Deep Dive (Part 1): Unlocking Music Royalties
Music Royalties - a topic that makes just about every artist squirm in their seat…. That is, until you understand them.
Indeed, the world of music royalties is truly complex, ever-evolving, and deeply interconnected. So, in our new series: Unlocking Music Royalties we are here to empower you with the knowledge and understanding you need to to be confident in collecting your royalties as an independent artist.
Contents:
Performing Rights Organizations
What is a music copyright?
Unlocking Music Royalties
What are the different types of royalties?
How are royalties calculated?
The Music Modernization Act
Preview Into Deep Dive Part Two
In our recent indie blog, we not only discussed How To Get Your Music Videos On Vevo and Why You’d WANT To, but also provided you with a quick checklist of the things that you would best need to secure firsthand. Turns out, you will need to have these same things established to collect royalties…. so let me remind you of it here:
Find a distributor. Actually, look no further! Our team at FreshNoise Distro got you covered! (And hey, you get to enjoy the perks and the personal approach with us. ;))
Sign up for Performance Rights Organization (PRO). PROs are responsible for collecting income on behalf of songwriters and music publishers when a song is publicly broadcast or performed. Public performances can include play on television or radio, in clubs and restaurants, on websites, or on other broadcasting systems. PROs collect license fees for this usage which they pay to their registered songwriters after taking a small fee. (ref. Performing Rights Organizations (PRO))
I know exactly what you need, click the button below for a full list of Performance Rights Organizations all over the world –
3. Sign up for Sound Exchange. Sound Exchange is the largest neighboring non-profit collective rights management in the world. It is the sole organization designated by the U.S. Congress to collect and distribute digital performance royalties for sound recordings.
4. Secure music licensing (if selling your music), a legal contract between the owner of the musical composition and a party that wishes to use it. The agreement typically includes provisions specifying what rights are granted, how much money will be paid for these rights, and when the payments will occur.
5. Invest in PR. This will secure article placements, streaming, radio play, and so on and so forth, which will boost your exposure and help you gain fans and followers. Thus, keeping you ahead of the potential high earnings when you’re finally ready to put out your music video. (don’t worry, we got you! We, at PressedFresh Collective provide smorgasbord offerings for independent artists!)
6. Last but not least, secure a Music Copyright.
What is a music copyright?
A Music Copyright delegates full legal ownership of a musical composition or recording. Thus, whoever holds the music copyright also has the right to redistribute the composition, and will receive the royalties earnings as well.
Copyright protection begins when music is fixed in a tangible form, depending on the type of music copyright. Every single piece of music you hear has two sets of copyrights:
Composition Copyright
The intellectual property. The publishing side of music – arrangement of notes, melodies, and chords in a specific order. This is held by songwriters, lyricists, and composers, and managed by their music publishers (partial copyright owners).
Master Recording Copyright
The copyright held by the performing artists, record label, or any other party that financed the recording.
NOTE: If you are the rights holder for the sound recording of your music, we encourage you to register your composition with the US Copyright Office.
For a guide on how to copyright your music/recording, you may refer to https://www.copyright.gov/engage/musicians/.
Finally, let’s talk about money! *chaching chaching!* This is where royalties come in.
Music Royalties
Music royalties are the payments made to the rights holders (i.e., performers, songwriters, and intermediaries such as labels, publishers, or producers) for the licensed use of their work. Royalties are a “cut off the top” of revenue earned for a use of the music. While a royalty interest is the right to collect a share of future royalty payments.
Image source: The Compliance Chronicle (by Tomas Geerkens)
What are the different types of royalties?
1. Mechanical Royalties
To put it simply, mechanical royalties are payments to the writer of a song whenever that song is reproduced in some form. Mechanical royalties are paid to the owner of the composition copyright.
Mechanical royalty rates are set by government regulation through various updates to the U.S. Copyright Act.
