How Do Music Royalties Work?

Any artist who’s just starting their music career has heard the term “music royalties.” If you’ve been wondering how do music royalties work, read this article, and we’ll explain its fundamentals and how royalties factor into your music career.

What Are Royalties in Music?

The basic “music royalty” definition is that they are a sum of money paid to the composer or recording artist of a written piece of music for each public performance of that work. Royalties are also paid to publishers and any other copyright holders. The bottom line is that anyone who holds a copyright on a piece of music will receive royalties for any public performance of that work.

Types of Song Copyrights

There are two types of music copyrights: 1) master rights (or sound recording rights) and 2) publishing rights. Master rights refer to the sound recording of the song. An artist, record label, or recording studio who owns the master rights will receive royalties any time the recorded song is played. Publishing rights refer to the actual music composition ( e.g., the notes, melodies, lyrics, etc.). Whoever owns the publishing rights receives royalties whenever the song is played and when the composition is reproduced.

The songwriter and the publisher register the song with multiple PROs, which tracks and collects their royalties.

7 Types of Music Royalties

There are several types of music royalties. The following eight types are the most common:

• Digital Royalty (Non-Interactive)
  Anytime a sound recording is played in a non-interactive digital environment (e.g., internet radio, satellite radio, cable TV, background music services), the performing artists and rights holder receives a Digital Performance Royalty.
• Neighboring Rights Royalty
  Anytime a sound recording is played in a commercial environment (e.g., radio, TV, venues), the rights holder receives a Neighboring Rights Royalty.
• Synchronization Royalty (Sync License and Master Use License)
  Anytime a sound recording and composition is synchronized to any other type of content (e.g., TV, film, ads, video game), the rights holders receive a Synchronization Royalty.
• Mechanical Royalty
  Anytime a composition is reproduced or distributed in any way (e.g., CD, record, downloads, on-demand streaming) whether in physical or digital form, the rights holder receives a Mechanical Royalty.

• Performance Royalty
  Anytime a copyrighted composition is played in a commercial environment (e.g., radio, TV, venues, background music services), the rights holder receives a Performance Royalty.
• Grand Rights Royalties
  Anytime a copyrighted composition is featured in a dramatic stage performance (e.g., Broadway show, musical theater, concert dance), the rights holder receives a Grand Rights Royalty.
• Print Rights Royalties
  Anytime a copyrighted composition is printed or e-printed for commercial use (e.g., sheet music, folios, songbook, lyric websites), the rights holder receives a Print Rights Royalty

Who Gets Music Royalties?

• Recording Artists (Master Rights)
  Since recording artists usually own the master rights, they receive royalties whenever their recording is played publicly (i.e., radio airplay, TV broadcasts, live performance venues, and interactive digital streams).
• Record labels and Music Distributors (Master Rights)
  If a recording artist strikes a deal with a record label or music distributor, a portion of the master royalties is paid to those entities for their work.
• Songwriters (Publishing Rights)
  The songwriter receives a mechanical, performance, and synchronization royalty for the use of their work. The songwriter receives 50% of the gross royalties, and the other 50% goes to the publisher. Sometimes, more than one composer writes the song, so the royalties are distributed to each songwriter based on an agreed-upon percentage.
• Publishers (Publishing Rights)
  Publishers receive 50% percent of performance and mechanical royalties for their work.

How Do Music Royalties Work?

Music royalties are paid out depending on the type of royalty, the platform, the country, and more. Here is a basic overview of how royalties work:

Once a songwriter writes a song and a musician records it, the two different types of copyrights (publishing and master) are created. Once there is a copyright, the artist executes an agreement with a publisher and a record label.

Next, the music product has to be distributed and registered for it to garner royalties. The recording artist and label work directly with a music distributor who submits and manages the product on various music channels (streaming, satellite, physical, and more). The songwriter and the publisher register the song with multiple PROs, which tracks and collects their royalties.

Once the music product gets played or sold, the intermediary (the distributor and the performance rights organizations) steps in and collects the royalties and pays the appropriate rights owners and administrators.

Got It?

These are the fundamentals of music royalties. For the most part, this is really all you’ll need to know to get started since the distributors and PROs work to make sure that each rights holder receives the proper royalties. Get yourself a good distributor and publisher, and you’ll get all the royalties you are owed!