• 14 Oct
  • 4 min read
types of music royalties

One of the biggest challenges or mysteries the music industry faces is how to get paid music royalties in the United States.  

We often hear about many starving artist criticisms, but what about the artist that eats? Have you ever wondered how do musicians at the top of their game reap what they have sown? We have got you a basic guide on types of music royalties you should be knowing. 

Definition of music royalties 

Music royalties are payments and payouts that go to recording artists, songwriters, music composers, music publishers, and other copyright holders for the right to use their intellectual property. In U.S, the U.S. copyright laws give music artists these exclusive rights to their work. 

What are music royalties 

Recording artists, composers, songwriters, publishers, and other owners of copyrights receive royalties as compensation for the use of their intellectual property. This exclusive right to their work is granted by the United States copyright laws.As well as licensing and usage, music royalties are generated. 

Music royalties fall under four categories:  

Mechanical, public performance, synchronization, and print music. 

Explanation of each type of music royalties is given under later.  

Musicians are paid through royalty payments as their primary source of income. These agreements are outlined in contracts between the creator and the distributor. 

 Here’s what you need to know about music royalties. Music copyrights and royalties are two of the most complex issues in the music business. 

Different types of music royalties-  

Royalties on music come in different forms. Copyright is also assigned to each of the four classes. Musicians earn royalties money in four different ways: 

1. Mechanical royalties 

Copyrighted works may be reproduced and distributed physically or digitally by mechanical royalties. Music downloads, CDs, cassettes, vinyl, and streaming services all fall under this category. 

When record labels press a CD of a songwriter’s music, they pay mechanical royalties to them. Alternatively, a copyright owner who is an independent distributor can collect mechanical royalties from a distributed digital music service. 

2. Public performance royalties 

Copyrighted performing, recording, playing, or streaming works generate music royalties. The term “public” means any place where you can hear your music, including radio, television, bars, restaurants, clubs, live concerts, streaming services, and any other location. 

Performance royalties are collected by Performance Rights Organizations (PROs). A PRO organization like ASCAP, BMI, or SESAC negotiates and monitors licensing for performances. A PRO organization contains and distributes rights holder royalties. 

A Performance Rights Organization must be contacted before you can collect public performance royalties. These royalties are split 50/50 between the songwriter and publisher. For 100% performance royalties, you need to register both as a writer and a publisher. 

3. Synchronization royalties (sync) 

Synchronization royalties are generated when copyrighted music is paired with visual media. Synchronization licenses have been issued to license copyrighted music for film, television, commercials, video games, online streaming, advertising, music videos, and other visual media. 

As different as synchronization is from audio and video media, for example, YouTube videos are not covered by synchronization licenses. Before using copyrighted music with a new audiovisual project, a licensee will need a master use license. 

A master use license and a sync license are required to use protected music in an audiovisual project. No matter how long or how short the sample is, it is welcome. It is necessary to have a master and sync agreement to sync YouTube wakeboarding videos with Jauz tracks. 

4. Print music royalties 

In general, copyright holders receive the least amount of payments via print royalties. Sheetmusic, for example, must be transcribed into a print piece and then distributed. 

In addition, each copyright holder is responsible for paying those fees according to the number of copies sold. 

How to calculate Music Royalties of artists  

While talking about types of music royalties for performing artists, there is a huge range of acceptable amounts based on your clout. Clout means no of fans you possess, what is your command over earning an income from those set of fans. Whether they are your regular listeners or not. If they are interested to attend your shows. If you are a beginner, your clout will be a little low. But, if you are an established one, even if you sneeze becomes a buzz in the town then it becomes helpful in quickly increasing your clout level if compared with other mid-level Artists. And then finally comes the superstars artists who are already commanding millions of streams and already making lots of money for their labels. 

While streaming royalties are under the category of Mechanical Royalties for performers, they are not straightforward as mechanical royalties from physical sales.  

Which means a single stream generates both Mechanical and Performance Royalties. 

Performance Royalties are negotiated without others intervention between streaming services and Performing Rights Organizations. Streaming services like Spotify are not straightforward about how much a single stream is worth. In fact, their royalty system is not based upon a fixed “per play” rate. 

Mechanical Royalties from streaming is calculated as-  

Mechanical Royalties

 
However company’s policy of distribution is subject to change time to time, Music royalties breakdown in Spotify can be as follows-  

  • Spotify’s number of paid (premium) users as a percent of total users; the more premium users, the higher “per stream” royalty rate 
  • Relative premium pricing and currency value in different countries 
  • An artist’s royalty rate based off of in-app advertisements.  

Here is a brief guide to breakdown of the copyright and licensing uses in types of royalties in music –  

Every song has two copyrights: Composition rights and Master rights. Music composition copyrights include the underlying music or any lyrics. Master copyrights include the reproduction as well as distribution of the master recording. 

There’s a difference between licensing and royalties in music industry.  

A master license grants permission to a music user for using intellectual property owned by some other artist, whereas, music royalties are the payments generated from using that intellectual property. 

Conclusion 

Royalties in music or music royalty are generated by using different music copyrights. The music industry and technology are evolving in such a way that new royalty streams emerge. While providing protection, they also generate revenue for musicians. 

The complexity of royalties can make learning to navigate them seem overwhelming. You should now feel more confident about entering the music business after reading this beginners guide. 

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