The music industry is an economic powerhouse, earning a revenue of $20.2 billion in 2019 alone. Despite its monstrous success, the heart and soul of the music industry – recording artists, songwriters, composers and publishers – often leave a substantial amount of money on the table. The question is: “why?” The answer – difficulty in navigating the complex world of royalties.
What are Music Royalties?
Music royalties are payments given to copyright holders (i.e. recording artists, songwriters, composers and publishers) for the continued right to use their work. For many musicians, royalties earned through the licensing of their copyrighted songs and recordings are their primary source of income. When determining what royalties you may be owed as a musician, it is critical to understand that there are two types of musicians: songwriters and performing artists. While songwriters maintain the rights to the lyrics and melody of a piece of music, performing artists control the right to a specific recording of a song, referred to as a master recording. In many cases, songwriters and recording artists assign their rights to a third-party. For songwriters, the rights are typically assigned to music publishers, and for performing artists, the rights are typically assigned to record labels. With this background, let’s discuss the four main types of royalties.
Under the U.S. Copyright Act, authors of original works are given the exclusive right to make any reproductions or copies of their work. It is under this framework that mechanical royalties generate income for songwriters. Mechanical royalties are payments made to the holder of the copyright to a composition, whenever their song is reproduced in some form, be it through vinyl, CD, digital downloads, streaming services and so on. Songwriting mechanical royalties are regulated by the government through a compulsory license, which is currently set at 9.1 cents per copy for songs shorter than 5 minutes (or, for songs exceeding that threshold, 1.75 cents per minute of playing time).
Synchronization Royalties (Sync)
Sync royalties are payments made to musicians when their copyrighted music is paired with visual media. Specifically, sync licenses give individuals or companies the right to use the copyrighted songs in films, television, commercials, video games, online streaming, advertisements, music videos and the like. Think the 1963 Beatles Classic, “Twist and Shout,” playing over the famous parade scene in Ferris Bueller’s Day Off.
Public Performance Royalties
Public performance royalties are payments made to musicians when their copyrighted works are performed, recorded, played or streamed publicly. This includes, but is not limited to, terrestrial radio, television, bars, restaurants, clubs, live concerts and music streaming services (i.e. Spotify and Pandora). Performance royalties are collected by Publishing Rights Organizations (PROs) and are then paid out to songwriters and rights holders. In order to collect performance royalties, musicians/publishers must first register with a PRO (e.g. BMI, ASCAP and SESAC). Notably, most songwriters and publishers split performance royalties 50/50, so you may have to register as both the songwriter and the publisher in order to receive 100% of these royalties.
Print Music Royalties
Least lucrative among the royalties are print music royalties. These are payments received by a publisher for the sale of printed sheet music, which often includes musical notations and/or lyrics. Print music royalties are typically paid to publishers and can fluctuate depending on the type of sheet music and whether it is a physical or digital print.
Music royalties are complex. Understanding who receives royalties and who administers them is often a whirlwind that results in thousands of dollars left unclaimed. As the music industry continues to expand, new technology will present additional obstacles to royalty collection. As you embark on this journey into musicianship, make sure you speak with a qualified legal professional to ensure that your blood, sweat, and tears turn into cold, hard cash.
This Blog is made available by Romano Law PLLC for general informational and educational purposes only, not to provide specific legal advice. By using this Blog you understand that there is no attorney client relationship between you and Romano Law PLLC or any individual contributor. You should consult a licensed professional attorney for individual advice regarding your own situation.