Passive Income In Artist’s Revenue Generation


In an ideal situation the artist’s distribution network and prevailing popularity match. Each measure transpires effectively towards the goal and allows the public make positive purchasing decisions. When the artist give interviews, perform live, or otherwise appear in public, the public have immediate access to the artist’s products, but they also have a prior information where to find them. If the artist or management neglects this, the artist cannot take advantage of passive income, at least to its fullest extent.

When the artist’s distribution network is setup, it takes care of bringing the products to dealers – in both physical and electronic forms. It is completely up to the artist’s management to decide how this task is taken care of. Many artists, because of the small size of their activities, do most of these things themselves – however this is not always an ideal setting. The goal of many artists is to achieve such revenue that they are able to outsource these activities to the record company or some other relevant player – depending on the business area in question. Here we come to what was meant by the prevailing popularity and efficiency of the distribution network. The more familiar, the more popular, or the more promising the artist is, the greater is the likelihood of industrial cooperation with the artist. Here we come to what the another article here meant about footwork. It is the main task of artists to make their activities interesting – it’s about pop music.

Passive income doesn’t mean the goal is to desire a state of affairs in which the money should come without doing anything. Not at all – it is the complete opposite. The job has to be done, but in advance. Music business earning logic has been arranged so that it possible to enjoy passive results. The clearest manifestation is found in music publishing. Song-writers get remuneration for the use of their songs whenever their music is publicly performed, or music recorded to a phonogram – as it is simply expressed. Copyright collecting societies and collective management organizations monitor the use of copyrighted music and collects royalties of their use. These organizations pass on royalties to the artists, provided they have affiliated with the organization as a clients or members. Copyright collecting societies, for example, grant licenses to radio stations or TV-stations when they play music in their programs. They also grant mechanical reproduction licenses when music is recorded on a phonogram. In this way it is perfectly possible that after writing a song an author of such piece can enjoy the copyright revenue only by joining such an organization. After that moment, he or she may no longer need to do anything, as the organization takes care of the monitoring of use and distributing royalties from the users to its authors. This is the passive income referred to in this article. The money doesn’t come from nothing but requires a prior work.

Here we come to the need of external help and the justification of its cost. In order to make passive income, the artist usually delegates powers to those who make the production available to the public. It is also about acquiring strategic know-how making that happen. Many record companies and music publishers are able to gain more revenue to the artist, even though they take part of the revenue. The question here is the price an artist should sensibly accept – as well as how much it is wise to give up decision-making power.

No one can find a song unless they know of its existence or various playlists or other industrial mechanism push it through. In the industrial sense, music producers and/recording artists don’t go looking for music they want to use from the massive registers of copyright organizations. To this end, the area has its own operator – music publishers. On a professional scale, their job is to do the footwork on behalf of the song-writers they represent. In this context, we do not take a stand in the legitimacy of music publishing. No – we want to demonstrate passive income and the meaning of its accumulation. If the author and music publisher end up in a music publishing agreement, the publisher will participate in the ownership of the catalog, yes. Consequently, the publisher gets the other half of the artist’s catalog insofar when it is associated with the publisher’s share. At this point, it is good to point out that 50/50 is not the only method of calculation used. There are also other kind of arrangements. It’s common practice that the artist gets to keep the writer’s share in full, but the artist and publisher share the publisher’s share equally. However, you cannot rely for this main principle – read the contract carefully. It may well be that with some income types, the split is something completely else. If this income generates a main income for you, even a small deviation can be meaningful.

When it comes to rehashing old songs, we find ourselves at the heart of the passive income. Previously released piece starts to generate additional revenue for its rights-holders. Kate Bush’s Running Up That Hill is a perfect example. When it got connected to Stranger Things in its Season Four, the song skyrocketed to multiple charts. For such songs, the footwork has already been done and its authors are in the ‘public domain’. Not to mention that for younger viewers, this song is completely new.

If the authors themselves intend to find performers for their songs, this footwork becomes their responsibility, in which the existence of the songs and their elements are brought to the attention of potential artists and producers. If the authors want someone else to do it, they will likely have to convince music publishers of the excellence of their songs. In a nut shell, in order to enjoy passive results, you must first succeed in footwork.

Passive income occurs also in record sales and streaming. All royalties received by the artist can be classified as passive income. When the artist has recorded the music and made it available to the public, the artist no longer needs to do anything. The operation is over. The popularity of the album determines the amount of revenue. If the artist succeeds in the promotion and gains popularity, this usually results in additional revenue. At this stage it is good to point out that communicating music to the public via radio and television or online is also a subject to copyright remuneration, not just album sales and streaming. Both the artist and the financial producer of a phonogram are entitled to earnings when the recording is played public. Just as it is the case for song-writers and music publishers, the recording artists also have their own copyright collecting societies. All the revenue gathered here is also classified as a passive income.

It is possible for an artist to become involved in passive income through other contexts than recording or music publishing. For example when their merchandise is sold on the internet by authorized dealers, or their music is associated with the film or other moving images. Passive income therefore concerns all activities that no longer require the artist’s physical presence.

As a comparison, live performances usually require a full show. Active income requires a physical presence and real-time performances by the artist before it becomes topical. It should be noted that passive income does not exclude income from active sources. Consequently an artist, acting as a performer of their own music, not only receive compensation for the show, but also as a copyright remuneration when their music gets performed publicly. The set information of the show, especially in festivals, can be a valuable thing. If the artist performs music created by others, then the authors of the musical piece will acquire passive income from that same public performance – and the performer will obtain direct premiums for the show. 

Passive income has a meaningful plug-in to the artist’s business plan. The artist must be able to organize their activities so that it matches the prevailing popularity and physical presence of the artist. Otherwise there is a risk the artist’s promotion is done in vain. However, at the beginning of a career, when still making name for themselves, this is not always possible.

The meaning of passive income is explained in this The Art of Music Business Management - For Artists & Managers book