How Music Royalties Work

Playing a musical instrument often opens many different paths. While some players decide to play only cover songs, others try to create their own original music.

It’s good to know that every single verse or chorus you create should be registered and protected by copyright. This will prevent other musicians from taking credit for your original work.

In this article, we’re going to explain how music royalties work and how musicians can protect their original songs.

Mechanical royalties

Just like its name says, mechanical royalties refer to the mechanical aspect of releasing songs. Let’s say that you’ve written a song and a certain label wants to use it on one of their editions. In order to get the right to publish your song under their label, they’re obliged to pay you the mechanical royalty.

Nevertheless, it’s not always that simple, because more often than not several different variables affect the situation with royalties. For instance, there’s a difference between the mechanical royalties on the number of released and sold albums vs. the number of manufactured records or CDs that include your songs. Therefore, the label in question needs to sort out these copyright questions with the songwriter before they start the entire publishing process.

Moreover, when a record label wants to release a song performed by a band, the mechanical royalties usually go to one or more persons who are registered as its songwriter(s). If that’s only one band member, he or she can share the royalties with other band members but isn’t obliged to do it.

Because of that, it would be wise to define these questions in advance with the band members with whom you write or record your original songs.

Ensuring mechanical royalties

If you protect your song by copyright or become a member of songwriters’ associations, you still won’t be able to automatically collect the mechanical royalties. In other words, it’s wise to join SESAC or any similar organization, but you’ll also have to establish a collaboration with one of the agencies that will collect mechanical royalties on your behalf.

Every country has some specific rules and separate organizations for collecting mechanical royalties. For example, musicians in the UK will have to register with the PRS for Music agency. Its equivalent in the USA is Harry Fox Agency. Also, these organizations collaborate with similar agencies in other countries, which ensures collecting songwriters’ royalties around the globe.

If you live in another country, check out what organization covers the field of mechanical royalties and get in touch with their staff.

Performance royalties

Unlike mechanical royalties, which are related only to the pressed and sold copies of songs, performance royalties refer to live performances.

In theory, performance royalties should be paid to a songwriter each and every time one of their songs is played live. The term live refers to concerts, gigs, TV and radio performances, as well as any other live settings.

Since musicians and singer/songwriters don’t have time to take care of these issues in person, they entitle performance royalties organizations to do that share of work for them.

This basically means that every songwriting musician should join one of these organizations. In the USA, for instance, SESAC also collects performance royalties. In addition to that association, you can also join ASCAP, BMI, SoundExchange, or any other similar company that has good ratings.

Such collaborations are usually based on annual memberships. Once you pay the membership, you’ve authorized the company in question to track live performances of your songs, as well as collect and redirect fees to authors.

Both a songwriter and their label have to join these associations. Each of these parties receives 50% of the fees collected for the live performances of the songwriter’s songs. What’s great for songwriters here is the fact that they receive their share of royalties directly, and not through the publisher.

Performance tracking

First and foremost, even the most meticulous societies and organizations can’t note down every live performance of the songs they’re responsible for. This becomes even more complicated due to the rise of digital media and live performances distributed that way.

However, each of these organizations has their special procedures that include covering as many live performances as possible.

For instance, ASCAP, as one of the largest US performance royalties organizations, uses several different performance-calculating strategies.

For TV and radio broadcasts, they receive cue sheets from the producers that operate those programs. Also, station logs and program schedules are also processed in order to count all the performances of the songs ASCAP is in charge of. After the data have been submitted, ASCAP’s operators note down the numbers, so that they can pay their songwriters.

Additionally, ASCAP has their own digital tracking software that calculates the performance royalties via a sample survey that includes all the radio stations, from public broadcasters to college radio channels.

Of course, there are live performances at concerts and live gigs. The songs played on these occasions are registered with the use of set lists from those events. Concert organizers and agents, as well as performers themselves need to deliver these lists to ASCAP.

Finally, beauty parlors, hairdresser’s salons, bars, restaurants and other similar facilities are charged an annual flat rate, set by the local trends on radio stations and recorded by ASCAP’s operators.

It’s impossible to track each and every live performance, so some events definitely slip under the radar, but performance rights organizations are doing their best to minimize the number of such performances.

Royalties in the digital world

Many people listen to their favorite music performers and songwriters from their computers or gadgets. It has become one of the most convenient ways to listen to music in the modern world. But do all these streaming services pay royalties and fees for using other people’s original work?

In the countries where legal institutions do their work, streaming services are either charged for the content they play, or closed down, in case they try to illegally stream music.

As the guys from SoundExchange explain it, streaming subjects submit all the playlists they’ve played. Then the SoundExchange workers calculate how much they need to pay on the basis of the frequency by which songs have been played. After that, they charge those streaming services with the fees. As the final step, they distribute the collected royalties to the songwriters who they collaborate with.

As for the percentage, the copyright owner, i.e. the label or the songwriter gets 50% of the royalties, while the main performing musicians receive 45%. The remaining 5% is distributed among all other performers that participated in the recording process.

Of course, there are some pirate radio stations that don’t pay any royalties to anyone, but most of them are closed down soon after being noticed.

The final word on royalties

Every artist who creates an original work needs to be properly awarded for that effort. Therefore, royalties are one of the most important achievements of the modern world, from the existential point of these artists. If you’re planning to record your songs, it’s useful to get in touch with organizations that deal with mechanical and performance royalties.

In case your creation reaches commercial success, you’ll ensure that you keep receiving your share of royalties for your hard artistic work.

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