Demystifying Music Copyright 4: From CDs to Digital Streaming

Explore early digital technology from CDs to the internet, downloads and streaming platforms

CONTENTS

Introduction

Do you have gaps in understanding how the music industry works — royalties and revenue streams like mechanicals, performance royalties, and sync licensing?

The best way to get a clear picture of the inner workings, is to explore each major technological advance and see how intellectual property laws evolved to shape and monetize the music industry.

In Part One we covered music publishers and songwriters collaborating to print music and collect public performance royalties.

In Part Two we covered audio recording technology, mechanical licenses and radio broadcast royalties.

In Part Three we covered film and television, music videos on TV, and the role of music supervisors in music synchronization.

Let’s dive into the digital evolution from CDs, to digital downloads, streaming, and how the music sync industry shifted into overdrive.

Timeline of digital music technology, the internet and streaming platforms

Late 20th Century

Vinyl LPs, Cassette Tapes, and CDs each changed how the recorded music industry packaged physical music.
They all generated mechanical royalties for songwriters when they sold — songwriters remained happy.
Digital recording technology enabled independent artists to record at home.
New distribution channels, like CD Baby, allowed artists to release music independently of the traditional music industry.

Early 2000s

The Internet introduced new distribution and marketing models, such as Bandcamp and Myspace and all our favorite social media platforms.
The sync industry expanded significantly due to rising demand for music in TV, film, ads, video games.
Music supervision and independent sync agencies became more prominent to meet the growing need for music.
Sync agents/reps developed catalogs of independent artists and built trusting relationships with music supervisors.
File-sharing and delivery platforms replaced CDs and hard drives, streamlining the process for sync pitching teams to deliver tracks to music supervisors.

2010s+

Music consumption moved to online streaming services like Spotify, Apple Music, and Tidal, which collectively track billions of plays, with payouts averaging $0.003–0.005 per stream to music owners.

For example each stream on Spotify generates three separate payments:

Audio Recording: Paid to the label or distributor.
Song Performance: Paid to performance rights organizations (e.g., ASCAP, BMI, PRS, APRA etc).
Song Mechanical: Paid to mechanical rights organizations (e.g., The MLC, MCPS, AMCOS etc).
This article by Sentric has a helpful breakdown

Artists can digitally release their music on hundreds of DSPs using distribution services like DITTO, AMUSE, UnitedMasters Too Lost, LANDR, and Symphonic.

In the sync space, major media companies entered the content streaming and production market as audience consumption shifted to subscription-based services (e.g., Netflix, Disney+, Amazon Prime Video, Hulu etc).

Platforms like DISCO emerged to solve workflow issues related to file downloading, organization, search, and music licensing.

AI machine learning technology is utilized to further streamline track tagging, similarity search, instrumental version creation and discovery.

Conclusion

As technology has evolved, so too has the way we make, reproduce, and distribute music. This evolution has impacted how copyrights are protected and how revenue is generated.

Basic copyrights and revenue streams summarized

1. Songs / Music Works (Composition)

Intellectual Property: Songs are considered IP and are usually managed by music publishers.

Registration: Musical works are tracked by the International Standard Musical Work Code (ISWC).

Revenue Streams:

Print royalties
Live performance royalties
Broadcast and digital performance royalties
Mechanical and digital reproduction royalties
Synchronization (sync) fees

2. Audio Recordings (Masters)

Intellectual Property: Master recordings are IP and are typically managed by record labels.

Registration: Audio Recordings are tracked by the International Standard Recording Code (ISRC).