Music Revenue Sharing in the Industry: Lessons from the Past for More Fairness in the Future
For decades now, music revenue sharing has been a complicated topic in the music industry and for creative artists. Even global popular music stars like Taylor Swift aren’t exempt from it; so much so she had to re-record whole albums (Taylor’s Versions) to battle against it.
In the beginning, music royalties and revenue sharing splits were fair compensations to the artists, musicians, and other rights holders behind the scenes. However, with digital development and streaming channels, this has changed dramatically.
While major streaming platforms like Spotify, YouTube, Apple Music, Tidal, and others are collecting large shares of the income, many independent songwriters, artists, and musicians are barely making ends meet.
It’s time that everyone in the music business gets a better understanding of revenue diversification and, more importantly, finds better solutions for splitting revenue amongst providers — whether you’re the artist, musician, songwriter, producer, rights manager, or anyone else that’s involved in a piece of revenue share for a work of music.
That’s the primary purpose this article — help those in the music industry navigate revenue share by highlighting its background and development. Armed with this information, you’ll build better processes for ensuring rights holders on every song, album, or other music project is fairly compensated.
Throwback to the early analog era (1920s-1970s)
Jazz, disco, and rock ‘n roll – the analog era saw it all.
As “Hey Jude” moved global music lovers, musicians were earning revenues primarily from physical media sales and live performances.
Musicians and songwriters received compensation through music publishing royalties, while live performance revenue often provided a substantial portion of an artist’s earnings.
At that point, vinyl records and radio stations were the dominant ways of accessing licensed music, which, in turn, helped artists receive compensation. This revenue was distributed amongst artists, musicians, songwriters, producers, managers, agents–even lawyers.
Inching towards digital (1980s-1990s)
The groundbreaking album, Thriller, by Michael Jackson, witnessed the new era of CD albums. The complementary music video was also one of the first of its kind to be played on MTV.
This shift from analog to digital brought about major changes in the music industry. CDs revolutionized the way music was consumed and sold.
With better sound quality and longer playtimes, CDs were able to boost album sales and increase revenue for artists and labels. Furthermore, music videos on MTV became a powerful tool to help market new songs and generate higher revenues.
Radio royalties also underwent major changes in these decades.
Previously, royalty calculations and music revenue sharing were often based on estimates of airtime and manual record-keeping. However, with digital audio recording and playback systems, the process of calculating radio royalties became more accurate.
The 1980s and ‘90s also saw the rise of home studios, which allowed artists to produce music independently, reduce production costs, and increase their potential profits.
Finally, the digital revolution (2000s)
The digital revolution of the 2000s welcomed several huge artists, like Eminem, Jay-Z, and Usher.
But it was also a turning point for the music industry as platforms like Napster made possible the share and accessibility of music at global scale.
Unfortunately, this resulted in a revenue decline for artists, record labels, and other music rights holders. Additionally, iTunes allowed users to purchase individual songs rather than entire albums, completely changing how they earn money from their music.
The 2000s also introduced us to digital royalties that were becoming increasingly important as music was played on digital platforms like internet radio and streaming services.
Eventually, this led to record labels offering music revenue sharing deals that included a split of an artist’s income from multiple earning streams, including touring, merchandising, and endorsements.
However, 360 deals were criticized for being unfair to artists, as they can give labels significant control over the artist’s career and limit their earning potential.
Today, we’re in our streaming era (2010s-Present)
Enter Spotify, Apple Music & YouTube Music!
The streaming era of these global giants has completely altered music distribution and, in turn, music revenue sharing. While streaming offers convenience and accessibility to listeners, it has sparked debates over fair compensation for artists.
The shift to streaming has reduced income from album sales, leading artists to rely more on touring, merchandising, and alternative revenue sources.
The per-stream royalty model has proven challenging for many musicians, leading to discussions about the sustainability of the current system. It was found that Spotify offers around $.0033 per stream. Spotify, again, also requires artists and their representation to vie for preferred placement on popular playlists in order to improve their streams.
Simply put, an artist needs 300 streams to earn a dollar. Additionally, it was found that their royalties range from 2% to 20% only, regardless of their position in the industry.
While the streaming era has fundamentally changed revenue share for the foreseeable future, artists are finding additional ways to increase their income and thus, their split-able amount between collaborators.
