Whether strumming on a guitar, producing beats, or writing the next hit, understanding music royalties is crucial and the secret sauce to your success.
What are music royalties?
Royalties are money generated every time your music gets played, streamed, purchased, downloaded, or synced. Let’s dive into the different types of royalties, how they all add up, and how you can set yourself up to collect every penny you’re owed.
One thing I’d like to throw in for the independent artists out there: Mechanical Royalties came about with the passage of The Copyright Act of 1976 and are established by the Copyright Royalty Board (CRB). Streaming royalty rates are generated based on how much revenue a service like Spotify is generating (paid users, ad content) coupled with what they are required by law to pay to songwriters.
Types of Music Royalties
1. Mechanical Royalties
Think of mechanical royalties as the money you earn every time your music gets reproduced. This covers everything from CDs (hahaha) and vinyl records to digital downloads and interactive streams (the user can choose which song to play i.e. Spotify, Apple Music, Tidal, etc). One important thing to note is that mechanicals only generate a publisher’s share of royalties, and then these are split between the publisher and the songwriter.
Royalties are generally split in half equally - Publisher’s Share & Writer’s Share.
How Are They Accumulated?
• Physical Sales: Every time someone buys a physical copy of your music, you get a cut.
• Digital Downloads: When fans download your tracks from platforms like iTunes or a personal website, you earn a mechanical royalty.
• Streaming: Services like Spotify and Apple Music pay mechanical royalties based on how many times your song is streamed.
Collection:
Interactive streams are paid out to DSPs (Digital Service Providers) like distrokid and cdbaby, who in turn pay them out to you.
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Mechanical royalties are collected by the MLC in the U.S. or PRS for Music everywhere else.
More Information about PRS and PPL is below at #4!
2. Performance & Digital Performance Royalties
These royalties are your ticket to getting paid whenever your music hits the airwaves, stages, or even background soundtracks in cafes and stores. This includes non-interactive streaming services like Pandora or SiriusXM.
How Are They Accumulated?
• Radio and TV Airplay: Your song playing on the radio, a non-interactive platform, or TV generates performance royalties. A recording artist does not receive royalties from radio because it provides exposure and promotion (This was 100% true when radio was super popular, can't justify that thinking now completely..).The Digital Performance Rights Act of 1995 is what granted copyright owners of sound recordings the right to publicly perform utilizing digital audio transmissions, and that’s how digital performance royalties were created.
• Live Performances: Every time you do a show live at a concert, club, etc.
• Public Spaces: When your music plays in restaurants, stores, or other public places. To get a right to publicly perform/play music, broadcasters acquire a blanket license from PROs which allows them to play any music they want, with the cost depending on the potential audience of the platform that they use (a song played on ESPN would earn a lot more than a song played in Dunkin Donuts for example).
Collection:
Performance rights organizations (PROs) like ASCAP, BMI, and SESAC collect the performance royalties for you. SoundExchange collects the digital performance royalties for you.
50% of Digital performance royalties go to the recording artist, and the other 50% goes to the Master copyright owner (usually your record label). While the typical split is 45% to featured artists, 5% to non-featured artists, and 50% to copyright owners, you can work out any predetermined term that works for you and your team.
3. Sync Licensing Fees
Sync royalties roll in when someone wants to use your music paired with visual media like movies, TV shows, commercials, video games, etc. They are essentially creating a derivative work based on your composition. The difference between this and traditional royalties is that those usually have fees that are predetermined and covered by blanket licenses. Sync fees are negotiated between the company/person wanting to use the music and both the owners of the sound recording (master use license) and composition (sync licensing) or the Admin Publisher / Sync Licensing company you designate.
How Are They Accumulated?
• Sync Placements: Each time your music gets used in a visual project, you score a sync fee.
Collection:
Sync royalties are usually negotiated directly between you (or your publisher) and the producers of the visual media. Keep in mind if there are multiple creators on a song whether it be the songwriting side or the recording side, their representatives need to be involved in the negotiations as well.
Admin Publishers help you claim the royalties you are due. If you are with a publishing company, this is handled for you. If you do not have an Admin Publisher, I recommend checking out this article I wrote explaining what they are and how to sign up.
4. Neighboring Rights
Neighboring rights royalties are similar to performance royalties but are collected and distributed internationally, paid to both performers and the owners of the master recording. PPL and PRS teamed up to make obtaining licenses easier, which also resulted in making the collection of royalties easier. You can read more about that by clicking here! → TheMusicLicense
PPL (Phonographic Performance Limited) Represents the musicians who performed on a recording and the record companies in the U.K. and overseas.
PRS (PRS for Music Ltd) Represents composers, songwriters, and publishers of music in the U.K. and overseas.
How Are They Accumulated?
• International Public Performance: Each time your music plays publicly in certain countries.
Collection:
Collected by organizations like PPL and PRS in the U.K. and other neighboring rights societies globally.
5. Producer Royalties
Producers often get a slice of the pie from record sales, known as producer royalties. At the bottom of this article, I have included a link to a post by Ari Herstand that explains Producer and Songwriter royalty splits in greater detail.
How Are They Accumulated?
• Sales and Streams: Based on how many records are sold or streamed.
• Leasing: This ties into the above, but also encompasses it as well.
Leasing is when you or another producer allows someone (recording artist) to use your track in their music to distribute and monetize it under their name. This can vary in length, and can also be exclusive or non-exclusive. The artist pays an upfront lease fee, and then each party collects their share of royalties.
Collection:
These royalties are usually negotiated in the producer’s contract and paid out by the artist or record label.
6. Micro-Sync Royalties
With social media booming, micro-sync royalties come from short uses of music in user-generated content on platforms like YouTube, TikTok, or Instagram.
How Are They Accumulated?
• Ad Revenue Sharing: Platforms monetize user-generated content and share ad revenue with rights holders.
Collection:
Collected through the platform’s monetization systems or third-party services managing content identification and monetization.
If you use services like DistroKid or SoundBirth you can sign up through them for accounts such as a TikTok Artist Account, Instagram Music Sync Account, YouTube Official Artist Account, etc.
How to Collect Your Royalties
I wrote a post on PROs along with a post on Admin Publishing Companies that explains the steps below in further detail and why it is important. Click the titles to read more!
- Why Every Musician Should Know About Performance Rights Organizations
- Unveiling the Powerhouses: Music Admin Publishing Companies
1. Register with PROs and Admin Music Publishers
Sign up with performance rights organizations like ASCAP, BMI, or PRS for Music, and Admin Publishers like Sentric Music, Songtrust, etc.
2. Distribute Your Music Properly
Use digital distribution services to get your music on streaming platforms and digital stores. These services help collect your mechanical royalties.
3. Register Your Songs
Make sure your tracks are registered with all the relevant organizations, including titles, credits, and ownership details. Metadata is SUPER important!
4. Negotiate Sync Deals
For sync placements, work with a music supervisor or sync licensing agent to find the best deals for your music.
Conclusion
Understanding and managing music royalties can seem like a maze, but it’s key to maximizing your earnings. By knowing the different types of royalties, how they’re accumulated, and the steps to collect them, you can ensure you’re getting paid for all the ways your music is enjoyed.
Stay on top of your registrations, monitor your music usage, and don’t hesitate to seek professional help when needed. With the right approach, you can turn your passion for music into a sustainable and rewarding career.
A few good reads on Music Publishing and similar topics can be found below!
Music Publishing 101 by SoundCharts
How Producer and Songwriter splits work by Ari Herstand
(Lol) Music Publishing 101 by Tunecore
The guide to neighboring rights by Songtrust
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Written by: earth2kwasi