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This Is How Distribution Companies Are Stealing Artists’ YouTube Revenue…
August 13, 2013
Each time a song streams on an interactive service like Spotify, Rhapsody, Beats, Slacker, Radio etc the songwriter earns a royalty. Learn why, how much and why you may not be getting all (or any) of it.
The following guest post comes from Jeff Price, the original founder of TuneCore and now founder/CEO of Audiam.com. Audiam’s objective is to get artists paid much more for the use of their music on YouTube.
“Each time there is a new way for an artist to make money, a new way emerges for others to take it from them.”
The most recent example: with no justification, a significant percentage of an artist’s YouTube money is being taken by many of the music distribution companies – (music distribution companies are the companies that place an artist’s music into iTunes, AmazonMP3, Spotify etc.)
The distribution companies get away with this by claiming that they, not the artist, control the rights to the artists’ recordings for licensing into videos on YouTube. This allows them to take a percentage of the artist’s YouTube money for doing nothing. They pull off this financial sleight of hand due to the incredibly tangled, confusing, backwards and, in some cases, almost impossible to understand copyright laws and music business practices.
Case in point. Distributors have never, ever controlled an artist’s right to license recordings into videos. This makes sense; the distributors’ role is to distribute recordings of music onto the shelves of music stores and then administer back the money from the sale of the music.
Distributors do NOT license music into videos.
As we are all aware, YouTube is not a “store”; music is not placed on a “shelf” and consumers do not pay money to buy music from it.
These rather glaring facts are not stopping some distributors from sticking themselves between the artist and YouTube, taking a percentage of the artist’s YouTube money for doing absolutely nothing and adding it to their bottom line.
If this does not yet make sense to you, it’s for a good reason. It’s confusing – and this confusion makes the unsuspecting artist vulnerable to being taken advantage of.
Let me explain in more detail.
How YouTube Works
There are two main ways to make money on YouTube.
One is from views of your own videos on your own YouTube account – this is called a “Channel.”
The second is from views of videos which use your music in them – this is called a “Claim.”
CHANNELS – How A Musician Can Make Money On Their Own Videos On YouTube.
Let’s say you wrote a song, recorded that song and made your own video with that song in it – like an official music video. This video would have three copyrights in it, all controlled by you:
1) One copyright for the video itself
2) One copyright for the recording of the song (called “The Master)
3) One copyright for the lyrics and melody to the song (called “The Composition”)
Next, you create an account at YouTube, called a “Channel” and upload your own video with your own music in it. You then tell YouTube to “monetize” your video with ads (this option appears in your YouTube account for everyone. No middleman needed). When the ads generate money, YouTube pays you about 55% of what the advertiser paid them.
NOTE: This option to make money on your YouTube video is open to everyone; no middleman is needed.
CLAIMS – What Some Music Distribution Companies Are Doing On YouTube To Take A Piece Of The Artist’s Money
Let’s assume that as before, you wrote a song, recorded that song and made your own video with that song in it – like an official music video – and uploaded it to your own YouTube account (called a Channel).
Also as before, the video has three copyrights and as before all three copyrights are controlled by you:
1) One copyright for the video itself
2) One copyright for the recording of the song (called “The Master)
3) One copyright for the lyrics and melody to the song (called “The Composition”)
This time however, there is a twist; the artist used a distributor to put the music in his/her YouTube video on the shelf of iTunes, AmazonMP3 etc. Unbeknownst to the artist, this distributor also has a special contract with YouTube called a “Direct Licensing” contract.
These “Direct Licensing” contracts are typically only given to larger music companies or distributors, not to individual artists or songwriters. These contracts allow the distributors to tell YouTube that they, not the artist, control the rights to the music of a song being used in videos on YouTube.
In addition the “Direct Licensing” contract also allows the distributor to go into YouTube, find the artist’s own videos in the artist’s own YouTube account, have YouTube place ads on the artist’s videos and then (here’s the important part) have the YouTube ad money flow from YouTube directly to the distributor, not to the artist.
(NOTE – these same “direct licensing contracts can be used for good by finding other people’s videos using the artist’s music and making the artist money off of those, something an artist cannot do on his/her own).
Now that the distributors have the artist’s money, they take a cut of it before paying the artist whatever is leftover. They very misleadingly call the percentage of money they take from the artist’s YouTube revenue a “distribution fee”.
Let’s be clear. It is NOT a distribution fee, the distributor did not “distribute” anything to YouTube. It’s a “we’re taking a piece of your revenue because we can” fee.
What justification does the distributor have to get a cut of the artist’s money? Good question, and sadly there is not a good answer.
