Understanding how royalties are generated, collected and ultimately deposited in your bank account is as important as songwriting and performing - and it’s not as complicated as you think. The more you know about the business life cycle of a song, the better you’ll be at making smart decisions about your work when it’s released.
Copyright Law Protects Songwriters and Performers
With a few exceptions for new technologies, the fundamental copyright laws that protected George Gershwin, Carole King and Smokey Robinson are still in place.
Copyright law states royalties are paid to everyone involved in the creation and performance of a song. Songwriters and performing artists each hold two separate types of copyright in their work. The law protects both the written lyrics and composition, called the musical work and the sound recording - anything that a musician and a producer do to turn music and lyrics into a recorded song. These are also referred to as the composition and the master recording.
Songwriters own the performance rights to the composition and lyrics of a musical composition. Multiple writers hold percentages in the entire song music and lyrics. Performing artists have the rights to a particular recording of that song, called the master recording. While the collection of master royalties is handled by the record labels and distributors, and is fairly straightforward, composition royalties are a bit more complicated.
Domestic and International Royalty Collection
Performance Royalties: Songwriters affiliate with Performance Rights Organizations (PROs) in their territory, such as ASCAP or BMI in the U.S. or GEMA in Germany, to collect their performance royalties. The PRO collects and distributes royalties whenever a song is played in public, whether it’s on the radio, via a streaming service or in a commercial or TV show.
PROs in the United States have reciprocal arrangements with international PROs to collect performance royalties earned in other countries but collecting the fees can be tricky because each country has different laws and regulations. Some artists opt to add a publishing administrator, like Songtrust, to their team to affiliate them with PROs and make sure all global royalties are collected.
Master Royalties: Master recording copyrights for performers are handled by a record label such as Sony or Warner, or by distributors such as Distrokid or CD Baby. Song copyrights are typically assigned to music publishers, while master recording copyrights are usually assigned to a record label/distributor.
Domestic and International Mechanical Royalties
Mechanical royalties are paid whenever a physical copy of the song is sold, downloaded or streamed anywhere in the world.
Composer mechanical royalties: Songwriters also receive another type of royalty payment called mechanical royalties from physical sales (CDs, records tapes, ringtones, digital sales and streaming) in the U.S. and anywhere else in the world. In the States, companies such as the Harry Fox Agency (HFA) collect mechanical royalties from record labels and Digital Service Providers (DSPs) such as Spotify and Apple Music. Songwriters must be with an affiliated publisher before they can receive payment. Outside of the U.S, retailers or distributors are responsible for paying out royalties that come from physical album sales. DSPs pay the international PROs or mechanical rights societies who then pay the mechanical royalties to writers and publishers.
Master royalties and recording mechanicals: Songwriters receive writing and publishing royalties, performing artists are compensated with royalties from sales of the recorded version of the song. A hard copy purchase of a CD or a download from iTunes or Spotify entitles the recording artist to master royalties. A distributor will collect royalties directly from the stores and streaming services on behalf of the record labels who distribute royalties to the artist. If the artist doesn’t have a record label, it’s the artist’s responsibility to collect recording royalties from the distributor.
Sync Licenses And Master Use Licenses
Songwriters and publishers also receive royalties for the use of their music song in connection with any visual medium.
If a piece of music is used in the score of a movie, TV show, commercial or a YouTube video, you need a synchronization license to collect those royalties. A sync license grants permission to use a piece of music as a soundtrack to accompany visual images in film, TV, videos, commercials or any other audio-visual production. A sync license is also required to use copyright-protected music in a phone message. Sync licenses are granted by the songwriter, publisher or music library. Record labels give permission if producers want to use a specific recorded version of the composition.
Master Recordings and Neighboring rights royalties
Neighboring rights or ‘related rights’ describes the relationship between a performing artist and the record labels who own the master recordings.
Neighboring rights royalties are earned when a performing artist’s master recordings are publicly performed or broadcast, but not sold. An artist earns neighboring rights if the song is played on over the air radio, services like Pandora, on cable TV music channels or in a dance club. To collect these royalties, it’s necessary for the record label or the independent artist to register the master recording with a neighboring rights organization.
To make sure you're collecting all your composition's performance and mechanical royalties, sign up with Songtrust today!