Beyond music: How do artists diversify their revenue?
With the increasing popularity of platforms like Meta (formerly Facebook) and TikTok, the landscape of music revenue sharing is evolving rapidly.
Meta, in the last few years, has introduced a groundbreaking feature that allows music artists to earn a share of ad revenue from eligible videos that use their music on Facebook Videos and Reels. This development is a significant step forward in empowering artists and content creators alike.
Ad Revenue and Music Guidelines
Meta’s new functionality enables artists to receive a portion of in-stream ad revenue generated from videos featuring their music. This applies to videos that meet specific criteria, such as adhering to Meta’s music guidelines and community standards. By integrating music into their content, video creators can enhance the viewer experience while supporting the artists whose work they feature.
Eligible Videos and Community Standards
For videos to qualify for revenue sharing, they must comply with Meta’s community standards and music guidelines. Only eligible videos—those that are original, adhere to content policies, and avoid the use of bots or other artificial engagement—can participate in the revenue-sharing program. This ensures that the distribution of revenue remains fair and aligns with the platform’s commitment to authenticity.
Impact on Video Creators and Content Creators
This feature not only benefits artists but also video creators and content creators who are now incentivized to use licensed music in their projects. By doing so, they contribute to a more vibrant ecosystem where creativity is rewarded. This is particularly relevant as Meta competes with TikTok, where music is a core component of viral content.
A Future of Transparent and Fair Revenue Sharing
As this functionality gains traction, it sets a precedent for how other platforms might approach music revenue sharing.
The ability for artists to receive a fair share of in-stream ad revenue directly from platforms like Meta could reshape the music industry’s future, making it more transparent and sustainable for all stakeholders involved. However, the future for fairer music revenue sharing doesn’t end here.
How do we make the future of revenue sharing in the music industry fair?
The last decade or so has posed a number of challenges to an artist’s revenue share, leaving them desperate for a solution. While popular global stars are able to generate significant income, many mid-level artists end up with very little profit.
As a result, new revenue-sharing models are likely to emerge. Direct artist-to-fan models, like crowdfunding, direct sales, and fan subscriptions could allow musicians to retain more control over their income.
On the other hand, AI may help streamline royalty distribution and music revenue sharing to ensure artists are compensated more accurately and efficiently. As technology continues to change, copyright laws will need to adapt to help creators get fairly compensated for their work.
Music revenue sharing between collaborators: An unnecessary challenge
Historically, revenue sharing in the music industry among collaborators has been a major challenge.
It’s often handled manually, leading to disputes over rights and percentages. Moreover, music revenue sharing usually doesn’t follow a standard format. Some collaborators agree on equal splits, while others opt for percentage-based shares.
When a single project generates income from album sales, streaming, licensing, and more, tracking music revenue sharing earnings can become incredibly complicated, especially with multiple revenue streams involved.
How can the music industry accurately calculate percentages for each album sale or streaming play? Managing these complex calculations manually, using traditional methods like spreadsheets, can be overwhelming and prone to error.
Since every cent counts, it’s crucial to have a reliable system in place. That’s why collaborators should turn to more efficient platforms like mozaic.
The solution: mozaic
mozaic is a global payment platform for multi-party payouts. We are the only split payment API providing smart contracts that automates split income among creative teams on any project, anywhere. Born and bred from the music industry, mozaic offers solutions for creators and businesses alike.
Our unique payment solution ensures collaborators get paid accurately and on time without any administrative hassle or human errors.
Whether you’re handling music royalties, ad revenue, or other revenue share in the music industry, mozaic can automate complex split payments in multiple currencies. This way, artists no longer have to worry about unjust revenue sharing — we handle all the legwork and technical work.
Revenue share in the music industry is made equitable with mozaic
Vinyl records, CD albums, radio royalties, and app streaming—the music industry has undergone significant changes in the last few decades.
Each change brought new challenges for artists, particularly in music revenue sharing, leaving them without a solution. Luckily, the search for a solution is over.
With innovative solutions like mozaic, there is hope for a fairer and more transparent revenue-sharing system that allows collaborators to focus on what they do best: creating.
Ready to take control of your earnings?
Schedule a personalized demo today and see how mozaic can transform your creative business and streamline your music revenue sharing!