Physical and Digital Downloads: In the US, from 2023 to 2027, the statutory mechanical royalty rate set by the Copyright Royalty Board is 12.0 cents per track or 2.31 cents (whichever is higher) for each minute of playing time. (data as of September 2023)
Mechanical Royalties Percentage Rate
New Artist: 13-16%
Mid-level Artist: 15-18%
Sensational Artist: 18-20%
On-demand/Interactive Streaming: The rate is set differently and depends on several factors. It is determined by a complex formula that involves the service's revenue, the number of subscribers, and the number of streams.
Note: Mechanical Streaming Royalties are NOT collected by your Distributor or Performing Rights Organization. They are collected by another party called a Mechanical Licensing Agent.
Subscription-based Services: The mechanical royalty rate is calculated as per-subscriber penny rate royalty multiplied by the number of subscribers.
2. Performance Royalties
Performance royalties are the fees music users pay when music is performed publicly such as the music played over a coffee shop, radio, in a restaurant or bar, or over streaming platforms such as Spotify, YouTube Music, Apple Music, Deezer, etc., are considered a public performance.
Streaming Rates for Streaming Platforms
Spotify: $0.003 to $0.005 per stream
Apple Music: $0.01 per stream
YouTube Music: $0.008 per stream
TIDAL: $0.013 per stream
Amazon Music: $0.004 per stream
Deezer: $0.0064 per stream
Pandora: $0.0013 per stream
Note: Streaming rates differ based on your country of location.
3. Synchronization (Sync) Royalties
Also known as Sync Royalties, are fees paid for the use of copyrighted music in audiovisual productions such as in movies and films, television, adverts, video games, etc. Generally, the license holders give permission to the producers to use their music for any of the latter purposes.
The synchronization royalty rate is usually negotiated between the two parties, depending on the type and scope of the project, the duration and prominence of your music, and the demand and popularity of your music.
4. Print Music Royalties
Print royalties are fees paid to the right holder when the music is transcribed or published in sheet music, songbooks, or magazines. The print royalty rate is usually a percentage of the retail price or the wholesale price of the printed material, depending on the agreement with the publisher.
In the US, the standard print royalty rate is 10% of the retail price or 20% of the wholesale price.
How are royalties calculated?
Going with a straightforward approach, here are a few formulas on this particular topic to visualize the calculation:
Mechanical Royalties:
Mechanical Royalty Rate X Number of Sold Units or Generated Streams = Mechanical Royalty
Performance Royalties:
Performance Royalty Rate X % Generated Revenue (that is attributed by the use of your music, depending on the type and size of the media or venue) = Performance Royalty
Synchronization (Sync) Royalties:
Synchronization Royalty Rate X Number of Sold Units or Generated Project Views = Sync Royalty
Print Royalties:
Print Royalty Rate X Number of Sold/Distributed Copies = Print Royalty
Bonus! The Music Modernization Act
Musicians should also be aware of the Music Modernization Act. Started January 1, 2021, the MMA updated the way musical work rights holders are paid royalties, including when their work is played online via interactive streaming services. To get paid by digital music providers that use the MMA’s blanket license, you will need to register your information with the Mechanical Licensing Collective (The MLC) via their online claiming portal. If you have a publisher or administrator, they should register for you. Please note, this is not a replacement for copyright registration. To ensure that you are due a royalty for non-digital uses of your musical works, such as for pressing vinyl records or CDs, you must be identified in the registration or other public records of the Copyright Office.
Ref.: https://www.copyright.gov/engage/musicians/
Keep in mind that nothing works like magic, and no one gets rich overnight (not unless you won the lottery). This is your guide to enlighten you with what you need, know your rights, and on how to make money off of your music, but not your guide to make a quick buck. However, growing your reach and fanbase that turns into loyal audiences or listeners increases your streams... Thus, enabling you to make money from your music. The latter, along with following these steps, will ensure the cash keeps flowing in the long run!
I work BEHIND THE SCENES - how do I get paid?
I’m a Producer, Mixer, or Sound Engineer - how do I get paid?
I am in the CREATORS WORK - how do I get paid?
These are just some of the additional talking points that we’ll be covering in the next part of our deep dive. We have more to unlock in the music royalties! So yeah, we’re only getting started.
Come back next month for our Deep Dive Part Two!
