Mechanical Royalties from Sales

Songtrust: Mechanical Royalties from SalesThe idea of mechanical royalties as they relate to the sales of music (physical sales like CDs and vinyl, as well as digital downloads) can be quite confusing to both writers/publishers and artists/labels. After a song is written and released for the first time, the owners of the composition copyright must grant compulsory licenses to anyone who wants to record and/or release that composition.

In the United States, whenever music is mechanically reproduced (in physical format or via a download), there is a statutory royalty rate owed to the songwriters of the composition. The current statutory rate is $0.091 per song per copy. The party who is selling the recording is responsible for paying this royalty, so in most cases, this is the label or artist. A common misconception is that a retailer like iTunes would be responsible for this payment, but that is not the case.

Thinking Of This Royalty As A Fee

For example, if a label is releasing a holiday album of 10 songs, and they are planning to manufacture 1 million copies on CD, they are responsible for paying $91,000 per song on the album to each song’s writers. The writers are then entitled to their share of that payment. If one song is written 100% by one writer, that writer would receive the full $91,000 fee. If a song is written by 4 writers who each own 25%, they would each receive $22,750. The label would secure a mechanical license with every writer (or their publisher on their behalf) involved on the project to confirm the use, the writers’ shares, and the label’s payment responsibility. They will typically account to the writers quarterly for any digital and any additional physical sales moving forward.

It’s helpful to think of this royalty as more of a fee than a royalty. Even if a label releases that holiday album for free, they still owe that statutory rate to the songwriters. It’s not a royalty that is generated by sales, nor is it calculated as a portion of the sale price. It’s a fee for the mechanical reproduction of a composition.

What This Means For Songwriters

With that in mind, consider a song released by a band with 4 members, written entirely by those 4 members. They release the song independently. In this case, they owe themselves that statutory fee for every copy sold. It is not the responsibility of their distributor to pay them an additional $0.091 per copy per song sold, nor is there a portion of whatever they earn from sales that is allocated solely for that mechanical rate. Typically in this case, if any of these writers have a publisher, that publisher would waive their right to collect the writer’s mechanical royalties for this release, as the writers would essentially be paying themselves and having their publisher take a fee.

Now if this band has additional co-writers on their song, the band would be responsible for paying those writers their shares of $0.091 per copy sold.

A mechanical license to manufacture and distribute works in the US can be done directly with the publishers/writers of a composition, or via the Harry Fox Agency. As your publishing administrator, Songtrust can directly license any requested releases of your compositions.

TL;DR

For physical sales/digital downloads - when a recording is sold, the seller (the label, or the artist in the case that there is no label), must license the composition for use in that recording, and pay a fee (or royalty) on each unit sold. That fee/royalty in the US is a compulsory rate of $0.091 per song per copy (currently). Songwriters are entitled to their share of that $0.091 based on their share of the composition that is being licensed (ie their splits).

As an independent artist, you must license any songs you plan to release and pay the statutory royalty rate to all of the songwriters on your release based on their ownership shares. As a songwriter on your own works, you don't make any additional royalties from sales. You just essentially owe yourself a percentage of $0.091 per copy sold.

To make sure you’re collecting all of your mechanical and performance royalties globally, register for Songtrust as your publishing administrator today!

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