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FMCnewbusinessmodels

Examples of New Business Models in Music *

Last update: Sept 12, 2012

and how labels, artists and songwriters are paid

* Compensation figures and agreements included in this chart are based on research, published FAQs,

2007-2012 Future of Music Coalition

and prior knowledge of services but should be verified with actual sources for accuracy.

www.futureofmusic.org

Are they compensated, and how much?


CATEGORY

SERVICE

FORMAT

DETAILS

LABEL

Online mailorder and digital retail


store. CD Baby also acts as an
aggregator, delivering digital music
to iTunes, Amazon, Spotify, etc.

Consumers can buy physical CDs


that are then shipped to them in
the mail, or can buy digital albums
or singles via CD Baby website.

N/A. Almost entirely unsigned


artists, or artists running their own
labels, so entire payment goes
directly to artist.

YES. Artist sets price of their album. CD


Baby keeps $4 for each physical CD sold.
The rest goes to the artist. For digital sales, Songwriter and publisher are paid
artist gets 75% of income from sales on CD mechanical rate: label/artists'
Baby, and 91% of net revenue from
responsibility.
iTunes/Amazon/ streaming services. Paid
out every Monday.

DIGITAL RETAIL iTunes Music Store

Digital retail store.

YES. Of $9.99 sale, label or digital


Consumers buy individual tracks or
distributor reportedly gets
albums for set rates, usually 99
$6.50$7.00. iTMS pays out on
/track or $9.99/album.
sales monthly.

YES. unsigned artist: gets anywhere from


91% to 100% of the $7.00 paid to
Songwriter and publisher are paid
label/aggregator. Indie label or major label
mechanical rate: label/artists'
artist: more complicated because sales are
responsibility.
based on percentages or "points" on
contract.

DIGITAL RETAIL Amazon Music Store

Digital retail store. All MP3 tracks.


Also offers cloud storage.

Consumers buy individual tracks or


albums for set rates, usually 99
cents/track or $8.99/album, though
some tracks are steeply
discounted.

YES, Same as above. Unsigned artists get


91% - 100% of what's paid to
Songwriter and publisher are paid
label/aggregator. Indie label or major label mechanical rate: label/artists'
artist gets whatever their contract
responsibility.
stipulates.

Digital retail store with cloud


storage.

YES, Same as above. Unsigned artists get


91% - 100% of what's paid to
Consumers buy individual tracks or YES. Though terms are not
label/aggregator. Indie label or major label
albums for set rates, usually 99
disclosed, it's similar to iTunes
Songwriter and publisher are paid
artist gets whatever their contract
cents/track or $8.99/album, though Music Store where, of $9.99 sale,
mechanical rate: label/artists'
stipulates. Artists can also go direct to
some tracks are steeply
label or digital distributor reportedly
responsibility.
Google Play and get 70% of profit, after
discounted. Free song of day.
gets $6.50-$7.00.
$25 setup fee. Provides good integration
with YouTube for track sales.

On demand subscription service


(with other features including
downloads, to go, etc).

For subscription streaming service,


consumers pay $5 to $10/month to
have real-time access to enormous
library of albums and songs. Some
offer free, ad-suppored tiers. (Paid
downloads also available for
subscribers).

DIGITAL RETAIL CD Baby

DIGITAL RETAIL Google Play

SUBSCRIPTION

Rhapsody, Spotify, MOG,


Rdio, Zune, Slacker

YES. Though terms are not


disclosed, it's similar to iTunes
Music Store where, of $9.99 sale,
label or digital distributor reportedly
gets $6.50-$7.00.

YES. For interactive streams:


direct licensing fee negotiated with
the labels. Rates are not disclosed.
For noninteractive steams, label
gets 50% of SoundExchange
digital performance royalties.

PERFORMER

YES. For interactive streams, fractions of a


penny per play. For noninteractive streams,
featured performer also gets 45% of
SoundExchange digital performance
royalties.

SONGWRITER

YES. For the subscription/


streaming services, each have
licenses with ASCAP/BMI/SESAC
for songwriter/publisher
performance compensation.

FMCnewbusinessmodels

Examples of New Business Models in Music *

Last update: Sept 12, 2012

and how labels, artists and songwriters are paid

* Compensation figures and agreements included in this chart are based on research, published FAQs,

2007-2012 Future of Music Coalition

and prior knowledge of services but should be verified with actual sources for accuracy.

www.futureofmusic.org

Are they compensated, and how much?


