Mechanical Royalties From Physical and Download Sales

Disclaimer: The following article discusses how mechanical royalties apply to music publishing’s U.S. market. The examples, collection processes, and pay sources mentioned within may vary in continental Europe and elsewhere.

For many of us, mechanical royalties are a confusing but critical part of music publishing. Let’s break down this major source of long-term revenue below. 

Discussing licensing is a given with any type of royalty. It’s important to note that there are three main types of licenses in music publishing:

• Performance Licenses: Focused on live concerts, radio broadcasts, television/film broadcasts (not the same as syncs), and the public performance aspect of streaming and other online usages.

• Synchronization Licenses: Focused on matching songs to moving pictures like commercials, television shows, films, online productions, and video games.

• Mechanical Licenses: Focused on the manufacture and distribution of physical products (like CDs and vinyl), digital downloads, and the mechanical aspect of streaming.

For the purposes of this article, we’ll focus on the mechanics of mechanical licensing — namely physical products and digital downloads. To learn more about streaming royalties, including streaming mechanicals, check out this deep dive. 

A Brief History of Mechanical Royalties

The term “mechanical royalty” dates back to the 19th century, when player pianos were played with piano rolls: encoded, perforated sheet music that was operated mechanically. The songwriters and publishers of compositions reproduced within these music rolls believed they violated existing laws because they weren’t being paid for the use of their copyrighted material. 

Eventually, the Copyright Act of 1909 was passed, which allowed anyone to reproduce a copy of original music provided they pay a “mechanical royalty”. Later, the amended Copyright Act of 1976 took things a few steps further when it came to protecting rights holders and their original copyrights. 

For example, Section 115 gives anyone the right to reproduce and distribute a work that has already enjoyed a “first use” without the permission of the songwriter or publisher, provided they either (a) obtain a license directly with the songwriter or publisher, or (b) submit a Notice of Intent (NOI) for a compulsory license to the U.S. Copyright Office.

Should you be able to get a mechanical license directly from the rightsholder (the songwriter or publisher), that license would typically vary the terms of the Section 115 NOI in some ways. For instance, royalty payments may be paid on a quarterly basis as opposed to monthly; audit language may be added; or additional rights may be granted beyond Section 115, such as lyric reprint rights for an additional royalty.  

As a result of these legislations, whenever music is mechanically reproduced — whether in a physical format or digital file — the rightsholders of the composition are owed money at a statutory mechanical royalty rate. 

Mechanical Royalties Further Explained

Mechanical royalties are paid out from record labels, distribution companies, or independent licensees. They are also received by songwriters and publishers on a “per unit” basis. 

Here’s how the process typically works: Someone writes a song and either records and releases it or provides explicit approval for another artist to do so. (This is the “first use” mentioned above.) The artist or record label that releases the song is responsible for paying mechanical royalties to the original songwriter or publisher. After that, anyone is permitted to cover the song and release it themselves, so long as they obtain a mechanical license or send an NOI to the U.S. Copyright Office, and pay mechanical royalties.

The “statutory” rate for mechanical royalties in the U.S. is $0.091 per song, per unit (e.g., CD or download purchase) for songs under five minutes, or $0.0175 per minute per song, per unit for songs over five minutes. In other words, if a song is under five minutes and you press 1,000 vinyl copies of its 7’’ single, you’ll owe $91 in mechanical royalties for that song.

Accessing Global Mechanical Royalties 

Because mechanical royalty rates are determined by the Copyright Royalty Board in the U.S., these same practices do not apply elsewhere. Each country adheres to its own set of rules and royalty rates. They are then administered by local music rights organizations in each territory, such as AMCOS (Australia), STEMRA (Netherlands), SACM (Mexico), and CAPASSO (South Africa). These organizations collect and allocate mechanical royalties for songs released in their territory, usually based on sales.

In reality, mechanical royalties are often a grey area for songwriters. As you might imagine, so many different systems and processes can make the collection process more difficult to trace.

Accessing these royalties from pay sources is another story altogether. Because mechanical royalties — unlike performance royalties — are paid by a seemingly endless number of labels, distributors, and other pay sources, establishing the chain of legal responsibility can be time-consuming. Some societies may also require a publisher or personal publishing entity, created in order to access royalties as an independent songwriter. Historically, it was more or less a given that writers had to be associated with a traditional publisher to have any functional access to mechanical royalties.

In short: In order to make sure you’re fully covered for mechanical royalty collection, you need to have your publishing set up. This means being affiliated with a collection society, having your own publishing entity or publishing administrator, and making sure your songs are registered for global royalty collection.

Another option: Songtrust. We’re here to change this system by helping independent artists and songwriters get access to all the global royalties they’re due. By ensuring your songs are properly registered, we leverage our international reach and direct relationships to help creators like yourself collect all the hard-to-access mechanical royalties you’re owed, both in the United States and abroad. 

If you’d like to know more about mechanical royalties — or learn about how Songtrust can help you manage the business side of your music publishing — feel free to reach out to our team anytime.