The distributor did not write the song, record the song or create the video. They did not create the artist’s YouTube account or even upload the artist’s video to YouTube.
And they certainly did not cause people to watch the video which generates the ad money.
Finally, unlike other digital services like iTunes and Amazon, no middleman is needed; artists can go direct with YouTube and make ad money on their own videos themselves by simply uploading their video and clicking the “monetize” button.
In other words, the artist writes a song, records the song, mixes the song, masters the song, shoots a video, edits it together, uploads it to YouTube and gets people to watch it based on the merits of the music and video. The distributor, which did NOTHING to cause these views, create the music and is not needed as a middleman to make money on YouTube, sits back and just takes a chunk of the artists’ money.
Due to the complexities of copyright law and/or the artist not knowing they can just go direct with YouTube a chunk of the artist’s money is being taken by someone else.
In other words, these distributors do it because they can get away with it.
They don’t need to do this, they consciously choose to. Meet the new boss, same as the old boss.
In this day and age, I can’t believe we still have to fight for an honest system. It really is not hard to give the artists all the money they are entitled to in a clear, timely and transparent fashion; you just have to want to do it.
But let’s say they don’t want to do it, and they’re solely in the game to make a lot of money at any expense. These sleight of hand business models work against them. Each time a stunt like this is pulled, eventually someone else will step forward with a way to correct things and completely cut them out (just look at what happened to the old school music industry).
As one example, in, 2005, I watched the artist needlessly have to give up their copyrights and a percentage of their money from the sale of their music in order to get it onto iTunes, so I started TuneCore (sadly, the investors in TuneCore threw out the three original founders and appear to no longer have the artist’s best interest in mind).
Now, in 2013, I’m watching the distributors have the artist needlessly give up a percentage of their YouTube money from views of their own videos on YouTube. So I started Audiam (via Audiam, the artist gets 100% of the revenue from the views on their own YouTube videos and also makes money on other people’s YouTube videos).
Can’t the new music industry take a moment and look at the past and learn from it?
If you screw the artist, eventually you are going to get cut out. Yes it’s easier to just take money by hiding behind the complexities, but if you truly want to create a great long lasting business of value, it’s going to take innovation and hard work. You actually have to create something that makes money predicated on real value, not on smokescreens and sleight of hand.
Change the model from exploiting the artist to serving the artist and we all win, both financially and morally (and maybe you can even sleep better at night).
In the meantime, can you just cut it out? Stop taking the artist’s money needlessly, its hard enough for them as it is.
– Jeff Price
Twitter Handle: @TuneCoreJeff
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Chris "Gotti" Lorenzo, former vice president of Murder Records, has set out on his own business venture with Add Ventures Music. The innovative platform is the first and only of its kind and aims to put artists back in control. One of Gotti's artists, Erica "Rikki" Woodlin, spoke with GMW about her success with the company.
Richmond, VA — Chris “Gotti” Lorenzo has absorbed a lifetime of knowledge in music and business. For over two decades he has influenced the careers of some of hip-hop’s most influential people, including his younger brother founder of Murder Inc. Records Irv Gotti.
With his latest project Add Ventures Music, Chris and members of his team are traveling the country with the goal of discovering, empowering and educating today’s new artists on the ins and outs of the music industry.
“I’m here to empower independent artists so they learn how to own, operate and monetize, keyword monetize, their music. Most of today’s artists don’t understand the value of what they’re creating and how to actually make the money from it in the real traditional record label sense.” – Chris Gotti, Add Ventures Music
Add Ventures Music is a digital network, distribution center and brand consulting firm that offers targeted services at a discount price for every artists within their network. It has been described to me as a true inner-circle of experts willing to help artists who are determined to advance their careers.
Add Ventures Music allows artists to maintain ownership of their masters, while educating those in the network about the music business. The company offers assistance with music distribution through major digital retailers such as iTunes, Google Play, and Amazon, music videos through Vevo, YouTube, and other platforms, and music streaming through outlets such as Tidal, Pandora and Spotify. Additional services such as mixing, mastering, studio rental, touring, music and television placements, radio promotion, and music video production are also available.
During his visit to Richmond, Virginia – where Chris hosted two seminars and a music showcase – I sat down with him to discuss the need for Add Ventures Music and his goal for the company.
You’ve helped a lot of people in the entertainment industry, at all levels of their careers. Tell me why you’re traveling the country and what you’re trying to accomplish with Add Ventures?
I’m on a ten city tour. I’m here to empower independent artists so they learn how to own, operate and monetize, keyword monetize, their music. Most of today’s artists don’t understand the value of what they’re creating and how to actually make the money from it in the real traditional record label sense. A lot of independent artists are doing everything a record label would do for them on their own. They’re just not making the money from it. Add Ventures is trying to fill that void and empower artists.