CATEGORY

SERVICE

FORMAT

DETAILS

LABEL

PERFORMER

SONGWRITER

Online subscription download


service. All MP3 tracks.

Consumers pay from $11.99


/month for 24 downloads, up to
$31.99/month for 73 downloads.
Since songs are MP3s, they can
be played on any player, including
iPods and iPhones.

YES. eMusic pays a set


percentage of subscriber
revenue/month to label or
distributor, calculated on their
share of downloads.

YES, Same as above. Unsigned artists get


91% - 100% of what's paid to
Songwriter and publisher are paid
label/aggregator. Indie label or major label mechanical rate: label/artists'
artist gets whatever their contract
responsibility.
stipulates.

ARTIST-TO-FAN Bandcamp

Adds physical and digital music


sales and merch sales option to
existing band website or blog, or
serves as web host for artist.

Provides fast, dependable


streaming and downloads of an
artists' entire catalog, Artist sets
prices (which can include free),
can choose high bitrates.
Bandcamp provides the web
interface for a very powerful, artistcontrolled storefront.

USUALLY N/A BUT.... Almost


entirely unsigned artists, or artists
running their own labels, but some
indie labels have storefronts here
as well. Assume that label gets
85% under $5000 and 90% of
sales over $5000, same deal as
unsigned artists.

YES. Artist gets 85% of sales under $5000,


and 90% of sales $5000+. Bandcamp, as
the intermediary, gets 15% of each
Songwriter and publisher are paid
transaction, but that drops to 10% if your
mechanical rate: label/artists'
sales exceed $5000. For artists signed to
responsibility.
labels using Bandcamp, assumption is that
label receives sales revenue and passes
along royalties to its bands.

ARTIST-TO-FAN Radiohead experiment

Short term digital release


experiment run by the band that
offered variable pricing option.

Consumers could pay "nothing",


N/A. No record label involved, at
although there was a $1 "handling
least at this stage of the
charge", plus Radiohead collected
experiment.
everyone's contact info.

YES. Though real figures were not


published, it's assumed that Radiohead
kept the vast majority of the income from
these sales

YES. Radiohead are also the


songwriters, so they retain all the
income from these sales.

On website, fans could choose


from: A) getting first nine songs for
free; B) paying $5 for a high bitrate
download of whole record; C) $10
for 2 CD set; D) $75 for deluxe CD N/A. No record label involved.
set or E) $300 for signed edition.
Also released simultaneously on
Amazon, and seeded to P2P
networks.

YES. Trent Reznor reported to media that


all the box sets sold out ($750,000), and
that, in the first week, there were 781,917
transactions that earned $1.6 million.

YES. NIN are also the


songwriters, so they retain all the
income from these sales.

Consumers can download as


many albums or songs as they
want for $15/month. Members can YES. Magnatune, acting as a
also access simple, one-click style "label", keeps 50% of
licensing for music uses in films,
sales/licenses.
TV, videos, etc. High bitrate
options.

YES. Artist gets 50% of any sale and/or


license fees.

Songwriter and publisher are paid


mechanical rate: label/artists'
responsibility.

SUBSCRIPTION

eMusic

Digital release of 36-track album,


ARTIST-TO-FAN Nine Inch Nails experiment Ghosts I-IV, that offers a range of
pricing and features.

ARTIST-TO-FAN Magnatune

Website with physical and digital


retail store, with $15/month
subscription fee and online
licensing.

FMCnewbusinessmodels

Examples of New Business Models in Music *

Last update: Sept 12, 2012

and how labels, artists and songwriters are paid

* Compensation figures and agreements included in this chart are based on research, published FAQs,

2007-2012 Future of Music Coalition

and prior knowledge of services but should be verified with actual sources for accuracy.

www.futureofmusic.org

Are they compensated, and how much?


CATEGORY

ADVANCE
PROJECT
FUNDING

ADVANCE
PROJECT
FUNDING

ADVANCE
PROJECT
FUNDING

ADVANCE
PROJECT
FUNDING

ADVANCE
PROJECT
FUNDING

SERVICE

Kickstarter

Pledge Music

FORMAT

DETAILS

LABEL

Musician sets up a goal -- say,


raising enough money to record an
album or buy a van -- and offers
Creative incubator that facilitates
different incentives to funders to
project funding by helping artists
contribute. $5 may get you a free
build project pages, create
CD, and $5000 may get you
N/A. No record label involved.
incentives, track fundraising
executive producer credit.
progress.
Projects must meet target within
30 to 60 day time frame. Money is
not given to artist unless project
goal is met.
Musician sets up a goal -- say,
raising enough money to record an
album or buy a van -- and offers
Music-focused incubator that
his/her funding patrons different
facilitates project funding by helping
incentives to contribute. There is
artists build project pages, create
no time limit on project length
N/A. No record label involved.
incentives, track fundraising
(must be less than 364 days).
progress, pre-sell albums and offer
Money is not given to artist unless
exclusives.
project goal is met. Also includes
charity-related funding, if targets
are met.

