Mechanical vs Performance Royalties

Once you’ve written, produced, and/or composed a song and started to distribute it, royalties are earned anytime it is reproduced or publicly performed. This revenue is split into master-generated (the recording itself) and composition (its underlying lyrics and melody) royalties.

Songtrust’s focus is music publishing -  the performance and mechanical royalties that are earned by your composition. As a songwriter, it’s important to know the difference between these royalties and how they’re collected, whether they are earned from streams on Spotify or a live performance at a local coffee shop. 

As with all publishing, your performance and mechanical royalties are paid based on each songwriter’s ownership share, which must be discussed and determined by all contributors. Once the ownership share is agreed upon and finalized, it’s best to enter that information on a split sheet or another shared document.

Making Sense of Mechanical Royalties 

Before the advent of streaming services, mechanical royalties were largely paid by record labels and collected by music publishers. Generally speaking, mechanical royalties are generated when your song is reproduced in any way, from physical CDs, LPs, and cassettes to digital downloads. Your record label or distributor is responsible for securing the license to reproduce your works, as well as paying mechanical royalties to you (or your publisher) for each physical copy sold. 

Mechanical royalties are also earned with every stream on services like Apple Music and Spotify — platforms that license your compositions and pay mechanical royalties to you or your publisher. These mechanical royalties are then collected and distributed by a mechanical rights organization like The Mechanical Licensing Collective (The MLC), the Harry Fox Agency (HFA), or Music Reports (MRI)

Outside of the U.S., mechanical royalties may be collected by a Collective Management Organization (CMO) that also handles performance royalties. In some territories, mechanical royalties are split between the songwriter and the publisher; in the U.S., mechanicals are payable entirely to the publisher.

A Pay Sources Primer 

While physical music products may have dominated the marketplace decades ago — and earned mechanical royalties for every unit sold — the primary source of today’s mechanical royalties is streaming. 

There are two types of music streaming services: interactive (Spotify, Apple Music), where the user chooses what music is played; and non-interactive (Pandora, TuneIn), a passive experience more like a radio station. There is no mechanical royalty paid for non-interactive streaming — only performance royalties. 

The rate at which songwriters and their publishers are paid mechanical royalties by streaming services is generally set by the government or determined by negotiations between publishers, collection societies, and streaming services. These rates will vary based on what type of customer is using the services (e.g., whether they’re on a paid or “freemium” plan) and what country the stream occurs in.

To learn more about mechanical streaming rates, check out this deep dive.

The organizations responsible for administering mechanical licenses and collecting mechanical royalties work closely with streaming platforms like Spotify to ensure you’re collecting everything that is owed to you. There can be a catch here: In order to collect these mechanical royalties, you need to have a music publisher, a publishing administrator, or your own personal publishing entity

Traditional publishers and publishing administrators typically have direct relationships with pay sources, making it easier for independent creators to access royalties than it would be without any help. 

YouTube is another crucial pay source when it comes to mechanical royalties. Because YouTube content is often audiovisual, they earn what is called “micro-sync” royalties,. Like with streaming, if your music is used in a video, it is technically a “reproduction” of your work as well as a public performance, earning you both types of royalties any time a monetized video plays your song on the platform. This is in addition to any micro-sync royalties a publisher or publishing administrator will collect for you.

To learn more about this type of royalty, check out our blog post

You’ll also need to cover your mechanicals outside of the U.S. As an independent creator, this must be done by registering with each Mechanical Rights Organization (MRO) or Collective Management Organization (CMO) in the country your song is being physically or digitally consumed in. Attempting to do this yourself would be tedious, costly, and complex. 

Other often overlooked ways you can earn mechanical royalties include ringtones/ringbacks, when your song is recorded as a cover by another performing artist, film soundtracks, karaoke recordings, and interactive greeting cards.

Get Paid For Performance Royalties

Performance royalties are generated by live performances, terrestrial (FM/AM) radio play, TV/film/advertising usage, and streams (both interactive and non-interactive). These royalties are collected and paid out by a songwriter’s Performing Rights Organization (PRO) or Collective Management Organization (CMO). PROs and CMOs license the songs in their catalog and use performance data to allocate money to publishers and songwriters. 

Performance royalties are then paid out in two halves: a writer’s share and a publisher’s share. This is typically a 50/50 split in the U.S., but the writer/publisher ratio may vary in other regions.

Much like mechanical royalties, performance royalties are determined through split sheets and the conversations you have with co-writers. Depending on your publishing situation, you may only see a portion of the publisher's share of the performance royalties. However, you’ll always collect 100% of your songwriter royalties — the writer’s share — directly through your home collection society. 

When your song generates performance royalties outside of your home territory, your domestic collection society will obtain these royalties through reciprocal agreements with the collection societies in those territories and countries. However, these are just data-sharing agreements, and may not guarantee that you’ll collect all of your performance royalties worldwide. 

Other ways you can earn performance royalties include TV broadcasts (a show, film, or commercial that features your music), streaming (interactive and non-interactive), internet/terrestrial radio, live performances, stores/restaurants, elevator music services, gyms, and digital jukeboxes like TouchTune. You can also get paid for public live performances by submitting setlists to your collection society. 

Wrapping Up Royalties

The music industry can be overwhelming and confusing to both new and experienced songwriters. Having a system in place to check your revenue streams is vital. Be sure to keep track of where your songs are being used, make sure you’re affiliated with your local collection society, and have your publisher or publishing administrator collect your global mechanical and performance publishing royalties.

When you join Songtrust, you’re covered for royalty collection and can see exactly where your royalties are coming from. You can also be sure that a dedicated team of publishing experts are working hard to provide resources on all the aspects of the music business and ensure you’re accessing everything you’re due. 

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