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Examples of New Business Models in Music *Last update: April 15, 2015
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and how labels, artists and songwriters are paid* Compensation figures and agreements included in this chart are based on research, published FAQs,
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© 2007-2015 Future of Music Coalitionwww.futureofmusic.organd prior knowledge of services but should be verified with actual sources for accuracy.
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Are they compensated, and how much?
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CATEGORYSERVICEFORMATDETAILSLABELPERFORMERSONGWRITER
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DIGITAL RETAILCD BabyOnline 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, artist gets 91% of income from sales on CD Baby, and 91% of net revenue from iTunes/Amazon/ streaming services. Paid out every Monday.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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DIGITAL RETAILiTunes Music StoreDigital retail store. Also offers iTunes Match.Consumers buy individual tracks or albums for set rates, usually 99¢/track or $9.99/album.YES. Of $9.99 retail sale, label or digital distributor reportedly gets $6.50–$7.00 wholesale. iTMS pays out on sales monthly.YES. Unsigned artist: gets anywhere from 91% to 100% of the $7.00 paid to label/aggregator. Indie label or major label artist: more complicated because sales are based on percentages or "points" on contract.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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DIGITAL RETAILAmazon Music StoreDigital retail store. All MP3 tracks. Also offers cloud storage.Consumers buy individual tracks or albums for set rates, usually 99¢/track or $8.99/album, though some albums are steeply discounted.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. Same as above. Unsigned artists get 91% to 100% of what's paid to label/aggregator. Indie label or major label artist gets whatever their contract stipulates.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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DIGITAL RETAILGoogle PlayDigital retail store with cloud storage.Consumers buy individual tracks or albums for set rates, usually 99¢/track or $8.99/album, though some tracks are steeply discounted.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. Same as above. Unsigned artists get 91% to 100% of what's paid to label/aggregator. Indie label or major label artist gets whatever their contract stipulates. Artists can also go direct to Google Play via Artist Hub and get 70% of profit, after $25 setup fee. Provides good integration with YouTube for track sales.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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DIGITAL RETAILBeatportDigital retail store specializing in dance/house/DJ musicConsumers buy individual tracks or albums for set rates. Beatport also offers full track streaming previews, and extra metadata about the songs (BPMs, tunings, etc). Beatport Sounds offers pre-cleared remix packs and stem tracks to music producers.YES. Beatport tends to work exclusively with labels. Terms are not disclosed, but per-track prices tend to be higher than iTunes and Amazon.YES. Payment from label to performer depends on the contract performer has with label.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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DIGITAL RETAILBandcamp for labelsDigital retail platform where labels can build a branded "store" to present their artists' music and merchandise via Bandcamp.Bandcamp offers labels lots of options: can sell physical CDs, downloads, bundled items, merchandise. Label sets the price for each item. Label fulfills orders for any physical good purchases or merchandise.YES. Label pays $20/month or $50/month maintenance fee to Bandcamp, and gets 85% of all revenue from music sales, and 90% of all revenue from merchandise sales across all the items available in their store.YES. Payment from label to performer depends on the contract performer has with label. Bandcamp also offers to pay any artists directly for their label store's sales if that band already has a Bandcamp account.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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SUBSCRIPTION DOWNLOADSeMusicOnline subscription download service. All MP3 tracks.Consumers pay from $11.99/month for 24 downloads, up to $31.99/month for 73 downloads.MP3 downloads 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% to 100% of what's paid to label/aggregator. Indie label or major label artist gets whatever their contract stipulates.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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ON DEMAND STREAMINGRhapsody, Spotify, Beats, RdioOn demand music streaming servicesFor subscription streaming service, consumers pay $5 to $10/month to have interactive access to an enormous library of albums and songs. Some offer free, ad-suppored tiers. Some also have non-interactive, radio-like playlists or stations.YES. For interactive streams: direct licensing fee negotiated with the labels. Rates are not disclosed. For noninteractive plays on their radio-like stations or playlists, label gets 50% of SoundExchange digital performance royalties.YES. For interactive streams, fractions of a penny per play. For noninteractive plays on their radio-like stations or playlists, featured performer gets 45% of SoundExchange digital performance royalties.YES. There are two separate payments. (1) On-demand streaming services pay a streaming mechanical royalty to publishers, which is passed on to songwriters. (2) These services also have licenses with ASCAP/BMI/SESAC for songwriter/publisher performance compensation.