PERFORMER

SONGWRITER

YES. If the project goals are met, the artist


receives 95% money that Kickstarter
collected for them. Kickstarter keeps 5%. If N/A in this case.
they do not meet their goals, the funders
are given their money back.

YES. If the project goals are met, the artist


receives the 85% of the money that Pledge
collected for them. Pledge keeps 15%. If
N/A in this case.
they do not meet their goals, the funders
are given their money back.

Indiegogo

Creative incubator that facilitates


project funding by helping artists
build project pages, create
incentives, track fundraising
progress.

Musician sets up a goal -- say,


raising enough money to record an
album or buy a van -- and offers
N/A. No record label involved.
his/her funding patrons different
incentives to contribute. Musician
chooses the funding strategy.

YES. Two funding options. (1) fixed project


goal that must be met in order to be
funded, in which artist gets 96% of pledged
N/A in this case.
money or (2) flexible goal in which artist
gets 91% of what's collected, even if they
don't reach their target.

Sellaband

Musician sets up a financial goal


and incentives for fans. Music fans
Online service that sells "parts" in a
can by a $10 "part" in a band, or
N/A. No record label involved.
band's future work
numerous bands, to support
upcoming projects.

YES. If the project goals are met, the artist


receives the 85% of the money that
N/A in this case.
Sellaband collected for them. Sellaband
keeps 15%.

ArtistShare

Label that builds patron


communities around its artists.

Consumers/music fans can not


only buy digital/physical CDs of
Artistshare artists, they fund the
projects in exchange for the
privilege of accessing
YES. Artistshare, as the label,
"the creative process" -- attending keeps a small percentage.
recording sessions/rehearsals,
working drafts of music in
progress, credit on the CD. Money
collected underwrites artists' costs.

YES. Artist gets a large percentage of


revenue from sales.

Songwriter and publisher are paid


mechanical rate: label/artists'
responsibility.

FMCnewbusinessmodels

Examples of New Business Models in Music *

Last update: Sept 12, 2012

and how labels, artists and songwriters are paid

* Compensation figures and agreements included in this chart are based on research, published FAQs,

2007-2012 Future of Music Coalition

and prior knowledge of services but should be verified with actual sources for accuracy.

www.futureofmusic.org

Are they compensated, and how much?


CATEGORY

SERVICE

FORMAT

DETAILS

LABEL

Jill raised $89,000 from her fans to


record a recent record.

Fans had option of contributing


anything from $10 to $10,000. For
$10, fan get a free digital download
when released. For $1,000, fan
N/A. No record label involved.
had a theme song written about
them. For $5,000, Jill pledged to
come and play a house concert for
donor.

Online music licensing service

B2B service. Creative directors or


music supervisors can use these
services as a source for affordable
music for ads/TV/movies, or on
YouTube.

Online videos

ONLINE VIDEO
StageIt
PERFORMANCES

ONLINE VIDEO
Google+ Hangouts On Air
PERFORMANCES

ADVANCE
PROJECT
FUNDING

LICENSING

Artist-powered outreach:
Jill Sobule as example

Rumblefish/Pump
Audio/Getty Music

ONLINE VIDEO
YouTube
PERFORMANCES

PERFORMER

SONGWRITER

YES. Raised over $89,000 to record.


Assumption that she has kept the vast
majority of income from sales.

Jill is also the songwriter so she


retains all the income from song
licenses/sales.

YES. If label is the entity that


submits the music, it gets 50% of
any fees on a license deal, then
passes on percentage to artist.

YES. If artist is self-released, he/she gets


35% to 50% of any fees on a license deal.

YES. If licensee gets a synch


license, and ASCAP/BMI/ SESAC
royalties would be sent directly to
songwriter and publisher if song
was performed as part of TV
show/movie.

Posted videos.

YES. If the label is participating in


YouTube's licensing program, label
shares in percent of advertising
revenue. YouTube can also link to
track or album purchases on
iTunes, Amazon and Google Play.
Labels can also earn money on
user-generated content through
the AudioSwap service.

