Mastering Revenue Splits in Music Collaborations: A Comprehensive Guide
In music, collaboration is key to success.
Collaboration on projects like songs, albums, and EPs involves a whole slew of disciplines: music production, songwriting, and vocal development, to name a few.
These collabs foster innovative ideas, enhance productivity and increase revenue.
In this comprehensive guide, you’ll learn the intricacies of music collaboration, focusing on one of its most crucial aspects: revenue splits.
The rising trend of music collaborations
The music industry has witnessed a significant surge in collaborations and creative partnerships, with a 30% increase in features and collaborations since the 90s.
This trend is evident in the growing number of songs with multiple artists reaching number one on Billboard’s Top 100, with the majority of music collaborations seen in hip-hop. In 2020, 40% of the top 100 songs involved a feature or collaboration, demonstrating the rising popularity of collaborative music-making.
Additionally, DJ Khaled, a prominent hip-hop producer, has achieved 24 Billboard Hot 100 hits in just over a decade, all of which are collaborations with other artists. Streaming services like Spotify and Apple Music have fueled cross-genre collaborations, allowing artists to experiment and grow their fanbase.
Examples of successful music collaborations:
- Jay-Z and Linkin Park – “Numb/Encore”
- Lil Nas X and Billy Ray Cyrus – “Old Town Road”
- CKay and ElGrandeToto – “Love Nwantiti”
When artists collaborate, they need to share the profits. That’s where revenue splits come in, a vital part of any joint project.
Revenue splits, explained
Revenue splits refer to the process of dividing income generated from a collaborative project among its contributors. This can encompass various forms of compensation, including:
- Royalties from music streaming and sales
- Profits from content monetization
- Licensing fees from commercial use
The importance of fair and transparent revenue splits
As music collaborations become the trend, fair and transparent revenue splits are essential to protect the interests of all contributors and artists. Similar to a business partnership, equal profit-sharing is crucial to safeguard the rights of songwriters, producers, featured artists, and music creators.
Key elements of fair and transparent revenue splits:
- Clear reporting of royalties and streaming revenue
- Open communication about revenue splits and payment terms
- Fair compensation for collaborators, producers, and songwriters
- Safeguarding artists’ rights and interests
The outcomes from fair and transparent revenue splits:
- Successful collaborations through clear revenue splits
- Harmony and understanding among collaborators
- Fair compensation motivates artists to produce their best work
- A positive collaboration environment drives music industry success
The pain points of traditional split management
Collaborative music creation can be a rewarding experience, but navigating revenue sharing and royalty distribution can be complex and daunting. Independent musicians and contributors face significant challenges in ensuring accurate compensation.
Traditional split revenue management platforms (e.g., DistroKid, TuneCore) offer limited support, and they often prove unreliable in dynamic music collaboration, leading to issues like:
- Unclear royalty splits and misunderstandings over percentage splits, causing disputes among collaborators, songwriters, and featured artists
- Manual calculation errors and complications in applying for accurate music publishing royalties and splits
- Late or inconsistent payments, delaying compensation for music producers, beatmakers, and other contributors
- Lack of real-time information and insight, creating uncertainty for rights holders
- Misunderstandings lead to costly litigation and friction between collaborators and distributors
- Time-consuming tracking of splits, distracting from creativity and growing the music business on streaming platforms like Spotify, Apple Music, and Amazon.
Decoding the revenue streams: Where's the money coming from?
Streaming royalties
Streaming royalties are a key revenue source for artists, paid based on total streams on a platform. For example, Spotify typically pays between $0.003 to $0.005 per stream. For example, with 100 million streams, an artist will earn approximately $300,000 to $500,000
The pro-rata model pools subscription fees and ad revenues, paying artists based on their share of total streams. This benefits large artists with significant streaming numbers. For instance, if Artist A represents 10% of all streams with 10 million streams on a platform and the total artists’ payout is $10 million, Artist A’s share would be $1 million.
In contrast, the user-centric model divides each user’s subscription fee among the artists they listen to. Artists are paid based on individual user listening habits, making it more equitable for niche and individual artists.
They receive direct support from their fan base, rather than sharing revenue with all artists on the platform. For example, if User X pays $10 a month for a subscription and listens only to Artist B, then Artist B’s total profit is $10, regardless of how other artists perform.
Performance royalties
Performance royalties offer artists and songwriters another valuable income stream, compensating them for the public performance of their work. Artists can earn performance royalties through various channels, including radio plays, live performances, and TV and film placements.
When a song is played on the radio, the station pays a performance royalty to the song’s rights holders. For example, if Taylor Swift’s song ‘Shake It Off’ is played on a popular radio station 10 times a day, the radio station would pay a royalty of $10 per play, totaling $100 per day, to Taylor Swift and her publisher.
Live performances also earn performance royalties, typically based on ticket sales. For instance, when The Rolling Stones perform “Satisfaction” at a sold-out concert with 10,000 attendees, the venue pays a royalty to the song’s rights holders. If the concert grosses $100,000 and the royalty rate is 5%, the rights holders would earn $5,000.
