Articles

Aug 20, 2024

Top mistakes artists make with their royalties

The royalty landscape is complex, and it’s easy to make mistakes that can result in lost income. Whether you’re an independent artist or signed to a label, understanding how to manage your royalties effectively is essential. Here are the top mistakes artists often make with their royalties and how to avoid them.

1. Losing sight of where to collect royalties

The problem:

Royalties are collected from various sources, like different labels or different kinds of PROs. Payments often come with significant delays, sometimes months or even years after the music is used. As a result, keeping track of who owes what can become complicated, leading to missed payments.

How to avoid it:

Create a detailed tracking system for all potential income streams. Regularly check statements from different sources and ensure you know when to expect payments. Using royalty management software or working with a professional who specializes in royalty tracking can also help you stay organized and ensure you don’t miss out on any payments.

2. Not fully checking revenue reports

The problem:

Revenue reports from streaming services, distributors, and other sources can be lengthy and complex. Without fully understanding these reports or comparing them against your contract terms, you could easily overlook discrepancies or errors, resulting in unpaid or underpaid royalties.

How to avoid It:

Take the time to thoroughly review your revenue reports, no matter how large or complex they may be. If necessary, work with a financial advisor or a royalty auditor who can help you break down these reports and ensure that everything matches up with your contract terms. Being diligent about this can prevent significant losses over time.

3. Failing to invoice when you can or are allowed to

The problem:

Many artists are unaware that they need to invoice for certain royalties, especially when dealing with sync deals, performance royalties, or mechanical royalties. Not invoicing means you might never receive the payment you’re entitled to, even if the revenue has been generated.

How to avoid It:

Know your rights and the terms of your contracts. Whenever you’re entitled to payment, ensure that you send out invoices promptly. Set up reminders for regular invoicing, particularly for recurring income like performance royalties. If you’re unsure when or how to invoice, consider consulting with a manager or a financial professional who can guide you through the process.

4. Not registering works with PROs or registering incomplete data

The problem:

Performance Rights Organizations (PROs) like ASCAP, BMI, PRS, or Buma Stemra, are responsible for collecting and distributing performance royalties. If you don’t register your works with these organizations, or if you register incomplete or incorrect data, you won’t receive the royalties you’re owed.

How to avoid it:

Ensure that all your compositions are properly registered with the appropriate PROs, and double-check that all information (song titles, writers, publishers, etc.) is accurate and complete. Regularly update your registrations as needed, especially if there are any changes in ownership, rights, or splits among co-writers.

5. Neglecting international royalties

The problem:

If your music is played or used internationally, you may be entitled to royalties from foreign markets. However, many artists overlook international collections, assuming their PRO or label will handle it, leading to significant lost income.

How to avoid it:

Make sure your works are registered with international PROs or ensure that your home PRO has reciprocal agreements with foreign organizations. You may also consider working with a global royalty collection agency that specializes in collecting international royalties on your behalf. This step is crucial if your music has a global reach.

6. Overlooking mechanical royalties

The problem:

Many artists are familiar with performance royalties but overlook mechanical royalties, which are generated from the reproduction of their music in physical or digital formats. These can add up significantly, especially with the rise of streaming platforms.

How to avoid It:

Understand the different types of royalties your music generates and ensure you’re registered with organizations that collect mechanical royalties, like the Harry Fox Agency in the U.S. or MCPS in the UK. Keep track of the platforms where your music is available and make sure you’re collecting all the royalties you’re owed.

7. Not keeping contracts and agreements organized

The problem:

Contracts and agreements with labels, publishers, distributors, and PROs outline how your royalties are calculated and paid. If you lose track of these documents, you may not be able to verify whether you’re receiving the correct payments, leading to potential disputes or lost income.

How to avoid it:

Keep all contracts and agreements organized in a secure, easily accessible place. Consider digitizing physical documents and storing them in a cloud-based system where they can be accessed from anywhere. Regularly review these documents to stay informed about your rights and obligations.

8. Ignoring tax implications

The problem:

Royalties are considered income and are therefore subject to taxation. Failing to account for tax obligations can result in unexpected tax bills or penalties, reducing your net income from royalties.

How to avoid It:

Work with an accountant, software provider, or tax professional who understands the music industry to ensure you’re setting aside the appropriate amount for taxes. They can also help you take advantage of any deductions or credits available to you as an artist.

9. Failing to monitor back catalog earnings

The Problem:

Many artists focus only on their most recent releases and overlook their back catalog. However, older works can continue generating significant royalties, especially if they are used in new sync deals, playlists, or other media.

How to Avoid It:

Regularly monitor the performance of your back catalog and ensure you’re collecting all the royalties owed for older works. Keep your back catalog available on all major platforms and consider new ways to promote or license it to maximize its earning potential.

10. Not seeking professional help when needed

The Problem:

Managing royalties can be overwhelming, especially as your music career grows. Attempting to handle everything on your own can lead to mistakes and missed opportunities for income.

How to Avoid It:

Recognize when it’s time to seek help. Whether it’s hiring a manager, working with a royalty collection agency, or consulting with a financial advisor, investing in professional help can pay off by ensuring that your royalties are managed efficiently and that you’re maximizing your income.

Conclusion

Managing your music royalties effectively is essential for maintaining and growing your income as an artist. By avoiding these common mistakes—such as losing track of where to collect, not fully checking revenue reports, failing to invoice, and neglecting to register your works properly—you can ensure that you’re getting paid what you’re owed. Staying organized, informed, and proactive will help you navigate the complex world of royalties and keep your music career on track.