How Does a Songwriter Make Money on Songs?

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How Does a Songwriter Make Money on Songs?

When a songwriter writes a song, that songwriter owns intellectual property.  If it is a great song, it has the potential to become a millionaire song.  But for that song to be worth anything it will need to be published and used.  You will have to do a lot of work promoting your songs and getting them used by the right people.  The challenge is that you have millions of competitors.  So essentially, the secret to success is relationships with the right people who can take your songs and get them used in the right ways to generate income for you.

The music industry isn’t simple.  However, the quickest and simplest way to start generating income from your songs is to perform them and record them yourself.  You can use the latest desktop recording systems to record your own CD and duplicate it.  This makes you the songwriter-artist-manufacturer-distributor-retailer.  So you don’t share the profits with anyone.  That means you keep the entire sale of the recording and your only costs were what you had in the manufacturing process and whatever promotional costs you had.  If you perform your songs in a public venue such as a restaurant, you can make sure a performing rights organization such as ASCAP, SESAC, or BMI knows about your songs and your performances and you’ll make a few pennies each time you perform them.  You have to join one as both a songwriter and publisher, and register your songs with the organization.  You won’t become a millionaire this way unless you can develop such a large fan base that you become a local celebrity and leverage that on a national level.

There are a number of ways you can make income off of your songs once you can get them used on a larger scale than your local bar.  First, I already mentioned the Performing Rights Organization that will collect royalties for you.  I also mentioned selling recordings on CD or other formats.  Technically, as a songwriter, these mean mechanical royalties.  If you get a recording artist to use your song on their latest release, they will pay you a mechanical royalty for each copy they make of the recording.  So if they print 10,000 CDs to release, they will pay you for 10,000 copies of your song.  It doesn’t matter if they sell all of them or not.  In 2006, the rate was 9.1 cents per copy for songs under 5 minutes.  Then there are mechanical licenses.  These are agreements where you agree to let the artist release your song for somewhat less than the statutory rate. 

Other sources include Film and TV where you will get a synchronization fee.  This is negotiated.  Then, assuming you didn’t sign them away, you get performance royalties when the show is exhibited.  Also, you can make income from the sales of videos and DVDs of those movies depending on your contract.  A hit movie or TV show could make you a millionaire.  Then, you can also sell your songs to advertisers who will pay you a fee to use it, and then you will earn performance royalties when the commercials air.  This can be lucrative due to the performance royalties you are likely to collect.  You can also sell your song to a Broadway show.  This is one of the most lucrative markets if you can get in.  If the play is a hit, you will get income from all the other sources as the play is merchandised.  You usually have to be involved in writing the play.  If you get a song in a hit play, you could earn as much as 1.5% to 4% of box office receipts, meaning a potential of millions of dollars in income if you have a top Broadway hit.  Other sources of income include video games, karaoke products, video jukeboxes, and reprints of lyrics.  Beyond that you are limited only by your creativity as to how to license your work, like ringtones, greeting cards, door chimes, musical flowers, theme parks, corporate videos, music boxes, etc.

Millionaires don’t just magically get that way just by writing a song.  As you can see it takes a lot of experience, knowledge, talent, key relationships, and luck to be successful at this.  But just as it is with any profession, good financial management is the key to keeping more of what you make and investing it.  You might not make millions with your songs, but you can still become a millionaire if you manage your money well.

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