TV and film placements require a sync license, which includes a performance royalty. For example, if a TV show like “Stranger Things” uses The Clash’s “Should I Stay or Should I Go” in an episode, the show’s producers pay a sync license fee, including a performance royalty to the song’s rights holders. Let’s say the sync license fee is $10,000; in this case, The Clash’s rights holders would earn $10,000 for the placement.
Performance royalties are typically collected by performing rights organizations (PROs) like ASCAP, BMI, and SESAC. These organizations track public performances of songs and distribute the royalties to the rights holders. This ensures fair compensation for the public performance of artists’ and songwriters’ work, providing a vital source of income.
Sync licensing fees
Sync licensing fees offer artists and songwriters additional revenue streams when their music is used in TV shows, movies, commercials, or video games. These fees are negotiated between rights holders and users, varying widely depending on usage and territory.
Sync licensing fees can also apply to physical and digital sales, such as when a song is featured on a soundtrack album. For example, a song by hip-hop artist Kendrick Lamar is featured on the soundtrack of a popular movie. The record label and publishing company (rights holders) negotiate a sync license fee with the movie producer for the use of the song. If the soundtrack sells 100,000 physical copies and 500,000 digital copies, the rights holders earn a percentage of the revenue, say 10%, which would be $150,000 (10% of $1,500,000).
Sync licensing fees can also apply to merchandise and brand partnerships, such as when a song is used in a commercial or advertisement. For example, a popular electronic music producer, Calvin Harris, partners with a fashion brand to use his song in their commercial. The brand pays a sync license fee to Harris and his publishing company for the use of the song. If the commercial airs 100 times on TV and online, the rights holders earn a fee, say $5,000 per airplay, totaling $500,000.
The advantages of sync licensing fees include increased revenue through extra income streams. This exposure and promotion can lead to increased popularity and sales. Rights holders also gain control and fair compensation. Additionally, sync licensing fees create diversified income streams reducing dependence on single sources.
Other creative initiatives
Artists can also explore various creative initiatives to monetize their music and brand beyond traditional revenue streams. One way is through social media platforms like YouTube, TikTok, and Instagram, where they can earn money from multiple sources such as:
- Ad revenue (e.g., YouTube’s Partner Program)
- Sponsored content (e.g., brand partnerships on Instagram)
- Affiliate marketing (e.g., promoting music gear on TikTok)
Example: Billie Eilish uses Instagram to promote her music and partner with brands, earning an estimated $205,359 – $342,265 per sponsored post.
Another approach is investing in marketing efforts to increase music visibility and sales. This can include:
- Email marketing campaigns
- Influencer partnerships
- Online advertising (e.g., Google Ads, Facebook Ads)
Example: Taylor Swift’s team launched a targeted marketing campaign for her album “Folklore,” resulting in a record-breaking 1.3 million album sales in 24 hours.
Artists can also diversify their income streams by monetizing their brand, creativity, and expertise beyond music sales. This can include:
- Merchandise sales (e.g., Kendrick Lamar’s clothing line)
- Live events and experiences (e.g., festivals, workshops)
- Licensing music for use in video games, ads, or TV shows
Example: Rihanna has built a business empire beyond music, including her cosmetics line Fenty Beauty, which generated an estimated $1.4 billion in revenue in 2020.
The art of the split: Understanding different collaboration scenarios
Producer-artist collaborations
In producer-artist collaborations, the producer contributes to composition, arrangement, and production, while the artist focuses on vocals and lyrics. The split of credits and royalties depends on the agreement, but common splits include 50/50 or 60/40 in favor of the artist.
Example: Producer Max Martin works with artist Taylor Swift to create a song. Max contributes to the composition and production, while Taylor focuses on vocals and lyrics. They agree to a 60/40 split in favor of Taylor, meaning Taylor gets 60% of the credits and royalties, and Max gets 40%.
Featured artist arrangements
Featured artist arrangements involve one artist contributing vocals, rap, or instrumentation to another artist’s track. The split depends on the agreement, but common splits include 50/50 or a flat fee.
Example: Artist Kendrick Lamar is featured on artist Maroon 5’s track. Kendrick contributes vocals and rap to the song. They agree to a 50/50 split, meaning Kendrick gets 50% of the credits and royalties for his contribution.
Songwriting partnerships
Songwriting partnerships involve two or more songwriters collaborating on a song. The split depends on the agreement, but common splits include 50/50 or a percentage-based split reflecting each songwriter’s contribution.
Example: Songwriters John Legend and Alicia Keys collaborate on a song. They agree to a percentage-based split, with John getting 60% of the credits and royalties and Alicia getting 40%, reflecting their respective contributions to the song.
Band dynamics
Band dynamics involve the collaboration of multiple musicians in a band. The split of credits and royalties will depend on the agreement between the band members, but common splits include equal shares or a percentage-based split reflecting each member’s contribution.
