Royalties 101
Gather round friends, Professor Krassner is about to give a lesson on registering your songs so you can collect royalties. Grab a pen, smart phone or computer and get comfortable. This is an important one!
First and foremost, if you want to collect royalties – and who doesn’t? It’s important to understand that there are two separate copyright-protected works involved when a song is recorded. The MUSICAL WORK (the composition, including the music and lyrics) and the SOUND RECORDING (the actual recording). These are separate works and can have different owners.
What do I mean? You have to identify and register the appropriate rights in the COMPOSITION and the SOUND RECORDING depending on what you wrote, performed, recorded or own, and depending on how the music is used. Not to deep dive into minutiae, but it’s very possible you could be performing/recording the song yet didn’t write it. Equally as possible is that you wrote the song, but you’re not performing or recording it.
Let’s break down the Royalty types:
Performance:
This royalty occurs when your music is performed in public. Examples of this would be radio, streaming, live venues, television, restaurants, retail and more. The specific rights and royalties involved can differ depending on whether we are talking about the musical work or the sound recording and how the music is being used.
So how to collect? You join a Performing Rights Organization, or PRO, such as ASCAP, BMI, SESAC (US) or SOCAN (Canada). You have to register yourself as the writer (if you are, indeed, the writer), register your publishing interests as applicable, and then register each song as a work.
Mechanical:
Mechanical royalties are generated when the musical work is reproduced, so to speak. Examples are streaming, downloads, CDs, vinyl, cassettes (if they exist for you) and cover versions.
In the US, The Mechanical Licensing Collective (The MLC) administers blanket mechanical licenses for eligible streaming and download services. They collect and distribute digital audio mechanical royalties to eligible songwriters, composers, lyricists, music publishers and administrators. The Harry Fox Agency (HFA) is a US-based music rights organization that provides mechanical licensing and royalty administration services, working with music publishers, digital services and other music users to help license the reproduction and distribution of musical works. In Canada, the Canadian Musical Reproduction Rights Agency (CMRRA) works with music publishers and self-published songwriters to license, collect and distribute reproduction/mechanical royalties for the use of musical works in Canada.
Mechanical royalties are associated with the musical work, not ownership of the sound recording. The recording and the composition are separate works with separate rights.
Sync:
You need a synchronization license when a musical work is used in timed relation with audiovisual content such as film, television, an advertisement or video game. When an existing sound recording is used as well, a separate license for the sound recording — commonly called a master use license — is also needed. You typically have separate licensing considerations for the composition and the sound recording. The terms and fees are negotiated based on the particular use and rights involved. For example, your sync licensing fee wouldn’t be as high as Harry Styles’, obviously. The bigger the name, the bigger the payout on both the master (recording) and synchronization (songwriting/publishing) sides.
Generally both sides are paid the same rate which can be referred to as MFN (Most-Favoured-Nations). Licensing fees are also determined by the terms. There is no universal fee or automatic rate based solely on the artist’s name.
Rates take into consideration where your music will be heard, for how long the license will last and sometimes even the post-production budget. Will the advert or TV show air in Canada, air all over North America or require clearance for the World? Does the license need to cover two years or forever (i.e. in perpetuity). Another point of discussion would be whether your song is playing in the background or featured throughout.
This is where the sync royalties come in. If you do land a sync license you will want to make sure your songs are all registered so you can collect any royalties that accrue once it airs. These are separate from the one-time fee. If a series goes into syndication it could become especially lucrative. Learn more about music supervision and sync licensing.
Digital:
These royalties are not one single type of royalty. Digital uses can generate different royalties depending on the service and whether we are talking about the musical work or the sound recording.
For example, interactive/on-demand streaming can generate mechanical royalties for the musical work as well as performance royalties for the musical work. In the US, The MLC administers mechanical royalties for eligible interactive streaming and download services.
Digital performance royalties can also apply to certain uses of sound recordings. In the US, SoundExchange collects statutory digital performance royalties for qualifying non-interactive digital audio services such as Pandora, SiriusXM (Satellite Radio) and other so-called non-interactive webcasters.
And so on..
Subcategories include Interactive Streaming Mechanical Royalties, which are triggered by streaming a song on on-demand services such as Spotify, Apple, Tidal, etc. The MLC collects eligible US digital audio mechanical royalties from DSPs operating under its blanket license.
Public Performance Royalties for Streaming can generate income for songwriters and publishers when the musical work is publicly performed, including through qualifying streaming services.
For US SoundExchange statutory digital performance royalties, the royalties are divided by law. 45% is paid directly to featured artists, 50% to the sound-recording copyright owner, and 5% to a fund for non-featured artists. These are sound-recording royalties, not mechanical royalties for the composition.
Note to the Songwriter
Remember, you’re entitled to royalties for the melody and lyrics you contributed. Even if you didn’t sing on, or perform in the recording provided, you are an owner/author of the musical work and the particular use generates royalties. So again, register those songs as the songwriter and publisher. Head here to read a great example of this.
Don’t forget your metadata!
Another very (underlined!) important step is to get an ISRC for your recording. An ISRC stands for International Standard Recording Code and it identifies the sound recording, but not the composition.
You can get an ISRC through an authorized ISRC registrant, which can include a distributor that assigns ISRCs as part of its services.
Your ISRC identifies the particular recording and provides a fixed reference for that recording when it is used across different services, formats, countries or licensing arrangements.
ISRCs can be associated with recording metadata and can help rights-management systems identify recordings and match recording information with other rights data. However, an ISRC does not identify the composition itself. Compositions/musical works have different identifiers and rights information.
ISRC’s also help keep track of your recording and can help reduce ambiguity around recordings. This can help with the management of recording rights and related royalties.
This is a lot to digest, and not always easy to understand, so if you have any questions, I am here to answer them. Don’t worry, there won’t be a quiz, but print this blog out, pass it around, keep it with you. A good musician is a smart musician!!!