Breaking down royalties: how musicians get paid

Introduction

What are royalties?

Royalties are payments made to artists and songwriters for the use of their music. These payments are typically made by record labels, streaming services, radio stations, and other entities that use music for commercial purposes. Royalties can be earned in a variety of ways, including through the sale of physical copies of music, digital downloads, and streams. They can also be earned through the use of music in films, TV shows, commercials, and other forms of media. The amount of royalties paid to an artist or songwriter depends on a number of factors, including the popularity of the music, the terms of the contract between the artist and the record label, and the specific use of the music.

Why are they important for musicians?

Royalties are crucial for musicians as they provide a steady stream of income for their creative work. Without royalties, musicians would have to rely solely on live performances and merchandise sales to make a living, which can be unpredictable and inconsistent. Royalties also ensure that musicians are fairly compensated for their contributions to the music industry, including songwriting, producing, and performing. Additionally, royalties can help musicians fund future projects and invest in their careers, allowing them to continue creating music for their fans to enjoy.

How do musicians earn royalties?

Musicians earn royalties through various channels, including streaming services, radio play, live performances, and sales of physical copies of their music. Streaming services like Spotify and Apple Music pay royalties based on the number of streams a song receives, while radio stations pay royalties to songwriters and publishers through performing rights organizations like ASCAP and BMI. Musicians also earn royalties from live performances through ticket sales and merchandise sales. Additionally, sales of physical copies of music, such as CDs and vinyl records, also generate royalties for musicians. The amount of royalties earned varies depending on the specific agreement between the musician and the distributor or record label.

Types of Royalties

Mechanical royalties

Mechanical royalties are paid to songwriters and publishers for the reproduction and distribution of their music. This includes physical copies of albums, such as CDs and vinyl, as well as digital downloads and streaming services. The rate for mechanical royalties is set by the government and is currently 9.1 cents per song for physical copies and digital downloads, and 0.0175 cents per stream. These royalties are typically paid to the publisher, who then distributes a portion to the songwriter. However, some songwriters choose to retain their publishing rights and collect the mechanical royalties themselves.

Performance royalties

Performance royalties are earned when a song is played in public, such as on the radio, in a live performance, or on streaming services. These royalties are collected by performance rights organizations (PROs) like ASCAP, BMI, and SESAC, who then distribute the money to the songwriters and publishers. The amount of money earned from performance royalties varies depending on the popularity of the song and the number of times it is played. PROs also collect royalties from businesses like bars and restaurants that play music in their establishments. It is important for musicians to register their songs with a PRO to ensure they receive their fair share of performance royalties.

Synchronization royalties

Synchronization royalties are earned when a musician's music is used in a visual medium such as a movie, TV show, or commercial. The amount of money earned from synchronization royalties can vary greatly depending on the popularity of the song and the length of time it is used in the visual medium. Musicians can also negotiate for additional compensation if their music is used prominently in a scene or if it is used as the theme song for a show or movie. Synchronization royalties can be a significant source of income for musicians, especially if their music is used in a popular and long-running TV show or movie franchise.

Print royalties

Print royalties refer to the money earned by musicians from the sale of physical copies of their music, such as CDs, vinyl records, and sheet music. The amount of money earned from print royalties varies depending on the artist's contract with their record label and the number of copies sold. In general, artists receive a percentage of the wholesale price of each physical copy sold. However, with the rise of digital music streaming, print royalties have become less significant for musicians in recent years.

Digital royalties

Digital royalties refer to the revenue generated from streaming services such as Spotify, Apple Music, and Tidal. These services pay artists based on the number of streams their songs receive. The amount paid per stream varies depending on the service and the artist's contract. While streaming has become the primary way people consume music, it has also been a source of controversy in the music industry. Many artists argue that the low payout per stream is unfair and does not adequately compensate them for their work. Despite this, digital royalties continue to be a significant source of income for musicians in the modern era.

Mechanical Royalties

What are mechanical royalties?

Mechanical royalties are payments made to songwriters and publishers for the use of their compositions in physical or digital formats such as CDs, vinyl, and digital downloads. These royalties are paid by record labels or digital music services to the copyright owners of the musical composition for the right to reproduce and distribute the song. The rate of mechanical royalties is set by law and varies depending on the format and the country in which the music is sold. In the United States, the current statutory rate for mechanical royalties is 9.1 cents per song for recordings of five minutes or less, or 1.75 cents per minute for recordings over five minutes. Mechanical royalties are an important source of income for songwriters and publishers, especially in the age of digital music streaming.

How are mechanical royalties calculated?

Mechanical royalties are calculated based on the number of physical or digital copies of a song that are sold or streamed. In the case of physical copies, such as CDs or vinyl records, the royalty rate is typically a percentage of the wholesale price. For digital copies, the rate is usually a percentage of the revenue generated from the sale or stream. The exact percentage can vary depending on the country and the specific agreement between the artist and the record label or distributor. It's important to note that mechanical royalties are separate from performance royalties, which are earned when a song is played on radio, TV, or in public venues.

Who pays mechanical royalties?

