Just under the surface of many of my daily interactions with music clients, is one question: Where does the money come from? The quick answer to that question is, for a new artist, mostly from live performances (i.e. cover charge money from the door). However, eventually, artists can make money from taking advantage of their songs and recordings (also referred to as "exploiting their copyrights").

Outside of live performances and merchandising, the money that is made in the music industry comes from two sources: the composition copyright or the sound recording copyright. In the interest of keeping this discussion simple, the bullet points below explain where the money comes from for compositions and sound recording copyrights.

COMPOSITIONS: (see Composition vs. Sound Recording Copyright for more information) Payable to the songwriter(s). This source of income is divided between a songwriter and the songwriter’s publishing company, which seeks to exploit the song on the songwriter’s behalf.

Mechanical Royalties – (9.1 Cents per sale) payments from sales of songs on cds, digital downloads, ringtones, etc.

• Includes payments from cover songs (i.e., Joni Mitchell and her publishing company are paid 9.1 cents each time Big Yellow Taxi is downloaded on iTunes.)

Public Performance – terrestrial and satellite radio, cable and broadcast television

• Performance rights organizations (PROs), such as ASCAP, BMI, and SESAC, collect money from radio, cable, and broadcast television stations each time a song is played. The PROs are paid lump sums by the stations. Songwriters and publishers are paid based upon how frequently their songs are played.

Synchronization Licenses – for film and television

• A "synch" license provides the right to synchronize the composition with video. For unsigned artists, synch and master use licenses (see below) are often acquired through one document.

Sheet Music

• Music books with notes and guitar tabs

Derivative Licenses

• The right to derive a new composition that is based upon another pre-existing composition. (Think: Kid Rock’s "All Summer Long" as derived from "Sweet Home Alabama")

SOUND RECORDINGS: Paid to the musicians whose performance is embodied on a specific final version of a recording. If a record label is involved, the label will own the sound recording copyright (or at least some percentage of it).

Album sales, digital downloads, CDs, etc -

• all net profit after mechanical royalties are paid

Master Use License – for film and television

• A master use license provides the right to use a sound recording in synchronization with video. A synchronization license is also needed.

Satellite Radio Public Performances – through Sound Exchange

• Paid to the studio musicians, the labels, and the primary artist(s)

NOT terrestrial radio or broadcast television public performances

• The United States is among a very small number of nations (including Iran, North Korea, and China) that do not pay public performance royalties to sound recording copyright owners. When you hear a song on the radio, only the songwriter – not the performing artist or his or her record label – benefits.