All you need to know about music royalties

Having original songs is a key factor to creating your own voice and style as an artist. Therefore, there are multiple artists who write original music for themselves or for other people. Regardless of whether you are a singer-songwriter selling songs to other artists or performing your own original music, knowing what money is being made by this music is essential. These payments are referred to as ‘royalties’; therefore, Groover wants to help out and guide you through the breakdown of a song and its royalties.

1. What are royalties?

In order to use someone else’s work you need to pay for the rights to use it, and those payments are referred to as royalties. Essentially, they are payments made to the owners of a work by people who want to use that work whether that be under a copyright, trademark or patent (all referred to as Intellectual Property). It is important to note that these royalties are payments made to the right’s owners of the Intellectual Property at hand therefore, for one to be paid, they need to be listed as one of the owners of this work: no rights or ownership, means no money. When dealing with music royalties, we are dealing with the Copyright of a song.

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2. Song and Royalty Breakdown

Before getting into the different types of royalties, I think it’s important to dissect what royalties we are dealing with and where they come from: a song’s copyright. Every song has two copyrights associated with it; one for the composition which, is also referred to as the publishing side of the copyright, and another for the recording itself, also known as the master. The following graph details the royalty breakdown of the song and how they are shared.

When dealing with the composition or publishing portion of a copyright there are two main types of royalties: Public Performance and Mechanical. All of the money collected from the publishing portion of a song is split between the songwriter(s) and the publisher. On the other hand, when dealing with the song recording or master of a song, we deal with Digital Performance and Master Recording Royalties. These are distributed amongst the recording artist(s) and the record label.

The following guide separates the songwriter and the recording artist as two separate entities because this is how most collection organizations classify the different shares. However, if you are both the songwriter and the recording artist of a song, take into account that you would be receiving royalties from both the composition and the master of your song.

Royalty Breakdown

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3. Public Performance Royalties

Public Performance Royalties are paid by PROs (Performing Rights Organizations) to songwriters and publishers for the use of public broadcasting of their music. In order for artists to broadcast original or covered music, they must pay a blanket license fee to a PRO. However, this also refers to radios, TV stations, live venues, restaurants, stores, etc. For example, every time that Whitney Houston’s I Will Always Love You plays on the radio, Dolly Parton along with the publishers of that song will receive a cut from that play. Dolly Parton receives her share because she is the original songwriter of the song, and because performance royalties are under the composition copyright of the song, the share of performance royalties goes to the songwriter and the publisher (if there is a publishing deal at play).

4. Mechanical Royalties

The Mechanical Royalty is the second half of the copyright associate with the composition of the song.  A mechanical royalty is a payment owed to the songwriter whenever a copy of their music is made. For example, if a record label or some sort of retailer that sells music (CDs, streams, digital downloads, etc) wants to use an original song, they need pay the artist in order to acquire a mechanical license. These payments are then collected by Collection Agencies or Mechanical Rights Organizations and then they pay the artist a lump-sum of these royalties after a certain amount of time (usually every 6 months). However, some countries deal with mechanical royalties differently, and they can also be negotiated within terms of contracts with bands, labels, publishers, etc.

All in all, like performance royalties, mechanical royalties go to the songwriter(s). However, a songwriter may have to share these royalties with other members of the band or a producer that may have been involved in the writing process (all detailed under the copyright of a song). If there is a publishing deal at play, before paying out the shares owed to the songwriter, the publisher will receive a percentage (also known as recoupment) of the mechanical royalties as well.

5. Digital Performance Royalties

Digital Performance Royalties are royalties that non-interactive digital streaming services pay to the recording artist (not the songwriter) each time their sound recording is used. The big difference here between the digital performance and the public performance royalty is the ‘non-interactive’ portion of the digital stream. For example, services like Spotify or Apple Music will pay public performance royalties to the songwriter versus, services like Pandora or Sirius XM will pay digital performance royalties to the label and recording artist. The difference here is that Spotify and Apply Music users are technically free to play whatever music they choose however, ‘non-interactive’ digital streaming services remove that power of choice from the user and the music they hear is solely chosen by an algorithm.

6. Master Recording Royalties

Master Recording or Master-Generated Royalties are exactly what the name entails. They are essentially the payment that recording artists and labels earn when the sound recording is streamed, downloaded, or physically bought. These royalties are collected by distributors from record stores and streaming platforms, and distributed back to the label where they then collect the percentage owed to them and the rest is given to the recording artist. If an artist is not associated with a label, then artists collect the money directly from the distributor.

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7. Synchronization Royalties

You may have noticed that this type of royalty is not mentioned in the flow chart above. That is because it is one of the few that are paid to the songwriter and recording artist equally; however, they are also one of the most common types of royalty thus, worth mentioning in this Groover guide. Video Producers must get permission (a sync license) to use original music that would be put to any kind of moving image. This sync license is negotiated directly with the publisher (if there is one) and is completely subjective to the negotiated terms. Therefore, there are no set rates when dealing with sync royalties. They are paid to both the songwriter and recording artist for the use of their recording in an audio-visual production; this includes movies, tv shows, advertisements, video games, etc.

Conclusion

In conclusion, there are many ways that original music can make money. However, as seen above, there are many intermediaries that come into play when it comes to the distribution of that money; therefore, it is important to know as an artist where and how you should be making money. Don’t hesitate to use Groover as tool! Groover has hundreds of industry professionals that are eager to help and guide you through your journey as well as, numerous articles to guide you through any queries that you may have.

| Check out: How to use Groover to promote your music with success?

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