Example: The band Imagine Dragons has four members who collaborate on a song. They agree to an equal split, with each member getting 25% of the credits and royalties.
Sample clearances and interpolations
Sample clearances and interpolations involve using a portion of another artist’s work in a new song. The original artist or rights holder must clear the sample and agree to a split of credits and royalties, which can range from 50/50 to a flat fee.
Interpolations involve re-recording a portion of another artist’s work, and the split of credits and royalties will depend on the agreement between the artists.
Example: Artist Cardi B wants to use a sample from artist The Notorious B.I.G.’s song in her new track. She clears the sample with Biggie’s estate and agrees to a 50/50 split of credits and royalties. Alternatively, she could also interpolate the song by re-recording the portion she wants to use and agree to a flat fee or percentage-based split with Biggie’s estate.
Crafting your split agreement: A step-by-step guide
Step 1: Determine contributions and value
- Identify roles: songwriters, producers, featured artists, beatmakers, and contributors.
- Assess the value of each contribution: vocals, lyrics, melody, production, etc.
- Determine ownership percentage based on contribution and fair share.
Step 2: Negotiate fair percentages and ownership
- Discuss the percentage split, royalty split, and revenue split among collaborators.
- Consider industry standards, market rates, and fair share.
- Negotiate ownership shares with distributors, record labels, and music publishing companies.
Step 3: Document the agreement
- Put agreed-upon split in writing for streaming services for platforms such as Spotify, Apple Music, and Amazon.
- Include details on royalty payments, accounting, dispute resolution, and communication protocols.
- Define the roles and responsibilities of each collaborator, including rights holder and contributor.
Step 4: Register with PROs and publishing administrators
- Register with PROs (ASCAP, BMI, SESAC) for music royalties and payouts.
- Register with publishing administrators (HFA, Music Reports) for mechanical royalties and music publishing.
- Ensure accurate registration for proper royalty distribution and credit on playlists.
Enter the digital age: Streamlining splits with technology
The traditional method of using spreadsheets and manual tracking for split management has limitations, leading to errors, discrepancies, and inefficiencies.
This approach lacks transparency and visibility, hindering collaborators’ ability to communicate and work together effectively. As businesses grow, scalability becomes a significant issue, making it essential to explore alternative solutions.
Modern-day split management platforms offer a centralized hub for automating split tracking and calculation, providing real-time reporting and analytics, and facilitating collaborative tools for transparent communication. These platforms integrate with existing systems and workflows, allowing for seamless adoption and scalability. By leveraging technology, businesses can streamline split management, reduce errors, and focus on growth.
When selecting a split management platform, consider key features such as automated split calculation and tracking, customizable split structures and templates, real-time reporting and analytics dashboards, collaborative tools, integration with existing systems, scalable and secure infrastructure, user-friendly interface, and reliable customer support.
Spotlight on mozaic: The answer to mastering revenue splits in music collaborations
As we’ve discussed, modern split management platforms offer numerous benefits for today’s music collaborators. To illustrate how these tools work in practice, let’s examine a popular option, Mozaic, and how it addresses the challenges we’ve discussed so far.
Mozaic is a global split payment platform designed for creators, offering a streamlined solution for managing and automating split payments. With Mozaic, creators can easily split earnings with collaborators across the globe, regardless of their location or currency.
Mozaic automates the split process in three key ways:
- Mozaic allows for easy setup, adjustment, and tracking of split agreements, ensuring that collaborators receive their fair share of earnings.
- Mozaic provides real-time transparency into payments, enabling collaborators to track their earnings and ensuring accountability.
- Mozaic offers instant payments to collaborators, eliminating the need for manual payment processing and ensuring timely receipt of earnings.
Best practices for long-term split success
To ensure the longevity and success of split agreements, adopting a proactive and informed approach is essential. The following best practices will help you navigate the complexities of split management and foster a harmonious collaboration environment.
- Regular Communication: Maintain open and transparent communication channels with collaborators through regular meetings or updates to discuss progress, concerns, and changes.
- Periodic Review: Regularly review split agreements to identify areas for improvement, ensure relevance and fairness, and make adjustments as needed.
- Detailed Record-Keeping: Keep accurate and comprehensive records of split agreements, payments, communication, and project progress to ensure transparency, accountability, and easy reference.
Industry Knowledge: Stay informed about industry developments, changes in laws and regulations, and new technologies to adapt and optimize split agreements for long-term success.
Automated split payments in the music industry are made possible with Mozaic
Mastering split management is crucial for achieving financial clarity and optimizing cash flow between music collaborators.
By understanding the fundamentals of split management and utilizing the right tools and strategies, you can make informed decisions that drive your business toward greater financial success.
Try Mozaic and discover how our innovative solutions can transform your split management practices. With Mozaic, you can achieve greater financial clarity and control, allowing you to focus on what truly matters—growing your business.
Ready? Start with mozaic today!