Mechanical royalties are paid by record labels to songwriters and publishers for the use of their music on physical and digital recordings. This includes CDs, vinyl, and digital downloads. Streaming services also pay mechanical royalties, but at a different rate than physical sales. The rate for mechanical royalties is set by the government and is currently 9.1 cents per song for recordings of five minutes or less. For longer songs, the rate is calculated based on the length of the recording. Mechanical royalties are an important source of income for songwriters and publishers, especially in the age of digital music where physical sales have declined.

How are mechanical royalties collected?

Mechanical royalties are collected by music publishers or mechanical rights organizations, such as the Harry Fox Agency in the United States. These organizations negotiate and issue licenses for the reproduction and distribution of copyrighted musical compositions. They also collect and distribute mechanical royalties to the appropriate songwriters and publishers. In order to ensure accurate payment, publishers and mechanical rights organizations rely on detailed reporting from record labels and digital music services regarding the number of copies or streams of a particular song that have been sold or played.

Performance Royalties

What are performance royalties?

Performance royalties are payments made to songwriters and publishers for the public performance of their music. This includes any time a song is played on the radio, in a live performance, or on a streaming service. Performance royalties are collected by performance rights organizations (PROs) such as ASCAP, BMI, and SESAC in the United States. These organizations then distribute the royalties to the appropriate songwriters and publishers based on the frequency and popularity of their songs. Performance royalties can be a significant source of income for musicians, especially those whose music is frequently played on the radio or in live performances.

How are performance royalties calculated?

Performance royalties are calculated based on a number of factors, including the number of times a song is played, the type of performance (live, radio, TV, streaming, etc.), and the size of the audience. For example, a song played on a major radio station during peak hours will generate more royalties than a song played on a small local station during off-peak hours. Additionally, performance royalties are often split between the songwriter and the performer, with the songwriter typically receiving a larger percentage. The exact calculation of performance royalties can be complex, but it is generally based on a percentage of revenue generated from the performance of the song.

Who pays performance royalties?

Performance royalties are typically paid by music licensing organizations such as ASCAP, BMI, and SESAC. These organizations collect fees from businesses that use music in their operations, such as radio stations, TV networks, and live music venues. The collected fees are then distributed to the appropriate songwriters, composers, and publishers based on the usage of their music. In addition, some digital streaming services also pay performance royalties directly to the artists and labels. It is important for musicians to register their works with these organizations to ensure they receive proper compensation for their performances.

How are performance royalties collected?

Performance royalties are collected by performance rights organizations (PROs) such as ASCAP, BMI, and SESAC in the United States. These organizations track and collect royalties for the public performance of music, including radio airplay, live performances, and streaming services. PROs also negotiate licenses with businesses that use music, such as restaurants and retail stores, to ensure that songwriters and publishers receive fair compensation for the use of their music. PROs then distribute the collected royalties to their members based on the frequency and popularity of their music performances.

Synchronization Royalties

What are synchronization royalties?

Synchronization royalties are a type of payment that musicians receive when their music is used in conjunction with visual media, such as movies, TV shows, commercials, and video games. These royalties are paid to the songwriter and the publisher of the music, rather than the performer. The amount of synchronization royalties paid can vary widely depending on the popularity of the song, the length of the usage, and the type of media it is being used in. Musicians can earn a significant amount of income from synchronization royalties, especially if their music is used in a popular film or TV show.

How are synchronization royalties calculated?

Synchronization royalties are paid to musicians when their music is used in TV shows, movies, commercials, and video games. The amount of money paid to the musician depends on various factors such as the length of the music used, the prominence of the music in the scene, and the budget of the production. The royalty rate is negotiated between the musician and the production company, and it can range from a few hundred dollars to thousands of dollars per use. The musician may also receive a percentage of the revenue generated by the production, such as box office sales or advertising revenue. Synchronization royalties can be a significant source of income for musicians, especially if their music is used in popular productions.

Who pays synchronization royalties?

Synchronization royalties are paid by anyone who wants to use a musician's music in a visual medium such as a movie, TV show, or commercial. This includes production companies, advertising agencies, and film studios. The amount of synchronization royalties paid varies depending on the length of the music used, the prominence of the music in the visual medium, and the popularity of the musician. Musicians can negotiate synchronization royalties with the party using their music, and it is important for them to have a clear understanding of their rights and the value of their music in these situations.

How are synchronization royalties collected?

Synchronization royalties are collected when a musician's work is used in a visual medium such as a film, TV show, or commercial. These royalties are negotiated between the musician or their representative and the production company or agency. The amount of the royalty can vary depending on the length of the use, the prominence of the music in the visual medium, and the popularity of the musician. Synchronization royalties can be a significant source of income for musicians, especially if their work is used in a popular or long-running production.

Print Royalties

What are print royalties?

Print royalties are a type of royalty that musicians earn when their music is printed in sheet music or songbooks. These royalties are paid to the songwriter or composer of the music, rather than the performer. Print royalties are typically paid by music publishers, who are responsible for creating and distributing sheet music and songbooks. The amount of print royalties a musician earns depends on the popularity of their music and the number of copies of their sheet music or songbooks that are sold. While print royalties may not be as significant as other types of royalties, they can still provide a steady stream of income for musicians.