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ARTIST-TO-FANBandcamp for artistsDigital storefront for bands/artists that integrates nicely with existing websites. Bandcamp provides the web interface for a very powerful, artist-controlled storefront. Artist can sell CDs, vinyl, downloads, merch, or bundles. Artist sets prices (which can include free), can choose high bitrates. Artist fulfills any orders for physical goods.N/A. See Bandcamp for Labels (above) for instances when an artist is signed to a label.YES. Artist gets 85% of music sales revenue, and 90% of merch revenue. Money from online purchases flows directly and immeditately to artist via PayPal.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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ARTIST-TO-FANMagnatuneWebsite with physical and digital retail store, with $15/month subscription fee and online licensing.Consumers can download as many albums or songs as they want for $15/month. Members can also access simple, one-click style licensing for music uses in films, TV, videos, etc. High bitrate options.YES. Magnatune, acting as a "label", keeps 50% of sales/licenses.YES. Artist gets 50% of any sale and/or license fees.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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PATRONAGE MODELSPatreonOnline platform where fans can subscribe to support a particular artist on an ongoing basis.Artists can set the various levels for financial contributions, from $1 up to hundreds of dollars, to support their work either on a monthly basis, or by creation.N/A. Typically these are artists who are not currently affiliated with a label.YES. Artist gets 95% of any pledges. Patreon keeps 5% to cover transaction costs. Auto-payments on the 5th of every month.N/A in most cases, but if the Patreon artist was doing covers, the mechanical licenses and royalties would be the artist's responsibility to secure and pay.
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PATRONAGE MODELSArtistShareHybrid label model started in 2001 that builds patron communities around its roster of artists.Consumers/music fans can not only buy digital/physical CDs of Artistshare artists, they fund the projects in exchange for accessing "the creative process" -- attending recording sessions/rehearsals, working drafts of music in progress, credit on the CD. Money collected through these "participant offers" underwrite artists' costs.YES. Artistshare, acting as a label, keeps a small percentage.YES. Artist gets a large percentage of revenue from sales.Songwriter and publisher are paid mechanical rate: label/artists' responsibility.
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ADVANCE PROJECT FUNDINGPledgeMusicMusic-focused incubator that facilitates project funding by helping artists build project pages, create incentives, track fundraising progress, pre-sell albums and offer exclusives.Two options: (1) DTF campaign. Musician sets up a goal and offers differently priced incentives to contribute within 30, 60 or 90 days. Money is not given to artist unless project goal is met. (2) Pre-order campaign. Good for labels and artists who have something recorded but want to generate pre-ordersYES, IF APPLICABLE. If it's a Pre-order campaign, it's assumed that the label will receive 85% of the money that is generated through pre-orders. YES. If the project goals are met, the artist receives the 85% of the money that Pledge collected for them. Pledge keeps 15%. If projects do not meet their goals, the funders are given their money back.N/A in most cases, but if the PledgeMusic artist was doing covers, the mechanical licenses and royalties would be the artist's responsibility to secure and pay.
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ADVANCE PROJECT FUNDINGKickstarterCreative incubator that facilitates project funding by helping artists build project pages, create incentives, track fundraising progress.Artist sets up a goal and offers differently priced incentives to encourage contributions. Projects must meet target within 30 to 60 day time frame. Money is not given to artist unless project goal is met.N/A. No record label involved.YES. If the project goals are met, the artist receives 95% money that Kickstarter collected for them. Kickstarter keeps 5%, plus 3 to 5% to cover Amazon payment transactions. N/A in most cases, but if the Kickstarter project included recordings of covers, the mechanical licenses and royalties would be the artist's responsibility to secure and pay.
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ADVANCE PROJECT FUNDINGIndiegogoCreative incubator that facilitates project funding by helping artists build project pages, create incentives, track fundraising progress.Artist sets up a goal and offers his/her funding patrons different incentives to contribute. Artist chooses the funding strategy.N/A. No record label involved.YES. Two funding options. (1) fixed project goal that must be met in order to be funded, in which artist gets 96% of pledged money or (2) flexible goal in which artist gets 91% of what's collected, even if they don't reach their target.N/A in most cases, but if the Indiegogo project included recordings of covers, the mechanical licenses and royalties would be the artist's responsibility to secure and pay.
