Methods and Practices Part 1: Recording Industry (Part 3)

In our module on music publishing, we spoke about how to properly set up our own sole

proprietorship music publishing company in today’s industry. The part about the general

organization, taxes, and so on, holds true for the general set-up of a sole proprietorship

micro indie record label as well.

Also, let’s keep in mind that if are going to be selling recordings AND managing music

publishing, we don’t necessarily have to create two business entities – a record

label AND a publishing company. We can simply create just one sole proprietorship, under

one DBA name, that does both things – publishing and record sales. Let’s say John Smith Music.

If we are going to be producing recordings as well, that too can be a part of this one

company, as a commercial activity. Meaning, we can produce and sell recordings, and publish

music, all under one sole proprietorship business entity. That way we have one name, one bank

account, one set of expenses, and one set of taxes. Makes it easier to handle things,

at least in the beginning. If we decide to split it up into separate businesses later

on, we can always do that.

And isn’t this possibility of handling music business across-the-board ourselves exactly

what the contemporary advances in technology and communications brought about, and what

many artists are doing, or attempting to do, today in the industry? A singer-songwriter,

who writes his own music, publishes his own songs, records his own music, and sells his

own recordings. Or a music entrepreneur who produces and sells recordings, and publishes

music on behalf of his artists. Both running their own micro indie labels and publishing,

powered by the Internet and the online music market instruments and tools.

Anyway, let’s talk a bit about some commercial activities and issues of such a universal

micro indie, and of today’s market paths, and build further on what we learned in a

segment about setting up our own publishing.

First of all, just like we have done with our COMPOSITIONS when we talked about managing

our music publishing, we need to register our RECORDINGS with the Copyright Office as

well. To do this, go to the copyright.gov site, and look over a document called Circular

56, which will take you through the whole process of registering sound recordings. If

you are a composer and a recording artist, and own both - the compositions and the sound

recordings – you can register both at the same time. Circular 56A on the copyright.gov

will take you through that combined copyright registration process.

Once our recording are registered with the Copyright Office, and since we will be selling,

streaming, and licensing those recordings, we have to make sure that we obtain our ISRC

Registrant Code, AND that we assign a unique ISRC for each of our recordings before we

start doing anything in the market place. IRCS what? No. ISRC. International Standard

Recording Code. A code unique to each of our recordings, which will permanently identify

it in the market place as our recording. It is used across the music market to identify

a recording in sales, streaming, and in managing various rights and licensing. It can, and

it most often is, embedded in the digital masters of the recordings in the mastering

process, so it can serve as a digital fingerprint unique to those recordings. It is not only

a useful market tool, but is also required by many online distribution and download services

in order to do online commerce. So it is important that we do it.

ISRC Registrant Code is what we need to get first, before we can assign ISRCs to the recordings

we own or control. There are two types of Registrant Codes – for those who own the

rights to the recordings, and for those who do not own the rights to the recordings. Those

who do not own the rights to the recordings, and who need a Registrant Code, are services

that provide music production, duplication, distribution, end so on, for the artists and

the labels, and offer ISRC code assignment as part of their services. In the ISRC terminology,

they are referred to as ISRC Managers. Now, in our hypothetical case here, we own the

rights to the recordings, so we are not interested in an ISRC Managers Code, but a regular Registrant

Code. By the way, the whole ISRC process we are talking about here is done online at USISRC.org.

Anyway, the Registrant Code we obtain will be our company’s code through which we can

assign up to 100,000 ISRC codes per year. You think that’ll do? I think we’ll be

ok with that number. Once we obtain our Registrant Code, then we can assign ISRCs to each of

our recordings. And, by the way, if we are going to produce music videos of our recordings,

and place those on the commercial market, we should assign a separate ISRC code for

each of those videos as well, so they can be appropriately identified for different

commercial purposes. Again, we can do all of that on USISRC.org.

The next thing to do is to register with SoundExchange. You remember SoundExchange, don’t you? From

our module on licensing of the sound recordings? Yea, yea, yea… I know, it was so long ago

we spoke about that. The whole two weeks or so. Excuses, excuses. OK, to save you time

fumbling trough those course videos, and I know you didn’t take notes (or did you?

now, that would be a pleasant surprise.) - SoundExchange is a non-profit performing rights organization

for the sound recording copyright owners, collecting the non-interactive digital transmission

royalties, and the ephemeral recording royalties, and distributing them to its members. Non-interactive

digital transmission services would be services like Pandora, or SiriusXM. SoundExchange is

the only legally designated and authorized organization to perform such task in the United

States, and as such, it collects from about 2,500 digital radio licensees, has 27 international

performance rights agreements, and distributes over 500 million dollars of statutory royalties

to the record labels and recording artists annually. I say we register with them, don’t

you agree? But seriously, it is the only way to get paid from all those non-interactive

digital transmission services out there, and if we don’t we might be missing on an important

income stream in today’s industry. Just go to SoundExchange.com, and join as

a copyright owner AND as a featured artist, if you ARE a featured artist on the recordings

you produce and will distribute, of course. Because just like the PROs that collect on

behalf of the composers (ASCAP, BMI, and SESAC, remember?) SoundExchange sends half of the

collected royalties to the artists and half to the sound recording copyright owners, which

is usually the labels. Since in our hypothetical micro indie you have your own label here that

produces and distributes recordings that feature you as a recording artist, we would register

the label as a copyright owner, and you as a featured artist. That way you will receive

all the funds collected and not just half. We did the same thing when we hypothetically

registered with ASCAP, BMI, or SESAC, where we registered your publishing company as a

publisher AND you as a composer, separately. Once you join SoundExchange as a copyright

owner AND as a featured artist, make sure that you register all the recordings you control

with them as well, of course.

OK, so now we have our recorded songs registered with the Copyright Office, and have the ISRCs

in place for all those recordings. We are registered with SoundExchange as a copyright

owner AND as a featured artist. Plus, if we wrote those songs we recorded, AND if we are

managing our own publishing, like in our little hypothetical micro indie scenario here, we

have those COMPOSITIONS registered with the Copyright Office as well, back in our module

on publishing. Plus we registered our publishing company as a publisher AND ourselves as a

composer, with a PRO, separately and accordingly, right? This set-up is not only a proper business

practice, but is the only way to participate in many aspects of the today’s music market,

and the only way to benefit from much of its income sources. Meaning, if we are doing the

business end of music ourselves, it’s not an option. It’s a must, before we start

distributing, selling, streaming, and licensing our music.

Today’s Music Industry

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Darko Velichkovski

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