Master Derived Income

I received an e-mail over the weekend from Jason asking what the “Master Derived Income” is that I made reference to in my “Getting Label Attention” post.  I’m really excited about this question as it’s getting into a bit more of the business detail which every band needs to understand.  You have to look at your band as a business if your goal is to become a career musician.  If you aspire for anything more than a band that plays for fun at the local club (which there’s absolutely nothing wrong with) you need to figure out how to pay the bills…the only way to do that is by generating income.  One possible source for this income is your Masters.

Topic – Master Derived Income
What is it and how do I get it?

Advice:
First, let’s make sure we know what a Master is.  For every song there are 2 copyrights, the publishing copyright and the master copyright.  Publishing copyrights are what make the song itself…the lyrics,  melodies, notes, progression of chords…it’s the writing of a song.  Master copyrights are the recordings of those songs..it’s the captured audio.  So every song that’s ever been recorded is a Master… What’s a copyright?  Just think of it as acknowledged protection that informs everyone that you own something and if they want to use it they have to receive permission from you and pay you for using it.

Still with me?!

So now that you know Masters are the recording of songs we can discuss how to make money off of that!  Most commonly it’s putting about 10-12 of those masters onto one album, making CDs, and selling them at shows for about $10.  But now, there are more and more opportunities to make money off the “exploitation” of masters such as selling digital downloads, ringtones, ringbacks, and licensing (allowing the use) of masters in film, tv, and or video games.  Each of these avenues create income for the owner of those masters.

Typically, when you sign to a label they own your masters.  They give you an advance (maybe), pay for the recordings (budgets are getting smaller), and they own the masters.  In return, they give you a royalty, or %, of the income generated by those masters…but count on never seeing it as it’s only paid to you if your account with the label is recouped.  So now, every time an album is sold, a track is legally downloaded, a ringtone is purchased…it goes back to the label.  If you’re an independent artist and you retain ownership of your masters, you will receive the full benefit and income generated from any and all sales and uses of your songs.  “But if we’re on a label and we’re selling our CDs at shows..don’t we get to keep that money”?  Sure, after the label sends you an invoice for anywhere between $6-$7.50 per CD that you sell.  You have to buy your CDs from the label.  They own it.

Advice?  Depends on what your short and long term goals are.  I’m an advocate of holding onto everything you can….especially now.  No one knows exactly what’s going to happen over the next 1, 2, 5 years in the music industry…every label is struggling…why hand your control and ownership over now?  You can’t wait 2 years, write better songs, develop a regional fan base, and then see if there’s a better opportunity?

Just a thought….
Ben