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ADVANCE PROJECT FUNDINGSellabandOnline service that sells "parts" in a band's future workMusician sets up a financial goal and incentives for fans. Music fans can by a $10 "part" in a band, or numerous bands, to support upcoming projects.N/A. No record label involved.YES. If the project goals are met, the artist receives the 85% of the money that Sellaband collected for them. Sellaband keeps 15%.N/A in this case.
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ARTIST-DRIVEN EXPERIMENTSRadiohead in 2007Short term digital release experiment run by the band that offered variable pricing option.Consumers could pay "nothing", although there was a $1 "handling charge", plus Radiohead collected everyone's contact info.N/A. No record label involved, at least at this stage of the experiment.YES. Though real figures were not published, it's assumed that Radiohead kept the vast majority of the income from these salesYES. Radiohead were also the songwriters, so they retained all the income from these sales.
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ARTIST-DRIVEN EXPERIMENTSJill Sobule in 2008In 2008, Jill Sobule raised $89,000 from her fans to record the album "California Years", released in 2009.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 had a theme song written about them. For $5,000, Jill pledged to come and play a house concert for donor.N/A. No record label involved.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.
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ARTIST-DRIVEN EXPERIMENTSNine Inch Nails in 2008Digital release of 36-track album, Ghosts I-IV, that offers a range of pricing and features.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 set or E) $300 for signed edition. Also released simultaneously on Amazon, and seeded to P2P networks.N/A. No record label involved.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 were also the songwriters, so they retained all the income from these sales.
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ARTIST-DRIVEN EXPERIMENTSThom Yorke in 2014Digital release of "Tomorrow's Modern Boxes" via Bittorrent platformSingle and video available for free. Album tracks plus a music video bundled and made available direct to fans via Bittorrent for $6.N/A. No record label involved.YES. Financials have not been reported but it is assumed that Thom Yorke was the recipient of the vast majority of the revenue for both digital bundle downloads, vinyl sales and CD sales.Thom Yorke and Colin Greenwood (Radiohead) are writers so they retain all the income from song licenses/sales.
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LICENSINGRumblefish/Pump Audio/Getty MusicOnline music licensing serviceB2B service. Creative directors or music supervisors can use these services as a source for affordable music for ads/TV/movies, or on YouTube.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 60% of any fees on a license deal, depending on the service they are using.YES. If workis synched and then publicly performed as part of an ad, TV show or movie, ASCAP/BMI/ SESAC royalties would be split 50/50 between songwriter and publisher.
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ONLINE VIDEO PERFORMANCESYouTubeOnline videosPosted 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.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 ad-based revenue received by the label passed through to them as per their deal.YES. YouTube and various PROs and Harry Fox Agency have negotiated public performance and mechanical royalties, though the rates vary according to whether the video is an official label release, or a user-generated video that uses someone else's music.
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ONLINE VIDEO PERFORMANCESStageItLive performances via webcastPerformer 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. Free for musicians to use.N/A. This is a relationship with a performer (unless performer owes label a percentage of their live performance money based on a 360 deal).YES. 63% or more of gross ticket sales. Also provides links to stores like iTunes for digital download sales.YES. StageIt has relationships with ASCAP/BMI/SESAC and pays performance royalties, which are then split 50/50 between songwriter and publisher.
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ONLINE VIDEO PERFORMANCESGoogle+ Hangouts On AirLive performance/broadcast via webcastPerformer 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 Google+ Hangouts on Air.UNCLEAR. Google+ Hangouts On Air requires performers to only play/perform music that they have exclusive rights to.
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RADIO/ WEBCASTING/ DIGITAL PERFORMANCESPandoraWebcast stations formed around Pandora's Music Genome recommendation engineTwo models: Ad-supported model for free, or ad-free version for $4.99/month. Search for bands or songs you like, and Pandora will play music that's similar. 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. Pandora's AMP program also provides musicians/managers with a dashboard of listener data.YES. Pandora has licenses with ASCAP/BMI/SESAC for songwriter/publisher performance compensation. Pandora also links to Amazon and iTunes for digital sales.