What is it about the industry that makes you think that this is the best move for independent artists?
You know, everything has a beginning and an end, right? The record business is no different. And I’m not saying music business is going to dissolve, but no one’s addressing the fact that once the internet started, the industry changed. And that paradigm shift that happened in the music industry, no one’s addressing it. Record labels, they are not saying, “Okay, this is going to fix the music industry so we can continue doing business a certain way.” All they did was fall back and take more, which just means the artist’s has to give up more.
Now it’s just time. We’re able to get music out to the public in a way like never before. Where the world can see it and hear it directly. And that’s all an artist can ask for, and we do it at a very efficient cost. At the end of the day, any artist, I don’t care who it is, they only want to be seen and heard. After that, if the people see and hear them, that’s when you know if you’re popular or not. If you’re a star or not, when people say, “Man that’s hot! I’m fucking with that!” Or, “I’m not really down with it.”
You know, people know me and my brother (Irv Gotti) for all our history, but the reality is we got more losers than winners. We just didn’t stop.
This is really about education and empowerment the next generation. You could be doing a whole bunch of different things, why is Add Ventures where you need to be right now?
Absolutely. This started years ago. What people don’t realize is, me and my brother, we negotiated every contract for all our artists. So think about it. They’re on our record label, and they’re negotiating ... we’re negotiating against ourselves. Our partner is Universal. So we’re fighting our partner to get our artists the best deal. You tell me in the history of music, whoever would have thought the record label would represent the artist to get them their best deal. That’s what we did. So when you think about that and then realize all of the issues that we’ve seen and conversations we had with CEOs of all these record labels and how they look at artists. It kind of gave me distaste for the record industry on how the labels take advantage of ignorance. At the end of the day, we all started from a very low spot, entry level. I’m no different. Right now, I have the opportunity to give back to artists and educate them, that’s what I’m going to do.
You’ve been very clear that this is not a label situation.
What makes a record label a record label? In the past, a record label would invest in careers. Why in God’s name would artists consider these guys today a record label when you’re doing it yourself and they’re not investing in you?
Originally, I understood why the label took so much because they put up a lot of money to make an artist a success and it didn’t work every time. It’s just simple economics or business philosophy, the bigger the risk the bigger the reward, right? That’s what it should be. Once they stopped putting money into the business and the artists, which is when the internet came in, their business spiraled downward and out of control and they just started firing everyone that worked for them and they stopped investing.
I’m giving you the information so now you don’t need a label. And if you’re a business person, you could reinvest in your career and build your career as far as you want.
How do you maintain wearing so many different hats at one time and keep your business successful?
I look at all the businesses that I do as one. It’s all about doing good work and maintaining good relationships.
You’re on a ten city tour, what are you looking to see when you come to these cities?
Really this tour is about Add Ventures. Everyone thinks it’s about the artists and they’re like, who’s on tour with you? And I’m like, I’m on tour. So my company’s on tour. Think of Add Venture Music as my record. I’m the artist, and that’s my record.
And the seminars are a big part of the tour.
The seminars are about educating you on this record that I just put out. Why it’s so good, why it’s so effective, why it’s different from most. I never think in the terms of, this is the only way to do anything.
Artists that sign up with your service, Add Ventures, how much access are they going to have to you and who do they access to?
You can’t pay for me, I’m not for sale but I’m giving you things here. I’m doing a seminar for $20. I don’t think there’s a person in the country that is doing that. So you tell me who’s coming to the hoods of the United States of America. I’ve been in Birmingham, Alabama; I’ve been in Memphis. East St. Louis. Chicago. Detroit. No one’s doing that. And I’m making it cost effective. I’ve been paid $25,000 to talk before. Just to talk, for an hour. For me, to let artists come and hear me talk for 20 bucks, I know what I’m giving you. I’m not saying it from a cocky or arrogant place. I’m saying it from, “I know my value.”
We’re going to have to wrap up with Chris Gotti. He’s on tour. He’s doing it big. But the whole thing for people who don’t know: education and empowerment is the whole goal of Add Ventures Music. Where can everybody find it?
There was a commercial when I was younger. It was a Charles Schwab commercial, an investment bank. And they came on, and they would tell you about all their services about investment. And they ended their commercial every time with, “A educated consumer is our best customer.” I promise you, that’s what I’m trying to do. That’s real. The more you know about this industry and what you’re dealing with and what’s out here, the more you’re going to realize why this is the best place for you to be as an independent artist. It’s that simple.