Do you ever wonder how much a musician, songwriter or producer really makes? The concept of recording contracts and royalty payments can be a foreign and confusing area to many In his article, “Where The Money Goes” Harvey Rachlin systematically breaks down where payments are made section by section in his article, leaving no area untouched.

Rachlin starts off his example with a fictional record label releasing a single from their  newly signed group. The song is a commercial success and their album rises to the top of the charts. An international tour is planned, the band receives offers to appear on TV shows and Merchandising companies are approaching the group about  liscensing products based on the group’s name and likeness. “Hit Heaven indeed seems paved with gold, but what can be earned from this record?” Rachlin breaks down his example into four categories. Each section disects the payment process of royalties for each of the benefiting parties. His logic is simple, yet it describes in a very articulate way, the intricacies of  the payment process.

The artist payment-

The artist earns a percentage of the retail price of units sold. Album sales deterimine how much an artist is paid and depending on the amount sold, what percentage the artist is paid. However, as Rachlin points out, the percentage the group makes off of sales doesn’t exactly go direcly to them. Factors like paying back album advances, money that is given to a group or artist in order to the record the album, are brought into the picture. A negotiated percentage is usually taken by someone like a producer or personal manager from a group’s royalty earnings. Rachlin makes it clear that what can appear to be a good payoff change change drastically after everyone is accomidated for. In his example the group’s 10% royalty rate earns the group around $33,000. After paying back a $10,000 advance, a 25% cut to the producer, and a 20% cut to the personal manager, the group is left with around $12,000. After splitting that up between the four band members, each one is left with around $3,000.

The songwriter and music publisher-

The songwriter and music publisher also collect mechanical royalties. The federal copyright law states that a royalty of 9.1 cents per composition or 1.75 cents per minute (whichever is greater) is made. (Copyright Law Section 115, The Mechanical Liscense) This establishes the maximum mechanical royalty rate and record companies can negotiate lower royalty rates as they often do.

Loose Ends- After the artists, songwriter, and music publisher are paid, record companies aren’t exactly done paying out money. There are other factors that need to be taken into account. People like background musicians and singers are part of unions that require labels to pay funds in small percentages of earnings of records that are paid out over time. Also, if the song is played on the air, performance royalties are made. These royalties are paid by those who play an artist’s song like radio, television, theaters, amusement parks, and much more. Liscensing off a song for a movie, tv show, or commercial can earn an artist even more money.

Rachlin’s main focus in the article is to educate the reader on how royalties are determined, what laws enforce these payments, and what parties recieve these payment. Overall the article is very helpful in giving the reader an exact impression of what goes on behind the scenes in the music business.

Harvey Rachlin, is the author of several books including, The Songwriter’s Handbook, The Encyclopedia of the Music Business, and The Songwriter’s and Musician’s Guide to making Great Demos.