As a music producer, your focus may lie in songwriting or performing; however, understanding royalties is equally essential to making informed decisions and staying within copyright laws that safeguard songwriters, performers, and their work.
Generating income from music involves understanding and leveraging various types of royalties:
Royalty Collection: Songwriters and performers are entitled to royalties for their contributions to a song. This includes both compositional rights and recording rights. Record labels, distributors, and rights holders collect recording royalties, while publishers or record labels manage composition royalties.
Digital Performance Rights: Record labels and distributors collect recording copyrights and royalties. Agencies like SoundExchange manage digital performance royalties from digital radio and non-interactive streaming. Artists earn recording revenue through sales of recorded versions, like vinyl albums or digital downloads.
Mechanical Royalties: These are paid when physical copies (CDs, vinyl records) or digital song streams are sold. In the U.S., the Harry Fox Agency collects these royalties for record labels and digital service providers. Internationally, retailers or distributors are responsible for paying out these royalties.
Sync Licenses: Songwriters and publishers earn royalties when their songs are used with visual media, like TV shows, movies, or YouTube videos. These licenses are necessary for using music in various media formats.
Neighboring Rights Royalties: These are paid when recordings by performing artists are broadcast or publicly performed, such as on radio stations or streaming services. Independent artists or record labels must register their recordings with an organization collecting these royalties to receive them.
Each revenue stream contributes to the income that music creators can earn from their work, highlighting the importance of understanding and effectively managing these various aspects of music publishing and rights management.
Royalty payments must be provided to songwriters and performing artists who contribute to a song, including those with compositional rights and record labels that own recording rights; some artists own or share recordings with record labels.
Record labels, distributors, and independent rights holders collect recording royalties, while publishers or record labels handle composition royalties. It should be noted that as long as your song exists in tangible form, its rights belong to you – no need to register it with copyright offices!
Every song contains two halves: composition and recording. These components receive royalties from different entities, so being informed will enable you to make better decisions regarding your work.
Songwriters in each territory are affiliated with pay sources or collection societies known as Performing Rights Organizations and Collective Management Organizations that collect and distribute composition performance royalties whenever their tunes are played in public – this includes live performances, streaming services, commercials, and T.V. shows.
Suppose you rely on local collection societies for royalty collection services. In that case, it is essential to remember that many have agreements with international societies or organizations to collect performance royalty earned abroad. While these may prove beneficial in terms of collecting royalties more efficiently and collecting performance royalties earned internationally, fees and regulations of each country could limit how effectively this works.
An alternative solution involves direct relations between publishers and individual pay sources, providing more significant support for collecting royalties. They are usually managed by publishing teams. Due to this arrangement, many writers use UniteSync as their publishing administrator for global royalty collection.
Record labels like Sony or Warner and distributors like Distrokid and CD Baby typically collect recording copyrights and royalties; third-party agencies such as SoundExchange manage digital performance royalties from digital radio stations and non-interactive streaming.
While writers and publishers earn royalties from the writings they create, performers receive compensation through royalties from sales of recorded versions. A vinyl album purchase, Spotify stream subscription, digital store download, or vinyl release qualifies an artist for recording royalties; distributors collect them on behalf of record labels, distributing them directly to artists. If an artist does not have their label, they must collect royalties directly from distributors.
Mechanical royalties will be paid when physical song copies, like C.D.s or vinyl records, are sold or when digital streams of any song anywhere around the globe are downloaded/streamed – whether through physical copies being sold or digital downloads/streams being made available for streaming or download.
Harry Fox Agency collects mechanical royalties for record labels and Digital Service Providers such as Spotify and Apple Music in the U.S. For payment, songwriters typically must be affiliated with either UniteSync Publishing Administrators or publishers to receive payments.
Retailers or distributors in countries outside the U.S. are responsible for paying out royalties from album sales; DSPs pay each international collection entity or pay source, which then pays mechanical royalties directly.
Song-related revenue sources also exist.
Here’s just a tiny taste of how music can be used as a source of income. Check out our Knowledge Center or continue reading for popular outlets for more resources and tips.
Songwriters and music publishers earn royalties when their songs are used with visual media, providing a steady source of revenue for musicians in recent years.
Synch licenses allow composers to collect royalties when music is featured as part of the soundtrack for television programs, movies, or YouTube videos.
A sync license is also necessary to use music protected by copyright in a phone message, which can be obtained from a songwriter, publisher, or music collection.
Again, as already noted, let us elaborate further: terms such as “neighboring” or “related” can give an appearance of conflict when used about recording labels that hold rights to recordings performed by artists who also own their rights – these rights would fall within “neighboring,” or similar, categories as discussed earlier.
Royalties for neighboring rights are paid when recordings by performing artists are broadcast or publicly performed, such as songs played on radio stations and streaming services such as Pandora and cable T.V. music channels; live or club performances of songs also attract neighboring rights royalties. To receive these royalties, an independent artist or record label must register their recording with an organization collecting neighboring rights royalties.
The United States takes an innovative approach to neighbouring rights. SoundExchange provides services that license and collect digital performance royalties on behalf of performing artists and recording owners from platforms like Pandora and Sirius XM.
Navigating royalty calculations can be confusing. UniteSync was explicitly developed to assist independent musicians in managing the business of creating music.
UniteSync makes capturing music publishing revenue across all distribution methods simple. Our team’s expertise in publishing traditional music enables them to handle licensing issues efficiently. Find out more or reach out – learn more, reach out!
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