Royalties play an integral part of how musicians are compensated, with various entities dispersing them across various platforms.
As soon as a song is streamed online, digital platforms generate streaming royalties which are collected by PROs who then distribute them among songwriters and publishers accordingly.
Producers are compensated by record labels through a producer point system that is typically negotiated during the recording process and can have a considerable impact on an artist’s earnings and recognition in the industry.
How many songs are there?
As an artist, you know there are an overwhelming number of songs out there to listen to and keep track of. Gracenote, a global music data company, estimated there were nearly 79 million registered with them by 2011.
So how many songs are out there today? Although impossible to know for certain, we can get an approximate idea by looking at the amount of money paid out each year in royalties. Royalties are payments made directly to copyrighted creators for copyrighted works created using copyleft technology such as radio broadcasting or live concert performances that generate public performance royalties for their owners – typically reported through performance rights organizations (PROs).
Royalties can also be generated when songs are “synced” with visual media productions such as movies, TV shows, YouTube videos or advertisements. When this occurs, synch royalties must be distributed accordingly to the owner of composition copyright.
To receive performance and mechanical royalties, songwriters and music publishers must register their songs with a PRO such as BMI, ASCAP, SESAC, SOCAN (Canada) or PRS (UK). Once registered with one of these entities, their payout will include both direct payment to songwriters as well as collecting publisher payments on behalf of publishing companies.
Congress also provides another source of royalty revenue – the statutory rate set by them, which provides for fixed amounts payable when using works, typically tied to the Consumer Price Index.
Typically, songwriters and music publishers split the various royalties evenly. This is due to a song’s copyright being split evenly into composition rights and recording royalties; recording artists also receive their performance and mechanical royalties from master recordings while songwriters receive composer rights royalties from that work.
How many artists are there?
As artists navigate a post-streaming music business landscape, they require all of the support they can find from all aspects of its royalty ecosystem – songwriters, publishers, PROs, record labels, distributors etc.
Royalties are the main source of revenue for any successful musician, but understanding how they work can be daunting. By understanding a few key points, however, you can better navigate the system and claim your share of funds.
As a starting point, it is essential to understand that royalties depend on copyrights, with each copyright having different types of royalty streams associated with it. Some examples of this would include:
Mechanical Royalties: Mechanical royalties refers to money you can earn when someone makes physical copies of your song (such as CD or record releases) for public playback (Note: performance royalties are different types of royalties; we will discuss later).
Performance Royalties: When your song is performed publicly – for instance on radio or in a bar/restaurant – someone will pay performance royalties to the copyright holders who own its composition; these would include songwriters and composers. But be mindful that if another artist records your song under their own name, only a percentage of performance royalties due will come your way as this would constitute “controlled compositions”.
Neighboring Rights Royalties: Neighboring rights royalties work similarly to performance royalties; however, they’re paid out directly to copyright owners of sound recordings used in advertisements – for instance if your song appears in one. Assuming you own that sound recording’s copyright rights. So if it appears in commercials such as ads featuring your song – neighboring rights royalties would apply in this instance.
All these royalties can be generated by various uses of your song and are collected and distributed by collection societies known as PROs such as ASCAP, BMI, or SESAC in the US. These companies serve as middlemen that track and distribute the money from these royalties while charging a small fee for their services. Furthermore, many songwriters also utilize publishing companies who manage their rights for them and take a cut of what publishers share back as fees – it is therefore imperative that you know your rights and stay in communication with publishers.
How many labels are there?
Record labels are companies that assist artists with marketing and distributing their music; typically holding master rights as well. Record labels may generate their revenue from mechanical performance royalties as well as pay artists a fixed amount per contract period or earn royalties through streaming royalties or other sources.
Royalty payments can be complex, but are typically distributed according to an agreed-upon formula. Composers are entitled to public performance royalties when their work is performed commercially such as radio or live concert broadcast, mechanical royalties when reproduced such as on CD or ringtone, while streaming services have altered this landscape by providing users with unlimited music streaming for a monthly subscription fee; these new royalties known as streaming royalties are calculated based on an underlying statutory rate set by Congress with periodic adjustments made due to inflation.
Songwriters frequently sign publishing agreements with publishers in what’s known as an arrangement known as publishing deals, whereby the publisher takes ownership and license management of the musical composition and collects royalties that they split with the composer, typically after taking a small administration fee as their share. Music publishers may also collect sync royalties when copyrighted music appears visually like in movies or TV shows.
Music publishing companies typically provide “Sync” licenses to individuals wishing to incorporate copyrighted songs into their creative works, such as YouTube videos. Sync royalties can be an important source of income for copyright holders; similarly, print music royalties owe to copyright holders when their musical composition is printed onto sheet music – generally collected through collection societies like ASCAP, BMI or SESAC; it is important for creators to maintain accurate records with these organizations to ensure they receive all available royalties due to them.
How many publishers are there?
Music publishers manage the copyrights of songwriters and composers, ensuring they receive royalties when their works are used in different formats such as streaming services, TV channels, films, ads or video games. Music publishers typically take a cut of any royalties collected; exact amounts depend on their contracts with individual songwriters/composers.
Recording songs results in another type of copyright known as Sound Recording copyright, owned by those recording it and held by their record label or group. When played publicly – such as radio stations, clubs, restaurants or events – its performance generates Public Performance royalties paid to musicians through Performance Rights Organizations like ASCAP, BMI or SESAC.
Streaming services often combine Public Performance and Mechanical royalties into one royalty pool, but these two forms of payments owe to different aspects of musical works. Mechanical royalties arise from physical reproduction and distribution of copyrighted works (like when record labels distribute CDs with songs on them). Mechanical royalties have an established statutory rate but there may be room for negotiation between copyright owner and record label on how this type of royalty should be calculated.
Synchronization royalties provide income from the use of copyrighted songs in visual media such as television shows, movies, commercials, advertisements, video games and online streaming services. They are subject to their own set of rules and regulations; music publishers may take a portion of any sync royalties they collect depending on their contract with songwriters and composers.
Navigating the complex world of music royalties can be challenging, but staying informed and working with an experienced manager can help artists ensure they receive all their owed royalties. Legal disputes over royalties are unfortunately all too frequent so it’s essential that artists understand how these payments are calculated and distributed before signing any contracts or signing new technology such as blockchain and smart contracts which is changing how royalties are tracked and paid out.