Music royalties and rights can be a tricky business. If you’re an artist, songwriter, producer, or any other type of music creator, it’s important to understand how your work is licensed, who owns the rights to your songs and what that all means when it comes to royalties.
Whether you’re just starting out in the industry or are already a well-known musician with a large following, understanding the financial side of music is crucial.
From listening rights and mechanical licensing to performance rights and public performance operators, this article will explain every element of music royalties – so you can get paid for all your hard work as a creative!
What Are Music Royalties?
First, let’s break down what music royalties actually are. Music royalties are the money you earn from your recordings or compositions. Essentially, they are a percentage of the profits that are made from your music.
Anyone who uses your music or recordings has to pay you a percentage of their profit. These are the music royalties musicians earn from their work. There are different types of royalties, depending on how your music is being used.
These royalties can be paid out in one of two ways: contract-based or performance-based. Contract-based royalties are when you’ve signed a deal with a record label or publishing company, and they will pay you out according to the terms of that contract.
Music Publishing Royalties
When an artist records a song, they are essentially creating a product – a song or recording that someone else can use to generate profits. In exchange for that creation, the artist will receive publishing royalties whenever their song is used for commercial purposes.
The artist who wrote the song is called the “composer,” and the person who invested in the song is called the “music publisher.” So, in essence, music publishing royalties go towards the writer’s portion of earnings from their own song. The artist who wrote the song will earn a percentage of the profit generated by the song each time it is used commercially.
There are many ways a song can be used commercially: in a film, on TV, in a commercial, online, in a podcast, etc.
Mechanical royalties are payments made to songwriters and publishers in exchange for a license allowing the reproduction and distribution of musical compositions. For example, let’s say that a radio station wants to play your song, but they can’t because you don’t own the rights to that song. Since you don’t own the rights to your songs, you can’t give them a license to play the songs.
Instead, you’ll need to get the rights to your songs and then offer them a license for them to play your music. The radio station has to pay you mechanical royalties for the use of your song.
These royalties go towards the writers of the song and the publishing company that represents the artist.
Performance royalties are payments made to songwriters or composers and/or their publishers in exchange for the right to perform their compositions publicly. In other words, these royalties are paid whenever your songs are performed in public – whether that be in a live setting or online.
You’ll receive these royalties each time your songs are played. If you’re a songwriter, you can earn performance royalties whenever your songs are played on the radio or at live performances.
If you’re a recording artist, you can earn performance royalties whenever your songs are played on the radio or at live performances.
Public Performance Operators: PROs and ASCAP/BMI
If your songs are played on the radio, you’ll receive performance royalties from the Radio License Fee from the Performing Rights Organizations (PROs): ASCAP and BMI. If your songs are played on TV, you’ll receive performance royalties from the Society of Composers, Authors, and Music Publishers (ASCAP).
Digital royalties are payments made to songwriters and composers and/or their publishers in exchange for the right to digitally reproduce musical compositions. These royalties are paid every time your song is “streamed.”
If you’re an artist, you can earn digital royalties when people listen to your music on services like Spotify and Pandora. If you’re a songwriter, you can earn digital royalties when people listen to your music on streaming services.
You can also earn digital royalties when your song is downloaded at places like iTunes and other online stores.
Contract-based royalties are payments received for licensing your work under a specific contract. These royalties are usually paid out on a per-use or per-download basis.
For example, if your song is played on the radio, the radio station will pay you a certain amount per play. If your song is downloaded online, the online store will pay you a set amount per download.
Understand Music Royalties Before Signing Contracts
If you’re an artist or songwriter, it’s important to understand music royalties before signing a contract with a record label or music publishing company. Contract-based royalties are different for everyone, depending on the contract you sign.
Some artists and songwriters earn more than others when it comes to contract-based royalties because the companies they’re signed to decide what percentage of profit they’ll receive for each use of their music. If you want to be sure you’re getting fair music royalties, it’s important to understand how royalties work before signing these types of contracts.
You don’t want to sign a deal that benefits the record label more than it does you – especially in the long run when you want to earn more from your music.
Music royalties are the money you earn from your recordings or compositions.
Music publishing royalties go towards the writer’s portion of earnings from their own song, while mechanical royalties go towards the writers of the song and the publishing company that represents the artist.
Performance royalties are paid every time your songs are played in public, and digital royalties are paid every time your songs are “streamed.”
It’s important to understand music royalties before signing a contract with a record label or music publishing company, as those companies decide the percentage of profit you’ll receive for each use of your music.