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RADIO/ WEBCASTING/ DIGITAL PERFORMANCESLast.fmUK based internet radio and music community site that also offers on demand streaming.Free for users. Create custom radio stations and playlists from any of the audio tracks in Last.fm's music library, and are able to listen to some individual tracks on demand or download tracks if the rights holder has previously authorized it.YES. 50% of SoundExchange digital performance royalties. Indie labels that are not SoundExchange members can be paid directly by last.fm's Artist Royalty Program. Also links to Amazon, iTunes and 7Digital for digital sales. Downloads require label
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.
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RADIO/ WEBCASTING/ DIGITAL PERFORMANCESWebcast of a terrestrial radio station: KEXP for exampleTerrestrial radio station with webcastThousands of commercial and noncommercial terrestrial radio stations in the US offer a live stream of their on-air programming via webcast.YES. 50% of SoundExchange digital performance royalties for webcast (not for terrestrial broadcast).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.
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RADIO/ WEBCASTING/ DIGITAL PERFORMANCESSirius XM Satellite RadioSatellite radio channelsConsumer pays for equipment plus monthly subscription fees, about $15/month.YES. 50% of SoundExchange digital performance royalties.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.
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RADIO/ WEBCASTING/ DIGITAL PERFORMANCESMusicChoiceMusic on cable TV stationsPart of consumer's monthly cable package billYES. 50% of SoundExchange digital performance royalties.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.
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GREY AREASoundcloudOnline audio capturing and sharing service.Users can search for, listen to, share and comment on audio tracks. Platform includes unsigned artists/composers, and some indie label musicians.YES. There are two ways: (1) Labels can post content to SoundCloud for promotional purposes, and then link to stores or their own site for purchases. (2) Premier tier partners get a share of advertising revenue. This will likely change in 2015 with Soundcloud's introduction of a subscription service.YES, BUT NOT DIRECTLY. (1) Artists who post to SoundCloud can link to stores and websites where their albums/tracks are available for sale. (2) Premier tier partners get a share of advertising revenue. There are also a couple of third party apps that can facilitate one-click purchasing.UNCLEAR, BUT PROBABLY NOT. Soundcloud's terms of service state that creators are agreeing to a "royalty-free" use. At this point, SoundCloud does not seem to have blanket licenses with the PROs.
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GREY AREAPodcastsOnline audio filesConsumers can either subscribe to podcasts or listen to audio files onlineNOT USUALLY. Technically, podcasters would need both reproduction and distribution licenses. Currently mostly free for promotion.NOT USUALLY. Currently for promotion only. Interactive performance, reproduction and distribution rights could be implicated, but these licenses are not usually acquired because of the significant costs and direct negotiations for rights that would be required.NOT USUALLY. ASCAP/BMI/SESAC do offer license that probably cover podcasting, but many podcasters use pre-cleared music.
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GREY AREAMP3 blogsBlogs that provide full-track links to MP3s of songs.Music fans can listen to and/or download full-length MP3s from blogs.NOT USUALLY. Currently for promotion only, though many blogs make it clear that songs are available short term only and that label/artist/publisher has right to request takedownNOT USUALLY. Currently for promotion only, though many blogs make it clear that songs are available short term only and that label/artist/publisher has right to request takedownNOT USUALLY. For promotion only. Label/artist/publisher has a right to request takedown
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Music on Twitter feedsTwitter users search for a song or artist using these services, then can forward link to the song to their Twitter followersFree for the momentUNCLEAR, 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 artistsUNCLEAR, BUT PROBABLY NOT. Reproduction and distribution licenses are required, but not obtained, so no compensation for songwriters
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Unlicensed P2P networksConsumers search for and download items without paying for the music.NO. Reproduction and distribution licenses are required, but not obtained, so no compensation for labels.NO. Reproduction and distribution licenses are required, but not obtained, so no compensation for artistsNO. Reproduction and distribution licenses are required, but not obtained, so no compensation for songwriters
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ISP music access proposalsConsumers would pay a monthly fee, say $5, on their cable or Internet bill for access to unlimited music content. Money collected would be distributed to artists/labelsTBDTBDTBD
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