather than a formal contract with certain friends and even clients. Their answers and then perhaps your next emails can make it clear the intent, and then I think Judge Judy would not yell at me. That silly kind of test. I might say something like this.

I think we should stick this out as a single? I don't mind paying the fees and once we are making money, I can recover those and we split the money 50/50? I'll do the paperwork and then we sit back and wait (and wait). What do you think?

They might respond like this?

You sure you don't mind doing that? Are the fees a lot? I don't mind chipping in if it's not too expensive.

I would then say

No - it's fine, I have to do other ones anyway, so I can just do this one too - don't buy the new car yet!

Clearly this is not like a proper contract, and could be challenged, but the meaning is there and British courts like common sense and agreement. Not sure about other countries but homemade wills are quite valid here.

Legal folk will probably laugh, but it has always worked for me.
 
Never expected this - but I got a streaming distribution arrive today for a few cover songs, and for the first time, there is an entry for streaming in CHINA! China are paying royalties for music streamed in their country. That to me, is pretty amazing.
 
Damn, I'm amazed. I know they're notorious for IP theft, so the fact that happened is surprising. But welcome for sure!
 
rob aylestone said:
Never expected this - but I got a streaming distribution arrive today for a few cover songs, and for the first time, there is an entry for streaming in CHINA! China are paying royalties for music streamed in their country. That to me, is pretty amazing.
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That'll be Tencent Music Entertainment Group, part owned by Spotify. It's parent company Tencent is part owner of UMG (among many other media companies) and is licenced by UMG, Sony Et Al to offer streaming in China. A true behemoth in the media world.
 
I am very pleased but also a bit confused. PRS here, delayed payments a month because they had changed the system. I got paid yesterday and one track from my old band suddenly has gone a bit mad, with four other covers, and i just got £1200! Still the very silly 0.000002c per stream or whatever, but those 5 tracks individually went from £550 to £10. Everything else, less than £10, but those tracks were mostly spotify, with a few others i have never heard of, so clearly they are working. However, spotifys public stats show the best track still at <1000? Its very odd, but I am not complaing.
 
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