Even if you’re new to the music business, you’ve probably heard about royalties. They’re the revenue you earn whenever your song is played, whether live, recorded, or streamed. Sounds simple, right? It’s when people start talking about the different kinds of royalties—and how to go about actually collecting them—that the subject suddenly gets a lot more confusing.
So let’s begin at the top: By defining performance royalties, one of the two major types of royalties songwriters can earn. By the end of this article, you should have a strong understanding of what performance royalties are, how they differ from mechanical royalties, and how they’re earned and collected.
Understanding Song Structure
Before we get into royalties, though, it’s important to know how—at least from the publishing perspective—a song is split into two parts: The composition and the master recording.
The composition refers to the underlying melody, lyrics, and music. By contrast, the master recording refers to the specific recording of that piece of music. (There can be many recordings out there for a single composition.)
While performance royalties are earned by both sides of the song, for the purpose of this article, we’re going to focus on those earned by the composition. In most cases, it’s the songwriters who created the song who have ownership of the composition or publishing, while the master recording is partially or fully owned by a record label or distributor.
Understanding “Performance” vs “Mechanical”
In the simplest terms, performance royalties are earned when a song is performed in public. This doesn’t just include live performances (though they’re included too), but also means the performance of a recording of the song, such as over the radio, at a bar or a gym, or streamed over a service such as Apple Music or Spotify.
Some of the other ways songs earn performance royalties include:
- TV (Royalties are paid by the TV station for the broadcast of a show, film or commercial which includes music. This is not to be confused with the sync royalty, which is the up-front fee for the actual placement of your songs in TV, film or commercials)
- Radio (broadcast, streaming, and satellite)
- Live venues
- Elevator music services
- Clothing stores
So…how are these different from mechanical royalties? Well, mechanical royalties are earned by the reproduction—physical or digital—of a piece of music. This includes mp3 downloads, CDs, and vinyl records, as well as online streams.
Historically, mechanical royalties have been paid by labels, distributors and mechanical agencies to the copyright owner of that piece of music. But with the passage of the Music Modernization Act in 2018, a new governing body, the Mechanical Licensing Collective (MLC), is set to inaugurate a new system of mechanical royalty payments in the near future. Until that happens, you can learn more about how mechanical royalties are collected, in this article.
Who Collects These Royalties For Me?
In the most general of terms, any time your composition is used, it earns performance royalties. These royalties are tracked and collected by a system of pay sources and collection societies who then compare the tracked information to the registrations in their systems to assign those royalties to the correct owner. They then pay out those royalties directly to the songwriter and their publishers. Seems simple, but as you dig deeper, it’s much more complex.
In the U.S., pay sources and collection societies, also referred to as Performing Rights Organizations (PROs), such as ASCAP and BMI, track and collect performances in their territories, and pay royalties directly to the rights owners who have properly affiliated and registered their songs.
Outside of the U.S., the system for royalty collection varies based on the country or territory. Another common pay source known as Collection Management Organizations (CMOs) do the work of tracking and collecting these royalties. The major difference between these two pay sources is that CMOs will also collect mechanical royalties whereas a PRO only collects performance royalties. As we’ve noted time and time again, these processes can get complicated and time-consuming when it’s spread across multiple countries and continents.
What about mechanical royalties? In the United States, collecting these mechanical royalties is typically handled by mechanical rights organizations (MROs) such as the Harry Fox Agency (HFA), who maintain and administer mechanical licenses. Outside of the U.S., collection is facilitated by the collection societies, or CMOs, themselves or in a similar structure to that of the U.S. This often requires rights owners to be affiliated with each CMO -- a lengthy, potentially confusing and time-intensive process.
Our goal is to make the business of collecting all your global performance and mechanical royalties as simple, intuitive, and hassle-free as possible. If coordinating with all of the different entities—from PROs to CMOs to MROs—seems like more work than you want to take on, we urge you to familiarize yourself with Songtrust and what we could do for you. You may just find that having a partner to help you track down and utilize all the different ways to earn royalties is more than worth it.
Take control of your publishing. Maximize Songtrust for your songs and business.
We created this guide to answer a simple question: How do songwriters support themselves?
The answer is not as simple as we’d like, but our goal is to make it as clear, transparent and understandable as we possibly can.
Songtrust is more than just a rights management platform and publishing administrator - we’re a team of experts in the music community who strive to educate, support, and provide thought leadership to creators, representatives, and businesses across the music industry.
Our hope is that you’ll finish this guide with an better understanding of the business behind songwriting and have actionable resources to help you be successful.