YES/POSSIBLY. If artist is self-released


and has a significant YouTube presence,
they may be able to participate in
YouTube's Partner Program. Artists signed
to an indie or major label may see adbased revenue received by the label
passed through to them as per their deal.

UNSETTLED. YouTube and


various PROs and Harry Fox
Agency have been in litigation
over public performance and
mechanical licensing.

Live performances via webcast

Performer sets date, time and


ticket price, Fans buy tickets to the
webcast show and watch show
online.Fans can also tip and
interact with performer in real time.

N/A. This is a relationship with a


performer (unless performer owes YES. 60% of gross ticket sales. Also
label a percentage of their live
provides links to stores like iTunes for
performance money based on a
digital download sales.
360 deal).

Live performance/broadcast via


webcast

Performer sets date, or just starts


to broadcast immediately. File
saves in real time to YouTube.

NO. This is a free service.

NO. At this point, it's not possible to sell


tickets or charge admission to your
webcast.

YES. StageIt has relationships


with ASCAP/BMI/SESAC and
pays performance royalties.

UNCLEAR. Google + Hangouts


requires performers to only
play/perform music that they have
exclusive rights to.

FMCnewbusinessmodels

Examples of New Business Models in Music *

Last update: Sept 12, 2012

and how labels, artists and songwriters are paid

* Compensation figures and agreements included in this chart are based on research, published FAQs,

2007-2012 Future of Music Coalition

and prior knowledge of services but should be verified with actual sources for accuracy.

www.futureofmusic.org

Are they compensated, and how much?


CATEGORY

SERVICE

RADIO/
WEBCASTING/
Pandora
DIGITAL
PERFORMANCES

RADIO/
WEBCASTING/
Turntable.fm
DIGITAL
PERFORMANCES

RADIO/
WEBCASTING/
Last.fm
DIGITAL
PERFORMANCES

FORMAT

DETAILS

LABEL

PERFORMER

SONGWRITER

Webcast stations formed around


music recommendation engines

Two models: Ad-supported model


for free, or ad-free version for
$36/yr. Search for bands you like
and services will also play music
that's similar, thus increasing
consumer's musical knowledge.
Hugely popular iPhone app.

YES. Sound recording copyright


owner receives 50% of
SoundExchange digital
performance royalties. Pandora
also links to Amazon and iTunes
for digital sales.

YES. 45% of SoundExchange digital


performance royalties paid directly to
featured performer. Pandora also links to
Amazon and iTunes for digital sales.

YES. Pandora has licenses with


ASCAP/BMI/SESAC for
songwriter/publisher performance
compensation. Pandora also links
to Amazon and iTunes for digital
sales.

Realtime webcast/DJ station

Combines music-streaming, chat


rooms, and voting by simulating a
virtual environment filled with
audience members and DJs
represented by player avatars.

YES. Sound recording copyright


owner receives 50% of
SoundExchange digital
performance royalties.

YES. 45% of SoundExchange digital


performance royalties paid directly to
featured performer.

YES. Turntable.fm has licenses


with ASCAP/BMI/SESAC for
songwriter/publisher performance
compensation.

UK based internet radio and music


community site that also offers on
demand streaming.

YES. 50% of SoundExchange


Free for users. Create custom
digital performance royalties. Indie
radio stations and playlists from
labels that are not SoundExchange
any of the audio tracks in Last.fm's members can be paid directly by
music library, and are able to listen last.fm's Artist Royalty Program.
to some individual tracks on
Also links to Amazon, iTunes and
demand or download tracks if the 7Digital for digital sales.
rights holder has previously
Downloads require label
authorized it.
permission but do not provide
compensation.

YES. 45% of SoundExchange digital


performance royalties paid directly to
featured performer. Indie/unsigned artists
that are not SoundExchange members can
be paid directly by last.fm's Artist Royalty
Program. NOTE: If your indie label is
signed up to last.fm's' ARP Program,
performer's royalties will go to the label,
which undercuts your ability to receive your
statutory share. Also links to Amazon,
iTunes and 7Digital for digital sales.

YES. Last.fm has licenses with


ASCAP/BMI/SESAC for
songwriter/publisher performance
compensation. To permit song
downloads (which are free), you
must own the copyright in both
the recording and composition.
Also links to Amazon, iTunes and
Digital7 for digital sales.

YES. 45% of SoundExchange digital


performance royalties paid directly to
featured performer for webcast (not for
terrestrial broadcast).

YES. Radio stations have


licenses with ASCAP/BMI/SESAC
for songwriter/publisher
performance compensation for
terrestrial broadcast and
webcasts.