How are print royalties calculated?

Print royalties are calculated based on the number of copies of sheet music or lyrics that are sold. The royalty rate is typically a percentage of the retail price of the sheet music or lyrics. This percentage can vary depending on the agreement between the musician and the publisher. In some cases, the musician may receive a flat fee for the use of their work in print form. It's important for musicians to carefully review their contracts and understand the terms of their print royalties to ensure they are receiving fair compensation for their work.

Who pays print royalties?

Print royalties are paid by publishers to songwriters and composers for the use of their music in printed form, such as sheet music or songbooks. These royalties are typically calculated as a percentage of the retail price of the printed material and are collected by performing rights organizations (PROs) on behalf of the songwriter or composer. Print royalties can be an important source of income for musicians, especially for those who have written popular songs that are frequently used in sheet music or songbooks. However, with the rise of digital music and the decline of physical sheet music sales, print royalties have become less significant in recent years.

How are print royalties collected?

Print royalties are collected by music publishers who have the rights to print and distribute sheet music. When a song is printed, the publisher pays a royalty fee to the songwriter and/or the copyright owner. The amount of the royalty fee is typically a percentage of the retail price of the sheet music. Print royalties can also be collected through licensing agreements with schools, churches, and other organizations that use sheet music for performances or events. It is important for musicians to work with reputable publishers and keep track of their print royalties to ensure they are receiving fair compensation for their work.

Digital Royalties

What are digital royalties?

Digital royalties are payments made to musicians for the use of their music on digital platforms such as streaming services, downloads, and online radio stations. These royalties are typically paid out by the platform to the record label or distributor, who then pays the artist a percentage of the revenue earned from their music. The amount of digital royalties received by musicians can vary widely depending on factors such as the popularity of their music, the number of streams or downloads, and the terms of their contract with their label or distributor. Despite the growth of digital music consumption, many musicians still struggle to earn a living from their music due to the relatively low royalty rates offered by some platforms.

How are digital royalties calculated?

Digital royalties are calculated based on a percentage of revenue earned from digital music sales or streams. This percentage varies depending on the type of service used to distribute the music. For example, streaming services like Spotify and Apple Music typically pay out around 70% of their revenue to rights holders, while digital download stores like iTunes pay out around 60%. Additionally, there are different rates for different types of digital uses, such as on-demand streaming, non-interactive streaming, and digital downloads. These rates are set by organizations like the Copyright Royalty Board in the United States and are subject to change over time.

Who pays digital royalties?

Digital royalties are paid by various entities depending on the type of digital use. For example, streaming services like Spotify and Apple Music pay royalties to artists and record labels for the use of their music on their platforms. Digital downloads from online stores like iTunes also generate royalties for artists and labels. Additionally, YouTube pays royalties to artists and labels for the use of their music in videos uploaded by users. It's important for musicians to understand who is responsible for paying digital royalties in order to ensure they are receiving fair compensation for their work.

How are digital royalties collected?

Digital royalties are collected through various means, including streaming services, digital downloads, and online radio. Streaming services such as Spotify and Apple Music pay royalties based on the number of streams a song receives. Digital downloads, such as those purchased on iTunes, pay a percentage of the sale price as a royalty. Online radio services such as Pandora and SiriusXM pay royalties based on the number of times a song is played on their platform. These royalties are collected by performance rights organizations (PROs) such as ASCAP, BMI, and SESAC, who then distribute the payments to the appropriate songwriters, publishers, and performers.

Conclusion

Why understanding royalties is important for musicians

Understanding royalties is crucial for musicians because it directly affects their income and financial stability. Without a clear understanding of how royalties work, musicians may not receive the full compensation they are entitled to for their creative work. Additionally, understanding royalties can help musicians make informed decisions about their careers, such as which streaming platforms to prioritize and which licensing deals to accept. By taking the time to learn about royalties, musicians can protect their rights and ensure that they are fairly compensated for their hard work and talent.

How to ensure you receive all the royalties you're owed

To ensure that you receive all the royalties you're owed, it's important to register your music with a performing rights organization (PRO) such as ASCAP, BMI, or SESAC. These organizations collect and distribute royalties on behalf of their members. Additionally, make sure to keep track of all your music releases and collaborations to ensure that you're receiving royalties for all of your work. It's also important to regularly check your royalty statements and follow up with any discrepancies or missing payments. Finally, consider working with a music lawyer or accountant who can help you navigate the complex world of music royalties and ensure that you're receiving all the payments you're entitled to.

The future of royalties in the music industry

The future of royalties in the music industry is uncertain, as the industry continues to evolve and adapt to new technologies and business models. Streaming services have become the dominant way that people consume music, and this has led to changes in how royalties are calculated and distributed. Some artists have criticized the current system, arguing that they are not being fairly compensated for their work. However, there are also efforts underway to improve the system, such as the Music Modernization Act in the United States. As the industry continues to change, it will be important for musicians and other stakeholders to work together to ensure that artists are able to earn a fair and sustainable income from their music.