The lifeblood of a musician and a record label entirely revolves around the twin aspects of the various types of music royalties and control of the master recording of any album. Yet, the role these royalties play in bringing you the music you love -or stopping that music from ever being played again- is still unknown by most fans and musicians.
After first getting involved in the music industry in the late ’90s, one of the co-founders of BAND Royalty, Noble A. Drakoln, has needed to fully understand music royalties and their actual value to both musicians and their fans.
Although initially complicated, the music industry relies on the royalties generated by licensing the copyrighted songs and recordings. The royalties are the primary form of payment for musicians. The music industry consists of a ton of different players. Some hold partial ownership of copyrights, and some are intermediaries engaged in collecting royalties and taking a cut.
For instance, if you are a singer or a songwriter with music on Spotify, it will pay you several types of music royalties for each play. You and Spotify will hold a record label, publisher, distributor, and a collective management organization. Besides, the players face multiple layers of deals and calculations, which helps determine what they end up with and several other complications.
How do all these synchronize? How do the royalties travel through the channel and reach the artists’ pockets? Today we will discuss the main music royalties types, the primary players involved in the collection and distribution system, and then zoom in on the working of music royalties.
Music Royalties Defined
Music royalties are compensatory remittances received by the copyright holders such as songwriters, composers, recording artists, and their representatives for using their licensed music. Primarily the institutions using the music, from the TV channels and radio stations to streaming platforms and beyond, collecting the royalties on behalf of the rights holders. Sometimes, the rights holders receive the payments directly from the users.
How do all these synchronize? How do music royalties travel through the channel and reach the artists’ pockets?
Types of Music Royalties:
There are four main types of music royalties, and each type has separate and distinct copyrights associated with them. Here we represent all six types of royalties.
The artists receive remittances for physical and digital production and distribution of copyrighted endeavors through Mechanical royalties. The royalties apply to all forms of music, including vinyl, CDs, cassettes, digital downloads, and streaming services.
Synchronization Royalties (or Sync)
Synchronization royalties generate compensation when you pair or synchronize the copyrighted music with any visual media. The sync licenses grant the rights to use copyrighted songs in films, commercial shows, television, online streaming, video games, music videos, advertisements, and other visual media.
However, you cannot use existing recordings containing audio-visual media such as YouTube videos with the sync licenses. Instead, the royalty mirrors an agreement between the master recording owner, such as record labels, and the person seeking permission for using the recording.
Public Performance Royalties
These royalties generate music income for copyrighted music performed, recorded, streamed, or played in public. These include television, bars, live concerts, restaurants, clubs, music streaming services, and other places where you stream the licensed music in public. The Performance Rights Organizations (PROs) such as ASCAP, SESAC, and BMI collect and distribute the royalties to the right holders.
For collecting the Performance royalties, you need to register yourself with a PRO; both the songwriter and the publisher enjoy an equal share of the royalties. Hence, to receive 100% royalties, you need to register yourself as a songwriter and publisher.
Print Music Royalties
Print Music royalties form the least-standard methods of generating income for a copyright holder. For example, if a user transcribes any copyrighted music to a printed piece such as sheet music and then distributes the same, the master holder will receive the royalty. Moreover, the copyright holder bears the fees of the number of copies made out of such printed pieces.
Types of Music Copyrights
The music copyrights comprise two components: Master rights and Publishing rights -for every piece of recorded music.
Master rights belong to the proprietor of the master sound recording. A Master sound recording consists of the original song or soundtrack used for further reproduction and distribution. Usually, the artists, record labels, recording studios, or any other party financing the recording holds the Master rights.
Publishing rights belong only to the owner of the actual music composed. Music Publishing refers to the melodies, notes, chords, lyrics, rhythms, and any other fragment of the original piece.
Breakdown of Copyright and Licensing
Every song composed consists of two copyrights: Composition Rights and Master Rights. While the Music Composition copyrights include the written music and any lyrics, the Master copyrights have the rights for carrying out reproduction and distribution of the master recording.
However, there is a difference between licensing and royalties. While a master license grants permission to a user for using the intellectual property owned by others, the royalties are the payments that the owner receives to grant rights to use their properties.
In exchange for royalties, the artists grant permission to a publishing company for using their recordings. The music publisher might then release the tapes and issue rights to a record label or Mechanical rights agency. Moreover, the artists might assign the master sound recording copyright to a record label, thereby allowing the title for reproducing, distributing, and licensing the record for the generation of royalties.
The entire group involved in the production (songwriters, record labels, publishers, performing artists, digital music distributor, performing rights organization, sync licensing agency, and mechanical rights agency) receive a percentage of the royalties. Often handling these royalty benefits is more manageable and stated in a legally binding agreement.
Usage of music copyrights generates several forms of royalties. However, the evolution and advancement of the music industry gave birth to new royalty streams as well. Besides protecting music, the royalties generate a revenue stream for the artists.
Some partners may disagree yet aim to work together to reach the common goal: building music careers and allowing musical talent to find the recognition they deserve. Remember, the music business stands firm on a tiny word: collaboration.