RADIO/
Terrestrial radio with
WEBCASTING/
webcast: KEXP for
DIGITAL
example
PERFORMANCES

Terrestrial radio station with


webcast

Seattle-based radio station with


streaming webcast. Free access.

RADIO/
WEBCASTING/
Sirius XM Satellite Radio
DIGITAL
PERFORMANCES

Satellite radio channels

Consumer pays for equipment plus


YES. 50% of SoundExchange
monthly subscription fees, about
digital performance royalties.
$15/month.

YES. 45% of SoundExchange digital


performance royalties paid directly to
featured performer.

YES. Sirius XM has licenses with


ASCAP/BMI/SESAC for
songwriter/publisher performance
compensation

RADIO/
WEBCASTING/
MusicChoice
DIGITAL
PERFORMANCES

Music on cable TV stations

Part of consumer's monthly cable


package bill

YES. 45% of SoundExchange digital


performance royalties paid directly to
featured performer.

YES. Also have licenses with


ASCAP/BMI/SESAC for
songwriter/publisher performance
compensation

YES. 50% of SoundExchange


digital performance royalties for
webcast (not for terrestrial
broadcast).

YES. 50% of SoundExchange


digital performance royalties.

FMCnewbusinessmodels

Examples of New Business Models in Music *

Last update: Sept 12, 2012

and how labels, artists and songwriters are paid

* Compensation figures and agreements included in this chart are based on research, published FAQs,

2007-2012 Future of Music Coalition

and prior knowledge of services but should be verified with actual sources for accuracy.

www.futureofmusic.org

Are they compensated, and how much?


CATEGORY

SERVICE

FORMAT

DETAILS

LABEL

NOT USUALLY. Technically,


Consumers can either subscribe to podcasters would need both
podcasts or listen to audio files
reproduction and distribution
online
licenses. Currently mostly free for
promotion.

PERFORMER
NOT USUALLY. Per artist contract.
Interactive performance, reproduction and
distribution rights could be implicated, but
currently mostly for promotion, so these
rights are waived.

SONGWRITER
NOT USUALLY.
ASCAP/BMI/SESAC do offer a
podcast license, but many
podcasters use pre-cleared
music.

Podcasts

Online audio files

Soundcloud

Visitors can search for, listen to,


share and embed audio tracks.
Online audio capturing and sharing
Includes unsigned
service.
aritsts/composers, and some indie
label musicians.

YES, BUT NOT DIRECTLY.


Labels that post content to
SoundCloud may be using it for
promotional purposes, and then
linking to stores or their own site
for track purchases. There are also
a couple of third party apps that
can facilitate one-click purchasing.

YES, BUT NOT DIRECTLY. Artists who


post content to SoundCloud may be using it
for promotional purposes, and then linking
to stores or their own site for track
purchases. There are also a couple of third
party apps that can facilitate one-click
purchasing.

MP3 blogs

Music fans can listen to and/or


Blogs that provide full-track links to
download full-length MP3s from
MP3s of songs.
blogs.

NOT USUALLY. Currently for


promotion only, though many blogs
make it clear that songs are
available short term only and that
label/publisher has right to request
takedown

NOT USUALLY. Currently for promotion


only, though many blogs make it clear that
songs are available short term only and
that label/artist has right to request
takedown

For promotion only. Publisher or


record label has a right to request
takedown

Music on Twitter feeds

Twitter users search for a song or


artist using these services, then can
Free for the moment
forward link to the song to their
Twitter followers

UNCLEAR, BUT PROBABLY


NOT. Reproduction and
distribution licenses are required,
but not obtained, so no
compensation for labels.

UNCLEAR, BUT PROBABLY NOT.


Reproduction and distribution licenses are
required, but not obtained, so no
compensation for artists

UNCLEAR, BUT PROBABLY


NOT. Reproduction and
distribution licenses are required,
but not obtained, so no
compensation for songwriters

Unlicensed P2P networks

NO. Reproduction and distribution


Consumers search for and
NO. Reproduction and distribution licenses
licenses are required, but not
download items without paying for
are required, but not obtained, so no
obtained, so no compensation for
the music.
compensation for artists
labels.

NO. Reproduction and distribution


licenses are required, but not
obtained, so no compensation for
songwriters

ISP music access proposals

Consumers would pay a monthly


fee, say $5, on their cable or DSL
bill for access to unlimited music
content. Money collected would
be distributed to artists/labels

TBD

Click here to access more resources from Future of Music Coalition

TBD

TBD