The Songwriting Business
Needs an Overhaul

Today on the Sound Royalties blog, we look back at a powerful piece from our CEO Alex Heiche on the need for substantial changes to be made in the songwriting business.

Published last year in The Tennessean, Alex’s insightful takeaways still ring true today. Give it a read:

The Songwriting Business Needs an Overhaul

The songwriting business needs an overhaul

By Alex Heiche

Recently, YouTube and the National Music Publishers’ Association announced a settlement that will go a long way toward making sure that the amazing people who create the soundtracks to our lives receive the money they have rightfully earned.

The settlement, which follows several others like it, is a big step in the right direction, but there is still a tremendous amount of work to be done.

The music industry is immense. Estimates show that YouTube’s music user base is more than 800 million people. And Spotify’s 2015 payment to the recording industry – about $2 billion – showed that their service had more than 100 million users. The industry generates more than $15 billion per year in the U.S. alone.

But that doesn’t tell the whole story, because many in the industry – even those who have already “made it” – are still struggling to make ends meet.

Songwriters and other music professionals rely on royalty paychecks that are typically delayed for many months. They often find themselves lacking the funds to fuel their creativity and drive their continued success.

As with performance licensing, for mega-stars, this problem isn’t a big one. But for the tens of thousands of people who work in music but don’t sell out stadiums or have their names on major marquees, the consequences are enormous. Many depend on those royalty checks to pay their bills, feed their families and keep their careers going from month to month.

Traditionally, this has led songwriters, producers and even record labels to sell their copyrights, giving up control of what happens to the music they have created and the future revenue from their creative works. Banks and lending institutions are often unaccustomed with the details of how royalty payments work, and are strictly regulated on the criteria they use to lend, leaving artists with few options. This forces songwriters to mortgage their assets – and the potential for lifelong earnings – in exchange for short-term cash.

Back in 1997, David Bowie – already a worldwide superstar for decades – worked with a banker to issue “Bowie Bonds.” In a deal worth $55 million, they offered investors the right to own a share of future royalties generated by the 25 albums Bowie had recorded before 1990 for a limited period of time. The model worked and the royalties eventually reverted back to Bowie as they rightfully should have.

Other artists tried to do the same, but after the digital revolution hit music in 2005, the potential largely vanished. That is because album sales do not generate the kind of revenue they used to, and streaming payouts are notoriously paltry.

We all love music; it brings joy to our lives and can be one of the great unifiers in our society. If we want this to continue, then we must find a way to ensure that writing music remains a viable career option for future generations. We must innovate on the business side of the music industry today, or risk losing the talented people who will innovate on the creative side in the future.

The time is now for the industry to evolve.  We must ensure that there is always a financially viable path for talented men and women to pursue full-time careers as songwriters. If we can help them make a good living while simultaneously living their artistic dreams, then the result will ultimately be more songwriters and more incredible music for the world to enjoy.

Alex Heiche is the CEO and founder of Sound Royalties, a company working to transform the entire way that songwriters fund their creativity.