5 Types of Music Royalties: Full Breakdown
Music royalties have always been thought of as boring, complicated, and this mysterious thing that major labels steal from artists.
But Today, I’ll clear it up and make it easy to understand.
Let's assume you've already got your music on Spotify and other major music retailers.
In this article, you'll learn:
What these royalties really are, five different types of music royalties, who is entitled to them, and and how music royalties are collected.
What music royalties are
The 5 different types of royalties
How music royalties are generated
How to collect music royalties
& Lots more
It’s a full music royalties breakdown.
Here we go!
What are Royalties in Music?
Music Royalties - Royalties in music are payments due to the copyright owners of a song for the use of their music.
Keep in mind that you technically have a copyright as soon as your Intellectual Property is made tangible.
For example - As soon as an artist writes down their lyrics on paper or records it; when a producer records or writes their composition in a tangible form, they automatically now have rights to protect their idea or intellectual property (assuming its original), these are copyrights.
For a more formal proof of copyright ownership of a song(s), it's recommended that you register your musical works with your local copyright office, to make proving you are the owner easier if need be.
Who is Entitled to These Music Royalties?
This may be the most confusing part, but depending on how many people play a part in the creation of your song, it could be incredibly simple or frustratingly difficult to figure out who's owed what royalties.
This is because songwriters and recording artists are paid differently when it comes to royalties.
You can think of a completed song as having two sides, Side A and Side B.
Side A - Referring to the actual song composition - who wrote the lyrics, composed it and owns the rights to that song.
Side B - Referring to the actual sound recording - who performed the recording of the song also known as a "Master" recording, and the rights holders to that Master recording.
If you're an artist who writes their own songs and records them as well, you can collect royalties on both sides.
Here are the players on both sides,
Side A: The Song Composition (aka Publishing)
Songwriters - The songwriter(s) and composer(s) of a song. Whoever writes the lyrics, melody or composition (underlying instrumental).
Publishers - Rights holders to the song. If a songwriter hires a publisher, the publisher works with songwriters to promote their music for use. They usually charge a fee and split royalties they collect with the songwriter. Songwriters can also be publishers themselves, keeping their song's rights.
Side B: The Sound Recording
Recording Artist - Entertains the song in the Master recording/ attained rights to record the song (no control of the song rights)
Record Label - If a recording artists is signed to a label, the label may own copyrights to the recording. Otherwise, the Independent recording artist will retain copyrights to the recording.
This chart depicts the copyright ownership of a single song.
How are Music Royalties Collected?
Royalties in music are collected by multiple agencies. It’s dependent on how the royalties were generated (the music royalty type) and location of the parties involved in the song.
Music royalties are collected by organizations such as Performance Rights Organizations (P.R.O.) in your country, SoundExchange, HFA, the CMMRA, and music streaming platforms or retailers themselves.
Keep reading and it will all come together.
You will want to make sure to register yourself and your music with the necessary organizations, and check back quarterly to claim any royalties you’ve generated.
Music Royalties Breakdown
The 5 Types of Royalties
Now that you know what music royalties are and the players involved in collecting royalties, I'll move onto the music royalties breakdown - the different types, how they are generated and who claims them.
1. Performance Rights Royalties
These are royalties generated when your music is performed publicly in places such as - radio, restaurants, bars, clothing shops, clubs, malls, etc.
These venues have to pay a performance rights license fee to play these songs publicly. Instead of trying to pay a fee for each song a venue or station plays individually, these businesses pay a yearly blanket license fee to Performance Rights Organizations (P.R.O.) so that they can use it's entire catalogue of music that's registered with them.
P.R.O.'s license their music catalogue out, make sure that they collect the fees from these businesses/ venues using the music, and then pay those royalties out.
Side A: The Composition
Rolayties collected by Performance Rights Organizations (P.R.O.). You may have heard of BMI, ASCAP or SESAC in the United States or SOCAN if you live in Canada, these are P.R.O.'s. Each country has their own agencies.
These performance royalties are then paid to the songwriters and publishers, split 50/50.
P.R.O.s in the U.S. do not pay recording artists due to copyright laws. Although, recording artists can collect royalties from digital performances and webcasts through SoundExchange.
Side B: The sound Recording
Royalties are collected by SoundExchange who issues performance rights licenses and collects performance royalties for digital performances.
These performance royalties are paid to the Record Label and/or Recording Artist.
Take Action! You can affiliate yourself with a local P.R.O., register you musical works and start collecting when your music is played or performed publicly.
2. Mechanical Rights Royalties
Royalties generated from the reproduction and distribution of your music by CD, Vinyl or digital download through retailers or labels.
Music retailers or record labels need to pay a mechanical rights license fee whenever they sell your song or make a copy of it for download.
This fee is the government set statutory mechanical rate, and is currently at 12 cents (up from 9.1 cents, as of May 2022) per song 5 minutes or under. Your publisher or mechanical licensing admin. will collect fees & pay these royalties out.
In the United States, the Harry Fox Agency (HFA) is a major organization where you can attain a mechanical license, and in Canada it is the CMMRA or Canadian Musical Reproduction Rights Agency. They issue mechanical licenses and collect the fees.
In recent years, music streaming platforms have started to obtain mechanical licenses for the music it streams through copyright owners themselves or their agents, such as music distributors. This allows these streaming platforms to pay mechanical royalties directly to the copyright owners of the music.
Side A: The Composition
Paid by the Record Label, Music Retailer/ Music Streaming Platform ; Collected by HFA in the U.S. and CMMRA in Canada or a music publisher.
Mechanical Royalties are paid to the Publisher and/or Songwriters.
Take Action! Register with HFA or CMMRA register your songs if you own the publishing and they will be able to track your music and pay you any mechanicals owed. Some music distributors will also collect mechanicals for you.
3. Synchronization (Sync.) Rights Royalties
Sync. royalties are generated when music is used in timed synchronization with a visual.
As in being placed in a motion picture, TV, commercials or video games. Production companies or businesses wanting to sync your music needs to pay a sync. license fee, royalties would be paid depending on the length of time your music is featured and how it's used.
Side A: The Composition
Paid by the production company or business as a Sync license fee to use your musical works.
Sync. Royalty paid to the Songwriters & Publishers, split 50/50.
Side B: The Sound Recording
Paid by the production company or business as a Sync license to use your sound recording.
Sync. Royalty paid to the Recording Artist & Record Label.
4. Grand Rights Royalty
Royalties earned when music is used in dramatic works - broadway shows and on stage plays.
Side A: The Composition
Paid by the production company.
Grand Royalties paid to the Songwriters & Publishers.
5. Print Rights Royalty
Royalties earned when music is printed and sold - Sheet music, folios or Song books. There are also digital print rights for - Ebooks, digital sheet music, etc.
This royalty is usually calculated as 20% of the retail price for a single song of printed sheet music. The royalty varies from digital print to physical print and whether they are using your full lyrics versus using a snippet.
Side A: The Composition
Paid by the printing companies and digital print business who want to use the Print rights license to sell your music.
Print Royalty paid to the Publishers & Songwriter.
Side B: The Sound Recording
Print royalties are not paid to recording artists or labels since the recording can't be printed.
Conclusion
Now that you're more familiar with the different types of music royalties, who is entitled to them, and how these music royalties are collected; hopefully you now have a better understanding of what you're entitled to depending on your role in a song, and how to collect money from your own music.
If you're looking to start selling your music on Spotify, Apple Music, Tidal, etc. Check out the article I wrote on music distributors.